Wal-Mart reframed it as a business strategy, and now eco-friendly packaging is beginning to bear fruit.It’s no exaggeration to say 2007 was a watershed year for sustainability: It transformed from something companies were talking and learning about to something they began implementing. • And while Al Gore and his documentary The Inconvenient Truth are credited for garnering broad environmental awareness among consumers and business at large, retailers prompted unprecedented action in the consumer packaged goods sector. In the UK, it was Marks and Spencer and Tesco pledging to put the planet at the heart of their strategies. Here in the United States, it was, of course, Wal-Mart. • Over the past year, the Arkansas-based retailer has guided some 60,000 manufacturers through a trial of its sustainable packaging scorecard, a tool to help its buyers evaluate and rate brands on their waste and energy reduction efforts and to make progress toward the company’s goal to reduce packaging five percent by 2013-equal to removing 213,000 trucks from the road and saving 67 million gallons of diesel fuel each year. • Even before the scorecard was enacted on February 1st of this year, there was plenty of grumbling over it, and the methodologies behind it (Wal-Mart reports 20 percent of its suppliers have yet to enter the system and that, yes, it’s tinkering with the metrics behind the scenes).
New perspective on costsBut recent indications from Wal-Mart are offering new incentives for CPG companies to get compliant.
“Having tighter standards on the social side, on the environmental side and on the quality side will reduce waste. We are even willing to pay more for products that have that,” Wal-Mart’s senior vice president of sustainability, Matt Kistler, told Reuters in February.
Kistler says savings in the supply chain will, in some cases, “more than offset the incremental costs of what we are paying for a better quality item.”
The result is that Wal-Mart has reframed the way CPG executives are looking at sustainable packaging. Rather than usurp its business strategies, Wal-Mart says sustainability is helping it achieve them in a better way.
“We don’t view ourselves as a green company,” CEO Lee Scott said in a speech to the National Retail Federation in January. “We are working to build a sustainable company in ways that are driven by our business and good for our business.”
New York design firm Little Big Brands says more CPG companies should take a cue from Wal-Mart and look at sustainable packaging as a powerful business strategy.
“While the environmental benefits of their packaging reduction initiative are staggering, it’s hard to ignore that Wal-Mart alone stands to save $3.4 billion,” says Little Big Brands partner Pamela Long. “If businesses realize that sustainability is a way for them to save money, create a better product, and connect with customers who care about the environment, many more would be embracing the idea.”
Take the laundry detergent category. Wal-Mart announced it would transition every brand of liquid laundry detergent on the shelves of its U.S. stores to concentrated, compact versions by May (San Francisco-based Method kicked off the ultra-concentrated concept, but it took the heft of Wal-Mart to take it mainstream).
The savings are impressive-projected at 125 million pounds of paperboard, 95 million pounds of plastic resin and 400 million gallons of water-but also surprising, considering the technology to concentrate liquid detergent has been available for more than a decade (why hadn’t brands acted before?).
True, there are often upfront conversion costs. Laundry detergent brands have likely had to create new bottle molds and source new caps-Unilever has reportedly had to shift to a new labeling process, and it’s estimated that Procter & Gamble incurred nearly $200 million to convert its laundry portfolio to compact packaging.
But with benefits like reduced material input costs and more efficient transport and storage, the savings in one area can account for costs in another. Wal-Mart has driven home that point. And it’s been an enormous trigger for CPG brands.
Rising energy costs are another, says Anne Johnson, director of the Sustainable Packaging Coalition. Packaging competes for the same energy and materials used in consumer products, fuel, and, in some instances, food.
“The economic climate is having a huge influence. Globally there’s been a massive increase in demand for resources and energy,” says Johnson. “Packaging is affected and companies are really affected, so how you use and manage those resources is increasingly important.”
That’s largely why CPG companies have looked at eco-efficiencies-lighter packaging, downsized formats and recycled materials-as their first order of business.
“Frankly,” says Johnson, “recycled materials become a hedge against virgin material prices that can be sensitive to energy.”
But, she says, more guidance is needed on materials and processes overall.
