A whopping 97 percent of environmental impacts in the retail sector come from the product itself — from raw materials, transportation and product manufacturing. With impacts so heavily weighted in the supply chain, retailers are increasingly and creatively wading upstream to partner with their suppliers on their greatest impacts. The key to success lies in selecting the appropriate supplier engagement method and then using that approach as a vehicle to deeper collaboration. But can successful retailer approaches truly motivate meaningful supply chain improvements?
The benefits of engagement
Probing a vast supply chain that may extend across the globe and include thousands of raw material suppliers and as many materials and processes is not easy. But retailers don’t have to go it alone; there are many well-respected, third-party tools and surveys that they can leverage to support this work. And as retailers turn their attention to this challenge, they are finding exciting opportunities for collaboration and innovation.
Adam Siegel of the Retail Industry Leaders Association (RILA) cites four main benefits for retailers that engage their suppliers: To “satisfy increasing stakeholder demands (including to comply with regulations); reduce reputational and supplier risks; identify new cost reduction, quality enhancement, or market opportunities; and ensure supply resiliency for the long-term.”
Pure Strategies’ research, The Path to Product Sustainability, found that 85 percent of survey respondents cited supplier engagement as the top place to invest for product sustainability innovation. Demonstrating that supplier surveys not only benefit retailers, use of customer surveys to focus supplier strategies ranked as the second most valuable product sustainability approach.
Product category surveys
Engaging a group of suppliers through a specific product category survey is one of the most effective ways to tackle key product impacts, especially for retailers seeking to elevate the performance of an entire category of products, as opposed to select companies.
Efforts to examine supply chain impacts run the gamut from homegrown tools and surveys to industry-wide efforts, to the granddaddy of them all — The Sustainability Consortium’s (TSC) product category surveys and implementation tools. TSC, a global non-profit focused on practical solutions for consumer product sustainability, is engaged in a revolutionary, collaborative effort to identify the critical social and environmental hotspots and improvement opportunities for dozens of categories of products. Using an external tool developed through multi-stakeholder consensus allows retailers to address issues that may be too complex or controversial for them to evaluate on their own. The TSC survey questions are available to all retailers directly from TSC or via the Product Stewardship Network, a web-based business network from SAP.
“Forward-thinking retailers like Walmart, M&S, Kroger and Ahold have already tackled the big opportunities in their own businesses,” notes TSC’s Euan Murray. “For them, the new opportunities are in the products they sell and in helping shoppers use products more sustainably. And retailers have insights, experience and expertise that their suppliers sometimes lack. To really drive change, The Sustainability Consortium is helping retail merchants directly engage with their suppliers on sustainability. This helps make sustainability part of everyday business and is what's needed for it to become truly mainstream.”
Walmart has deployed the TSC surveys to thousands of suppliers via its Sustainability Index. Zach Freeze, Walmart’s Director of Sustainability for General Merchandise and Softlines, notes: “Our merchants are the key point of leverage in working with suppliers to communicate our priorities and to push for improvements. When buyers discuss Index scores and strategies for improvements with their suppliers, it communicates our priorities and allows us to engage entire product categories.”
CVS and Target turn to focused tools
For many retailers, focusing broadly on product impacts from cradle to grave is less important than diving deeply into issues such as chemical safety or social compliance. On chemicals, retailers including CVS/pharmacy, and most recently Amazon, have turned to the WERCSmart risk-mitigation solution to manage regulatory compliance requirements for chemicals.
“At CVS Health, we recognize the value of partnering with our suppliers to mitigate environmental impact, “ notes Eileen Howard Boone, SVP of Corporate Social Responsibility and Philanthropy at CVS Health. “WERCSmart enables us to classify products as non-hazardous or hazardous according to both federal and state regulations. Using this tool, we prioritize certain ingredients to remove from all CVS Brand products, and all products across our supply chain are held to the strictest regulations.”
Importantly, WERCSmart is only one pillar of the company’s chemicals program. Boone explains that the company also conducts, “annual audits with all suppliers to ensure that they are adhering to all performance, regulatory and compliance requirements.”
Target uses its own Sustainable Product Standard to communicate its priorities for its personal care and household cleaning products. The company evaluates chemicals of concern, ingredient transparency and environmental impact for items in these categories. With incentives for companies to improve their product scores and mentoring on best practices, the program has the potential to drive far-reaching change.
Supplier collaboration at Walmart
Supplier surveys and related tools open up previously opaque supply chains — but their real power lies in uncovering opportunities for retailers to partner with suppliers on solutions to thorny issues. When retailers shine a light far upstream — onto farms, down mines, and into sweatshops — they may uncover issues that demand a concerted effort to resolve.
“The Index showed us there was a tremendous need for education and assistance on energy efficiency in our supplier’s factories,” explains Walmart’s Freeze. “We rolled out the RedE system to our toy manufacturers in China in the fall of 2013 to provide them with a toolkit that any factory could use to start working on energy efficiency right away.
“We know that many factories will be more comfortable tackling the least expensive changes first. RedE allows them to get started and then ramp up to the more capital-intensive projects over time. As they progress, we will be tracking reductions in energy use and greenhouse gas emissions in aggregate over time. We are in the process of scaling up these efforts beyond toys to additional categories and eventually we may expand to incorporate water and waste into the tool, as well.”
Walmart also collaborates directly with suppliers on key initiatives. Freeze continues: “When we became aware of an untapped opportunity to increase the recycled content in our plastic storage products, we partnered with one of our leading suppliers to explore this. As recycled plastic costs less than virgin plastic, there was a cost motivation for pursuing this, as well as a sustainability one. By partnering together in 2014, one key supplier alone will utilize over seven million pounds of recycled material in 19 products in support of our goal to improve material sustainability.”
A retail revolution
With robust third-party surveys that can help focus retailer-supplier collaborative energies, there are abundant examples from leading companies of successful partnerships to elevate product sustainability. TSC’s Murray sums the opportunities up for us this way: “By using consistent tools and metrics, and by recognizing the best performers and encouraging the laggards, retailers can be the rising tide that lifts all boats.”