Wal-Mart is bucking conventional wisdom about the ease of being green, and will soon rake it in as a result.
As it spearheads a massive shift toward ecologically friendly packaging, the retailer is offering incentives to suppliers who adopt more sustainable and/or fewer primary and secondary product packaging materials.
Starting Feb. 1, 2008, its more ecologically progressive trading partners will be given priority when Wal-Mart makes sourcing decisions.
Small changes to packaging can have dramatic effects on shelf space, the use of materials, manufacturing, shipping containers, trucks, storage, refrigeration, waste and the energy used for production, transportation and waste, according to Wal-Mart.
The Bentonville, Ark.-based retailer projects that a 5% packaging reduction within its own supply chain by 2013 will lead to the realization of $10.98 billion in collective transportation, manufacturing, shipping and storage-related savings. Wal-Mart anticipates that its own sizable piece of the pie will equate to $3.4 billion in savings.
Innovations will be gauged on an SKU-by-SKU basis by the retailer's online Packaging Scorecard, which is accessible through the company's Retail Link supplier portal.
“Participation in the scorecard is not mandatory, but it is in suppliers' best interest, since we're going to make purchasing decisions based on their score and the improvements they make to it,” explained Wal-Mart spokesman Kevin Thornton. “We're giving them a year to key in all the data, and then next year we'll begin holding them accountable for it.”
The scorecard was introduced to Wal-Mart's 60,000-member global supplier network in February. As of last month, 2,268 suppliers had signed on to use the tool, and 117 products had been entered into the system.
“We'd love 100% participation, and no one has told us no yet,” said Thornton. “We've had an extremely overwhelming amount of feedback from suppliers. They've expressed their happiness with being able to do something like this. We can save money, they can save money and our customers will in turn save money.”
The tool rates trading partners in nine areas, including renewable energy use, innovation, recovery value, recycled content, transportation, cube utilization, product/package ratio, material value and greenhouse gas/carbon dioxide per ton of production.
“As soon as a supplier enters information in the system they'll receive a score on the fly,” noted Tom Valarde, information technology publications editor for Solon, Ohio-based Efficient Collaborative Retail Marketing (ECRM), which helped develop the application. “The questions are not at all open-ended; instead they'll ask things like ‘how many pounds of this particular material is used in your packaging.’”
Since suppliers will be judged against their peers, competitive pressure will drive innovation.
“Each SKU will be given its own individual score, but at the same time suppliers can use the tool to get a much broader view,” said Thornton. “Some trading partners supply our stores with thousands of products; they'll be able to see their whole score or view their score by category. Suppliers won't be able to directly compare their score to that of their peers, but they will be given an indication of the percentile that they rank in amongst people of their class.”
Packaging scores are updated in real time, while percentiles are updated on a nightly basis.
In addition to preventing millions of pounds of trash from reaching landfills, the company's five-year goal is to save 667,000 metric tons of carbon dioxide from entering the atmosphere. This equates to taking 213,000 trucks off the road annually plus saving 323,800 tons of coal and keeping 66.7 million gallons of diesel fuel from being burned.
The retailer's marriage of environmental stewardship and business efficiency will undoubtedly have a dramatic impact on the entire industry.
Various supermarkets are already benefiting from Unilever's All Small & Mighty packaging innovation, which makes efficient use of shelf space by concentrating the contents. The triple-concentrated laundry detergent cleans the same 32 loads of laundry as 100 ounces of conventional All detergent. Still, its 10-inch-high, 32-ounce bottle, which retails for $5.99, takes up much less space.
“Products like these have a snowball effect,” explained Thornton. “If an item doesn't take up unnecessary space on the shelf or on the truck, it makes it easier to replenish, it can be ordered less frequently and it requires fewer trucks on the road, which equates to fewer emissions.”
Wal-Mart has rewarded Unilever for its innovation by granting the manufacturer the same amount of shelf space in its Wal-Mart and Sam's Club stores as it did before Unilever began merchandising the smaller bottles. The result is more bottles of detergent occupying the same amount of space.