Even “deep green” brands, those with the environment at their core, have trouble sorting it out. Last year, UK-based innocent drinks conducted a trial with PLA, a corn-based plastic. After the test period, though, innocent decided to go with 100 percent recycled PET.
Jessica Sansom, the brand’s sustainability manager, says that, while PLA is made from a renewable resource, “it does not use any waste materials”. Sansom also says the brand was concerned about the use of food crops to produce plastic, and about feedback from recyclers that “PLA bottles can add costs into their recycling operations and, in some cases, prevent recycling of conventional plastics”.
“It isn’t always the obvious solution that makes the best sense overall,” she says.
To be fair, NatureWorks, the primary U.S. producer of PLA, says its material can be composted (through industrial, not home-based, systems), incinerated via waste-to-energy systems, chemically recycled to its base unit or, in fact, recycled. The trouble is, in the United States as well as the UK, the recycling infrastructure isn’t ready for PLA, yet.
“NatureWorks PLA has the potential to be recycled once there is a sufficient volume of product in the market and the infrastructure is in place to make recycling economically feasible,” the company’s web site says.
Joel Makower, executive editor of GreenBiz.com, says such dilemmas are common on the path to sustainability. “It’s rare to find the perfect choice that will always be perfect in a time of technological change,” he says. “Sometimes there are unintended consequences...it all depends on the company and its products.”
And a clear definition of sustainable packaging in the first place. Innocent pressed its packaging suppliers to make 100 percent recycled PET viable, but such efforts have often been hampered by the different “languages” spoken by various players.
The Sustainable Packaging Coalition worked to combat that issue with a detailed definition of sustainable packaging released in October 2005, giving marketing, design, packaging and procurement professionals a common vocabulary and the foundation to work collaboratively.
Conversation turns to metricsJohnson says that, with a definition in place, the sustainable packaging discussion has now largely moved to how progress is measured and what tools and resources are appropriate.
“When you have a lot of different initiatives using different metrics and data sets, the lack of standards really has become part of the conversation,” Johnson says. “We’re at a point where we need to do some work in clarifying that landscape.”
One such tool is life cycle analysis (LCA), which examines environmental inputs and outputs of a package from raw material acquisition, through manufacture, to the retail shelf, at the point of use and through the end of its life. Early forms of LCA were used by Coca-Cola in the ‘60s, but, as LCA has evolved, it has become increasingly more expensive, and complex.
The principles behind it, however, are being adopted for the development of more simplified tools. Not surprisingly, the SPC is devising one such instrument, with a beta version planned for release this summer.
Designed for the packaging design phase, SPC’s material assessment tool will look at packaging attributes: metrics that describe characteristics of the package (recycled vs. virgin content, use of renewable materials, what is the likely end of life, etc.); and environmental evaluation metrics: fossil fuel consumption, water consumption, etc.
Though, according to Johnson, “It’s not a tool designed to replace a full life cycle analysis”.
But by collecting national peer-reviewed lifecycle data to develop the tool, she hopes the utility will establish credible metrics to drive environmental evaluations for CPG companies, so “they don’t have to go to a consultant every time they want to do an analysis.”
Marketing Needs consistencySuch clarity is also required to shore up green marketing claims. Little Big Brands’ Long says some CPG marketers have been careless in jumping into the green movement too quickly.
“Few have taken the time to do what’s right for their own brand and the environment,” she says. “For most, it’s a ‘me too’ approach of bathing packaging in Kelly green, coming up with a half-hearted socially responsible platform, or slapping natural and organic claims on their products.”
Sherwin Williams, for instance, has taken heat over its “Cover the Earth” logo, which depicts a can of paint spilling its contents over a globe. It’s been in use since the late 1880s, but, in an era when brands are hyper-concerned about their environmental images, Long says, the logo and its implication stick out like a sore thumb.
“It’s more than a little confusing for the consumer,” she says. “[Sherwin Williams] may be embracing environmental initiatives, but it’s not believable with their current corporate identity.”
Others are taking the opposite tact, creating new identities or labels to prominently tout their sustainability efforts. But, according to Jacqueline Ottman, founder of J. Ottman Consulting, the “self-certification” trend is likely to fail.
