In the shadow of sustainability

by Keith Nunes
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In September 2007, when the staff of the Grocery Manufacturers Association (G.M.A.) began planning the association’s first-ever Sustainability Summit in Washington, the staff expected 200 to 300 to attend. Two weeks prior to the event, which was held Jan. 17 and 18 at the Ritz Carlton Hotel, attendance reached 600, and the association was forced to close registration.

"If that doesn’t tell you something, it should," said Daniel C. Esty, director of the Yale Center for Environmental Law, author of "Green to Gold," a book for executives trying to understand and address the issue of sustainability, and a keynote speaker at the Summit.

Depending on your position within a food company, environmental sustainability may take many forms. For chief executives, it is a top-of-mind mandate because customers, most notably Wal-Mart Stores, Inc., Bentonville, Ark., are demanding, processors develop and implement sustainability initiatives to remove cost from the supply chain and take a more proactive stance on preserving natural resources.

"Working with customers up front is essential," said John Brock, president and chief executive officer of Coca-Cola Enterprises, Atlanta. "Sustainability is clearly on the agenda of what our customers want to hear from us."

The sharp rise in the costs of many commodities also has prompted food industry chief executives to direct their staffs to identify costs that may be removed from the supply chain in an effort to get spending under control. Reducing energy and water usage are just two areas where food processors may reduce costs as well as improve their environmental sustainability profile.

For operations executives, the challenge is daunting once they get beyond the low-hanging fruit of initially reducing energy and water usage. Many operations managers also are struggling to determine the best methods for measuring an operation’s environmental impact throughout the supply chain and how to reduce it.

In the purchasing department, managers are being asked to incorporate environmental values into the equations with which they base some of their purchasing decisions. Unit price remains paramount, but quality and now sustainability also must be factored.

"Lee Scott has unleashed a green tsunami, but it is not just Wal-Mart," Mr. Esty said. "We are seeing investors focusing on climate issues and pushing capital into the market."

Stephen A. Silbert, senior vice-president of industry affairs for the G.M.A., said the issue of sustainability appeared on the association’s radar 20 months ago.

"While there is a focus on Wal-Mart, I would argue Whole Foods is the most advanced retailer in this space," Mr. Silbert said. "Their sourcing, hiring and training is focused in this area. They have complete programs from the beginning of production through to the products on the shelf."

So-called "trickle-down sustainability" was emphasized during the Sustainability Summit. Efforts by retailers and food service operators have increased the pressure on food processors to push ahead with their own sustainability initiatives.

The effort has even trickled down to food industry suppliers. In the hallway outside the ballroom companies as diverse as CHEP, Natureworks L.L.C. and Martek Biosciences Corp. were promoting the sustainable benefits of their products. Philip C. Fass, executive director of industry and commercial relations for Martek, pointed to algae, the raw material used to develop Martek’s omega-3 fatty acids, as providing a sustainable benefit compared to those that rely on oil from fish.

Many requests, limited resources

One of the challenges facing the largest food processors is responding to the numerous requests from their customers regarding how they are approaching sustainability and incorporating it into their operations and end-products.

"The future is about a collaborative process," said Douglas Conant, president and chief executive officer of Campbell Soup Co., Camden, N.J. "We must do our homework, but you can only manage so much anarchy at one time."

During the Summit, representatives from Wal-Mart, Safeway, Inc. and Sysco Corp. presented how their respective companies approach the issue of environmental sustainability. For Wal-Mart, the initiative took on new meaning for manufacturers in September 2006 when the retailer launched its packaging scorecard and announced its intention to measure the sustainability efforts of its suppliers worldwide.

Matt Kistler, senior vice-president of sustainability for Wal-Mart, told the Summit the supply chain is the biggest opportunity to work on for sustainability projects.

"In some cases it requires looking at how you do things differently," he said.

While Safeway, Inc., Pleasanton, Calif., does not use a packaging scorecard, the retailer expects its suppliers to follow its lead as a user of renewable energy such as solar and wind power. During the Summit, on Jan. 18, the retailer also announced it had converted its entire U.S. truck fleet to biodiesel.

For Sysco Corp., the focus is similar, but the largest food service distributor also must address the requests of its customers for more organic and locally supplied products.

"Our customers are demanding more sustainable products, and we are responding," said Larry Pulliam, executive vice-president of global sourcing and supply chain for Sysco Corp., Houston.

"I think those three presentations illustrate the challenge," Mr. Silbert said. "Each has their own strategy and their goals may be similar, but the bigger issue is, is the root data going to be the same? Is the objective going to be the same? Is it going to be different customer to customer, channel to channel?"

Gene Kahn, vice-president and global sustainability officer for General Mills, Inc., Minneapolis, said when his company began trying to evaluate the impact U.S. agriculture has on the environment, a step necessary in order for General Mills to compare its performance to the broader market, the company found few resources available for a science-based accounting.

"The situation presents an opportunity to create a comprehensive assessment and establish a set of objectives, improvement plans and realistic timelines," Mr. Kahn said. "Additionally, we can use this assessment as an opportunity to increase public confidence."

Developing consistent metrics and monitoring systems were key issues discussed at the Sustainability Summit, and it had to be with relief for manufacturers that shortly after the meeting Wal-Mart called for the development of such a system.

