2013 Retail Sustainability ReportFUELING CONTINUOUS DEVELOPMENT
Special thanks to our sponsor:                 (www.ey.com/climatechange)2
AT A GLANCE    Retail companies’ sustainability programs are    following a continuous development curve. They    begin by...
Letter from the Retail Industry Leaders      AssociationOn behalf of the Retail Industry Leaders Association (RILA) and ou...
Report Contents        6    About the Retail Industry Leaders Association        7    About This Report        8    Execut...
About the Retail Industry Leaders AssociationThe Retail Industry Leaders Association (RILA) is the trade association for t...
About this ReportRILA’s first sustainability report, the 2012 Retail Sustainability Report, highlighted the major trends a...
Executive Summary:         Fueling Continuous DevelopmentWhile developing this report, we listened to the stories, followe...
decision making. Similarly, organizations can use investments in information technology such as        environmental manag...
Stakeholder engagement. What are you working on?           Product and supply chain. What are you working on?    Consumer...
Chapter One:     Managing Sustainability11
Team and     Organizational     Structures     A sustainability team is the lifeblood of a     sustainability program. Tea...
WHILE TEAMS GROW, SENIORITY RISES                                        least one-third of working hours. Complying with ...
Figure 5. To what department does the sustainability leader at   developed voluntary compliance to maintain properyour com...
regulatory compliance for those who sell products             focus their ethical sourcing efforts on their private-with h...
Investing andBenefitingAll companies must rank their prioritiesbased on their strategic importance andbusiness benefits an...
INVESTMENT MODELS                                                Reducing waste is another; it lowers costs and can       ...
Figure 9. What risks to your business are you explicitly                the burden on local energy and landfill infrastruc...
Prioritizing and    Planning    Prioritizing, planning, executing, and    evaluating are crucial phases to the success    ...
BROADENING EFFORTS                                                improvement. All of them also define sustainability to  ...
Figure 14. Internal organization - what are/will you work on?        Figure 15. Stakeholder engagement - what are/will you...
Table 2. Stakeholders necessary to engage for each goal type GOAL TYPE        EXAMPLE                  EXAMPLE            ...
Measuring andReportingIn order to track and report on the progressof sustainability programs, relevant financial,environme...
MEASURING KEY SUSTAINABILITY METRICS                               progression of their programs, they are able to make   ...
channels is expected to rise more than threefold                     While about two-thirds of companies currentlyover the...
Chapter Two:     Implementing Sustainability26
Building OperationsRetail stores and distribution centers varysignificantly in size, design, and location, butthey all hav...
RECYCLING AND WASTE MANAGEMENT                                    waste are the two types of goals retailers most often   ...
like LED (light-emitting diode) bulbs with significantly     Interior space build outs require the installation ofimproved...
different, leases that incorporate green provisions               The most common obstacle that retailers andwill typicall...
Supply ChainOperationsThe consumer product supply chain is anextensive and complex global network.Supply chains span count...
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
2013 RILA retail sustainability report
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2013 RILA retail sustainability report

  1. 1. 2013 Retail Sustainability ReportFUELING CONTINUOUS DEVELOPMENT
  2. 2. Special thanks to our sponsor: (www.ey.com/climatechange)2
  3. 3. AT A GLANCE Retail companies’ sustainability programs are following a continuous development curve. They begin by developing programs and practices, implementing strategies and technologies, and collaborating internally and externally. These activities uncover significant business benefits that fuel further investment in turn. As the retail sustainability field evolves, a class of top performers has emerged—those companies that have defined the development curve for the industry by embracing the full breadth of sustainability activities, thereby achieving an equally wide breadth of benefits. The respondents to the survey that forms the basis of this report are retail companies representing more than 65,000 locations and $1 trillion in global revenue.3
  4. 4. Letter from the Retail Industry Leaders AssociationOn behalf of the Retail Industry Leaders Association (RILA) and our member companies, we are proud to presentRILA’s second Retail Sustainability Report. For the past six years, RILA has provided resources to empower,enhance, and accelerate sustainability activities in the retail industry; research like this report is a cornerstone ofour efforts, and is intended to help companies understand how they compare to others in the industry and wherethere are opportunities for improvement.The objective of this report is only to act as a snapshot of the industry’s sustainability programs. Between thepublication of our first Retail Sustainability Report in January, 2012 and the publication of this report, we havefound that the industry is continuing to drive progress and increase accountability on the most critical issues. Also,through this report, we want to bring to your attention the significant business benefits retailers have achievedfrom their sustainability endeavors, ranging from improved employee loyalty to decreased costs to more resilientsupply chains. As you will see illustrated in the subsequent chapters, these benefits are fueling the continueddevelopment of sustainability programs over time. However, program development does not come withoutchallenge.Please use this report to understand the core components of a sustainability program, as well as the innovativestrategies retailers are pursuing. We will continue to publish this report in future years to show how the industry isprogressing on key sustainability indicators. Sandy Kennedy Deborah White Adam Siegel President Executive Vice President and Vice President, General Counsel Sustainability and Retail Operations4