“Retailers reward space based on productivity,” noted Unilever Marketing Director Helayna Minsk. “The smaller bottle allows for more inventory, resulting in better customer service, less restocking during the day and great shelf impact. All Small & Mighty is also providing distribution, inventory and labor cost savings for retailers.”
In 2006, the product also saved the environment 16 million gallons of water, nearly 1 million gallons of diesel fuel, nearly 5 million pounds of plastic and about 25 million square feet of corrugated cardboard, according to Minsk. The product didn't replace any traditional-size All detergent. Instead, it was added to the manufacturer's product mix.
Other major manufacturers, such as General Mills, have improved upon their product-to-package ratio without reformulating their products.
The Minneapolis-based company recently reduced Hamburger Helper packages by 20% without reducing product quantity, according to General Mills spokeswoman Kirstie Foster.
“The environmental benefits include a significant reduction in the amount of paper fiber used, and 500 fewer distribution trucks on the road each year,” she said.
General Mills also reduced the amount of metal used in its Progresso soup cans, which yields 350 fewer tons of steel per year.
Meanwhile, its Pop Secret microwave popcorn went from requiring four different case sizes to one common case, saving some 1.5 million pounds of packaging material and taking 250 trucks off the road each year.
“General Mills began using recycled materials for cartons back in the 1930s,” said Foster. “In the 1990s it undertook an initiative to reduce the amount of packaging material required for our product cases by more than 20%, which ended up reducing packaging materials by 90,000 tons on an annual basis. Sustainable packaging will not only reduce the environmental footprint, but also drive value for manufacturers, retailers and consumers.”
Other suppliers, like those that Wal-Mart sources its produce from, have improved upon the recyclability of the cardboard boxes used to ship their products.
“They are redeveloping the packaging for items like fresh fruit,” Thornton noted. “Previously they used a corrugated cardboard box with wax coating, and the wax made it unrecyclable, so some suppliers are developing a different formula that doesn't include wax. In some cases it's vegetable oil-based so it can be recycled in the current machines.”
As part of its effort to inspire further innovation, Wal-Mart hosted a Sustainability Packaging Exposition last month. The event brought together 3,000 product suppliers and 130 packaging suppliers who presented alternatives to traditional packaging.
EYE ON RECYCLING
London-based Marks & Spencer, which merchandises all of its own company-brand products, ranging from food to clothing, has also set forth ambitious packaging plans. As part of its 200-million-pound (U.S. $395 million) ecological project known as Plan A, the retailer has committed to using packaging material from sustainable and recycled sources.
Its five-year goals include cutting its use of non-glass packaging by 25%. Glass is 100% recyclable.
Marks & Spencer also aims to use sustainably sourced materials such as cardboard or plastic that have a recycled content, or Forestry Stewardship Council-certified board stock from sustainable forests. The retailer is also focusing on using materials that are easy to recycle or compost, such as cornstarch-derived plastic polylactic acid (PLA), polyethylene terephthalate (PET), polypropylene (PP) and polyethylene (PE).
To help encourage its customers to recycle and compost, Marks & Spencer will print easily identifiable symbols on its packaging. The grocer is also piloting a closed-loop recycling program, which includes turning used packaging into new packaging, in six of its Café Revives, with the aim of extending the program to all 450 of its customer and employee cafes in the U.K. and Ireland within five years.
Marks & Spencer's latest packaging innovation involves the world's first plastic milk bottle to use recycled materials, according to the retailer.
Following a 60,000-bottle pilot, all of the retailer's organic milk bottles will use 10% recycled high-density polyethylene (HDPE).
The development was the result of an industrywide collaboration among the retailer, Dairy Crest, Nampak and the Waste and Resources Action Program (WRAP).
“This technology is very new, so there is a limited volume of recycled content available for milk bottles,” noted Olivia Ross, a Marks & Spencer spokeswoman. That's why the retailer has limited its rollout to organic milk for now.
“Used plastic milk bottles are sorted, flaked and washed before undergoing a ‘super clean’ recycling process,” said a statement issued by the retailer. “The resulting food-quality plastic or polymer is then added to virgin HDPE and made back into plastic milk bottles.”