In the traditional economic models, a company would make decisions on widget production based on considerations such as profit or sales. Today that still applies, with one notable difference: Companies are increasingly weighing factors such as impact on energy, resources and the environment.
This is particularly true for global companies that are feeling increasing environmental pressure from consumers, government and the media - all of which relate to this week's issue of SN, which looks at world retail trends and includes our annual list of the Top 25 global retailers (see Page 22).
Who are the global companies taking the lead on environmental issues? The list is far too long to publish here, but two companies that recently spoke out on the topic were Wal-Mart Stores and McDonald's. Executives from those firms outlined their corporate strategies in a presentation this month at the FMI show in Chicago.
Wal-Mart is targeting renewable energy and sharply reducing solid waste, said Bruce Peterson, senior vice president and general merchandise manager. The retailer has become a huge buyer of organic cotton. It has opened "environmentally friendly" stores in Texas and Colorado, which Peterson called "living labs to explore what is possible."
Given Wal-Mart's size, even a small change has major impact. Wal-Mart altered the dimensions on a single stockkeeping unit of toys, a move that saved 3,800 trees, sharply reduced oil usage, and generated freight savings of $2.4 million a year.
For its part, McDonald's has made numerous strides in its energy-intensive food-service business, explained Bob Langert, the company's senior director of corporate responsibility. It developed supply chain environmental guidelines for water, air and energy. It reduced 300 million pounds of packaging over the past decade. The chain's Swedish restaurants are 91% waste free, and they even recycle their water.
Particularly impressive is how the executives explained the rationale for these moves. The chains are placing a bet that environmental considerations will be increasingly important to shoppers. "We believe that in the future consumers will reward companies for these actions," Langert said.
But these are not just moves to avoid consumer criticism. "We also see it driving growth," Langert added.
Executives also see these directions as more than temporary. "This is not the pro-ject of the month," Peterson said. "The environment is a new filter through which things will go."
If all of these aren't strong enough reasons, here's another one for suppliers: Your retailer customers will make you do this. For instance, McDonald's is asking potato suppliers to measure and disclose uses of air, water, energy and solid waste.
The above arguments are compelling. But what about those tied to the old economic model, the one that says adapting widgets should save money too? It turns out that's still important. While some of these corporate environmental moves cost money, others are neutral or represent overall savings, the executives explained.