“This year will see the seeds planted to severely curb the use of self-imposed eco-labels such as Home Depot’s ‘Eco Options’ and Ca’s ‘Clean Earth’ [labels],” she predicts. Her advice? “Stick with only those, such as Energy Star, FSC and organic, that have been issued by trusted third parties.”
It’s clear that if the industry doesn’t police itself, there are those waiting in the wings who will. The Federal Trade Commission, for instance, is stepping in to assess eco-labeling initiatives, and to determine the substantiation for such green packaging terms as “sustainable” and “renewable”.
Environmental activists and investors are also at the ready to ensure eco claims are accurate and that brands are transparent about their businesses.
Some CPG companies have decided to work closely with such stakeholders: Clorox, for instance, partnered with the Sierra Club to roll out its GreenWorks brand of household cleaning products this year. But other companies protest and say activist efforts are often misdirected-that they don’t understand true business challenges.
“Waitrose is constantly under scrutiny about how many carrier bags we use and how far our food travels-certainly relevant questions. Yet I am hardly ever quizzed about the single biggest contributor to our carbon footprint: refrigeration, which accounts for 60 percent of our energy requirements,” writes Mark Price, the UK retailer’s managing director on his blog, “Refrigeration is never going to grab headlines, but we are investing £55m over five years to ensure that ours is more efficient.”
Information is key, says Price. “Customers need to be aware that ethical purchasing decisions are usually far more complex than bite-size mantras or headlines. Being truly ethical is never easy.”
To be sure. And brand marketers should expect that mistakes are going to be made. But that shouldn’t paralyze you from taking steps toward sustainable packaging and being willing to move forward with less than perfect solutions. Method, the San Francisco cleaning brand, has a good take, saying, “We consider mistakes dirty little messes we can learn from, and nothing that can’t be cleaned up and made better.”
Go long with SustainabilityMost experts say it’s important that CPG companies are recognized for their efforts.
“If we want to drive positive behavior, you want people to get recognition in the marketplace for that,” says SPC’s Johnson.
One way to do that is to reach for broader, more progressive sustainable packaging goals.
For instance, a gap in Americans’ awareness of global warming and their willingness to buy green products or recycle conventional ones reveals an opportunity for brands to take the lead in communicating better product stewardship, and to win points by instilling a sense of self sufficiency in consumers that, unfortunately, seems to be lacking.
Pricing is another strategy.“We have an enormous opportunity to help influence consumer behavior in a way that also protects our environment. Price is perhaps the most important factor in helping motivate consumers to make the right decision,” says Wal-Mart’s Lee Scott.
Another big CPG goal could be the development of recovery and reuse systems for materials, where, Johnson says, “everyone stands to gain”. Coca-Cola, for instance, has teamed up with the National Recycling Coalition on a grant program that donates recycling containers for use in public settings; it’s part of an ambitious $60 million commitment by the beverage company to recycle or reuse all the plastic bottles it uses in the U.S. market.
Surely, as more brands take greater hold of sustainable packaging, companies like Wal-Mart, Coca-Cola and other visionaries will not be the only ones enacting such sweeping efforts.
In a speech to managers at the annual kick-off meeting for its U.S. stores, Wal-Mart’s Lee Scott said there’s opportunity for companies as people around the world become disillusioned by governments’ seeming inability to solve big problems, including global warming. “I can tell you that’s changing,” he said. “People are now looking to business to fill the problem-solving vacuum.”
WHERE TO GO FOR MORE INFORMATION...Wal-Mart’s Sustainable Packaging Scorecard
(Education on the scorecard available atwww.sustainability-education.com)
Green design consulting
Little Big Brands (917.912.6346;email@example.com)
Sustainable packaging definition
(Available for download on the Sustainable Packaging Coalition’s web site,www.sustainablepackaging.org)
Corn-based PLA polymer
NatureWorks LLC (800.664.6436;www.natureworksllc.com)
Green marketing consulting
J. Ottman Consulting (212.879.4160;firstname.lastname@example.org)