  5. 5. Report Contents 6 About the Retail Industry Leaders Association 7 About This Report 8 Executive Summary: Fueling Continuous Development 11 Managing Sustainability 12 Team and Organizational Structures 16 Investing and Benefiting 19 Prioritizing and Planning 23 Measuring and Reporting 26 Implementing Sustainability 27 Building Operations 31 Supply Chain Operations 35 Stakeholder Engagement 40 Conclusion 41 Appendix: Member Survey5
  6. 6. About the Retail Industry Leaders AssociationThe Retail Industry Leaders Association (RILA) is the trade association for the world’s largest and most innovativeretail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers,which together account for more than $1.5 trillion in annual sales, millions of American jobs, and more than100,000 stores, manufacturing facilities, and distribution centers domestically and abroad.The retail industry is proud of its accomplishments and excited to continue to evolve sustainability programs thatdrive business value, consumer and employee loyalty, and support a healthier planet. And RILA is excited tocontinue to convene the industry’s leaders and advance the practices and breadth of business benefits of retailsustainability programs.RILA’s Retail Sustainability Initiative (RSI) focuses on five topics key to successful retail programs: 1. Energy and greenhouse gas emissions 2. Waste and recycling 3. Products and supply chains 4. Environmental compliance 5. Communicating, reporting, and engagingRSI engages retail sustainability executives to share best practices, develop new processes, and communicatetheir efforts to the industry’s most crucial stakeholders. RILA uses its annual conference, benchmark studies,collaborative partnerships, and research on behalf of retail sustainability interests to achieve the objectives set bythe five sustainability topics listed above.6
  7. 7. About this ReportRILA’s first sustainability report, the 2012 Retail Sustainability Report, highlighted the major trends and bestpractices within the industry in a case-study format. The report educated the industry’s stakeholders about itssustainability achievements, goals, and challenges by highlighting the specific sustainability activities retailers arepursuing. The report found that environmental and social considerations are beginning to supplement traditionalmeasures of competition, including price, service, and quality. We encourage you to reread the 2012 report tolearn more about how these trends are influencing the industry’s direction.As we reflected on the 2012 report and brainstormed about opportunities for improvement, we determined that itwas important to update this year’s report format to provide a RILA-wide snapshot. The current report effectivelyportrays a detailed view of the industry’s adoption of sustainability programs. Specifically, we asked the largestretail companies about the indicators they use to assess the depth and breadth of their sustainability programs.Equally important to establishing this baseline, we will update this view over time to see how the industryprogresses in the coming years. Will the industry’s efforts continue to accelerate? Will sustainability becomeintegrated into functions across the retail organization or remain a separate and distinct role? Will the scope ofsustainability focus areas continue to grow, or will companies hone their attention? This updated report format willallow us to answer these questions over time.We also recognize that it is important to show current trends. Where possible, we asked retailers about wherethey see their company’s sustainability efforts progressing over the next two years. While we cannot definitivelystate that the industry will follow these projections, the trends provide a view of one potential future.SOURCES OF INFORMATIONThis report was developed through two sources: a survey and in-depth interviews. The survey, which can befound in the Appendix, was disseminated in July of 2012; 35 RILA member retailers responded, representingmore than 65,000 locations and $1 trillion in global revenue. Ten RILA member companies were interviewed andeight companies served as report advisors.ERNST & YOUNG INVOLVEMENTRILA is extremely pleased that Ernst & Young LLP (www.ey.com/climatechange), a global leader in assurance,tax, and advisory services, supported this RILA effort. Ernst & Young, an organization that is well recognized forits sustainability leadership, provided RILA with financial and advisory support for the conceptualization anddevelopment of the 2013 Retail Sustainability Report.7
  8. 8. Executive Summary: Fueling Continuous DevelopmentWhile developing this report, we listened to the stories, followed the funding, and analyzed the conversations thathave led to the development and subsequent growth of company sustainability programs. From that research, werecognized that once a company kicks off a sustainability program, the program tends to grow and thrive, even inthe midst of an economic recession. ―Why?‖ we wondered. Inquiring further, we realized that, while sustainabilityprograms are initiated in any number of ways, their development and growth hinge on the same key elements asany other business program. As a sustainability program matures within an organization, its business benefitsbecome increasingly apparent, and the business applies more funding and resources to it. We also found that aclass of top-performing companies that best exhibits this growth dynamic has emerged in the retail industry.PROGRAM GROWTH BEGETS FURTHER GROWTHImplementing systems that promote the expansion of resources, activities, expertise, and benefits of a particularinitiative over time can fuel continuous development. In sustainability, we see that companies who kick offcontinuous development processes are growing, not only the amount and breadth of their sustainability-relatedactivities, but also the business benefits of those activities.Once an organization overcomes any static friction and forms a sustainability program, success stories within theorganization further solidify the business case for sustainability, and executives take note. With proof of conceptestablished and the business case validated, senior management warms up to a broader range of potentialactivities. Increased confidence and commitment expands the program’s resources and allows the scope ofsustainability efforts to broaden.SUCCESSFUL PROGRAMS FEED THE GROWTH DYNAMICWe also recognized that the same ingredients are necessary for asustainability program to be successful as for any other businessinitiative. In particular, five characteristics allow a retailer to effectively Breadth of benefitsinitiate, fuel, and accelerate sustainability programs: 1. Executive engagement. Top executives control a company’s purse strings and make strategic investment decisions. When they recognize that sustainability is not necessarily a cost center but rather drives strategic growth and innovation, there is potential to free up resources and All integrate sustainability priorities into the overall business Top strategy. Amount of activities 2. Investment in people and systems. Ultimately it is up to people to develop, lead, and execute any new business process. A team focused on orchestrating sustainability efforts across an organization can, in turn, educate and train employees in other functional roles about the importance of sustainability in their8