"Many of our supplier factories have multiple customers, including multinational customers and local retailers," said Lee Scott, president and c.e.o. of the retailer, in a presentation before the company’s U.S. store managers on Jan. 23. "Each retailer often imposes different standards and requires separate inspections. This often results in duplication of efforts without a real improvement in performance.

"In the next three years we would like to build a very different system. We believe that there should be one framework of social and environmental standards for all major global retailers. And there should be one third-party auditing system for everyone. This will ensure improvement will occur across the board on a level playing field."

Wal-Mart is working with CIES, a global retail and consumer goods network, as well as several other global retailers to develop the system.

"The effort is now focused on social standards, and I believe it should be expanded to environmental standards as well," Mr. Scott said. "Today, I call on all major global retailers to join this effort."

Mr. Scott went on to say Wal-Mart will continue to focus on requiring suppliers to meet specific environmental, social and quality standards; certifying and ensuring supplier compliance with social and environmental standards; and favoring, and in some cases even paying more to suppliers that meet the company’s standards and share its commitment to quality and sustainability.

A big footprint

An environmental sustainability initiative may cover a gamut of endeavors. It may be as simple as altering the shape of the noodles used to make Hamburger Helper so they fit better in the box and reduce the package size, as General Mills, Inc. has done, or it could, as Kraft Foods Inc. has done, involve developing technology to trap and reuse wasted energy from the ovens that bake Oreo cookies.

It also may be as significant as committing to ensuring all vehicles in a distribution fleet are fueled by biodiesel as Safeway has done.

As with any corporate initiative, buy-in at the top is required. The nation’s retail community has ensured sustainability will remain a top-of-mind issue among consumer packaged goods manufacturers, but beyond the mandate, getting started may be difficult since the topic is so all encompassing.

"Engineering, packaging need to do more and we must look closely at the value chain," said Mr. Conant of Campbell Soup Co. "We also need to look beyond the four walls of our company."

Mr. Silbert of G.M.A. said a good place to look beyond the four walls of a company is to non-government organizations (N.G.O.s) that have experience working in the sustainability field.

"N.G.O.s understand the stakeholders around these issues," Mr. Silbert said. "They have been at it a lot longer than food manufacturers. If we can learn from the N.G.O.s, that also happen to represent consumers, about how to build a sound initiative that focuses, for example, on the rain forest, then we can bring something back that helps our members, their customers and consumers. In the end, it is an opportunity for all segments."

U.K. companies commit to reducing water use

LONDON — Twenty-one food and beverage manufacturers in the United Kingdom agreed to improve water efficiency and reduce water use. The agreement — known as the Federation House Commitment — is expected to save 140 million liters of water per day and have a combined savings of about €60 million ($89 million) per year on water bills.

The Food and Drink Federation and Envirowise, a government-supported sustainability program, helped facilitate the commitment. The companies agreeing to the commitment include Apetito, Birds Eye Iglo, Britvic, Cadbury Schweppes, Coca-Cola Enterprises, GlaxoSmithKline, Kellogg Marketing & Sales Co., Kraft Foods U.K., Mars Snackfood, Muller Dairy, Nestle U.K., PepsiCo U.K., Premier Foods, Tate & Lyle, UIN Foods, Unilever U.K., Uniq, United Biscuits, Warburtons, Weetabix and Young’s Seafood.

"Last October F.D.F. chose to be bold about the environment by targeting priorities where we can make the biggest difference through collective action," said Callton Young, the director of sustainability and competitiveness for F.D.F. "Today’s signing of the Federation House Commitment by many of our largest member companies is an important demonstration of this commitment and their desire to reduce environmental impacts of our sector through the widespread adoption of water efficiency best practice. The leadership that they are bringing to bear on this important issue is to be applauded."

The commitment will help F.D.F. members achieve water reduction goals and be essential to achieving an industry-wide target of reducing water, excluding what is embedded in products themselves, by 20% by 2020 compared with 2007.

The companies signing the commitment will work with Envirowise to review current water use and develop action plans to reduce water use and costs. The companies also will report annually on water and cost savings made on site.

"As with health and well being, we’re committed to being in the leading pack for driving change within the industry," said Greg Peterson, managing director of Kellogg U.K. "Kellogg’s has been using recycled card for our packaging since Corn Flakes first started over 100 years ago. Using resources efficiently is a business imperative and will lead to commercial success as consumers demand this from manufacturers."

Sustainability definition and scope

Many businesses in the U.S. do not share a common definition of sustainability. To address the disparity and establish a common ground for discussion, the Grocery Manufacturers Association’s Industry Affairs Council and management consulting firm Deloitte worked to develop a definition of sustainability as: "The continual improvement of business operations to ensure long-term resource availability through environmentally, socially sensitive and transparent performance as it relates to consumers, business partners and the community."

The definition is consistent with the United Nations and Brundtland Commission definitions of sustainability as well as with definitions by many companies issuing formal sustainability reports. The definition includes environmental, social and economic initiatives.  

Source: "Sustainability: Balancing opportunity and risk in the consumer products industry," a 2007 report by the G.M.A. and Deloitte.

This article can also be found in the digital edition of Food Business News, February 5, 2008, starting on Page 26. Click here to search that archive.

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