  9. 9. decision making. Similarly, organizations can use investments in information technology such as environmental management systems (EMSs), reporting platforms, decision tools, and financial calculators to integrate sustainability planning broadly. 3. Measurement and tracking. The business adage ―what gets measured gets managed‖ is as true for sustainability as for any other effort. Setting metrics, developing a baseline, and implementing systems to periodically track and report makes a program accountable its progress. Measurement and tracking also provide the mechanisms necessary for the company to set goals and tell stories about their efforts. 4. Goal setting. Setting goals is an integral part of a company’s business and sustainability strategies because the process of goal setting gains buy-in and alignment throughout the organization. To achieve their goals, retailers must develop strategies to engage both internal functional teams who make the business decisions and external stakeholders who provide resources, guidance, and services. Also, announcing goals internally and externally demonstrates a company’s commitment to sustainability. 5. Storytelling. Employees of any business constantly tell stories of all kinds—from the informal anecdote at the water cooler to those conveyed through boardroom meetings and financial reporting. Stories are a crucial way for ideas, practices, and results to be shared across the enterprise, and they are a component of every company’s decision-making process. Showcasing sustainability opportunities and success stories through a variety of channels creates an exciting buzz that promotes broader awareness of activities and shared understanding of how sustainability relates to business objectives. Properly told, stories can convey the business case for programs or projects that help executives to prioritize sustainability as a key strategy and provide the impetus for additional investment. But storytelling should not be confined to those stories told within the company; creatively discussing company achievements related to sustainability can engage consumers and other stakeholders, driving consumer loyalty, brand enhancement, access to additional expertise and resources, and more.Each of these strategies can generate new ideas related to, interest in, and investment for sustainability.A CLASS OF TOP PERFORMERS IS EMERGINGWhile developing this report, we recognized that a variety of practices defined a class of top-performingcompanies. These top performers are active in a wide range of sustainability-related programs—from facilityefficiency to supply chain optimization to stakeholder engagement—and achieve greater-than-average benefits.We identified top-performing retailers as those companies who are focusing on a wide breadth of sustainabilityissues. Of all the companies we surveyed, eight retailers indicated that they include more than three-quarters ofthe facilities, employees, product and supply chains, and stakeholder engagement issues listed below in theirsustainability strategies.Facilities. What are you working on? Employees. What are you working on?  Energy usage  Store employee engagement  Greenhouse gas emissions  Senior management engagement  Water usage  Health and safety practices  Waste and recycling  Diversity programs  Green buildings (i.e. LEED, EPA EnergyStar)  Ethics and governance (i.e. board oversight of  Land use and development sustainability, company ethics policy)  High-efficiency lighting  HVAC retrofitting9
  10. 10. Stakeholder engagement. What are you working on? Product and supply chain. What are you working on?  Consumer education  Measuring life cycle impacts  Engaging suppliers  Product design  Nonprofit / NGO engagement  Materials, including chemicals of concern  Community engagement  Packaging design  Philanthropic donations  Manufacturing human rights impacts  Investor relations  Manufacturing environmental impacts  Government affairs  Sourcing locations (geographic)  Transportation and logistics  Product take-back  Product use and disposal  Plastic bag usage / reduction Business model innovationIn particular, top-performing companies vary from other retailers in the following ways:Top-performing companies have sustainability teams that are led by a vice president or someone in ahigher position and average nine team members in size. The teams’ primary roles are to orchestrate internalefforts, communicate with outside stakeholders, develop strategies, and interact with senior managers. And to doso, they have set up working relationships across the organization, focusing on public and government relations,the supply chain, merchandising, facilities, real estate, and construction.Top-performing companies focus on a wide variety of facility, product lifecycle, and stakeholder managementissues. Facility improvements include waste, energy, green-building design, greenhouse gas emissions, and landuse. Product lifecycle improvements focus on transportation, materials, packaging design, and product take-back.With regard to these issues, the sustainability team manages the development of a company’s strategy and goals,with input from across the organization, and typically plans their efforts with a five-year strategic horizon.As the sustainability team’s scope of responsibilities and breadth of benefits expand, top-performing companiesare increasing their team’s budget. They see a vast array of benefits from their activities, including reducingcosts, managing risks, staying ahead of regulations, and increasing revenues and profits. Riskmanagement activities—a crucial function for the success of any retail brand—include managing reputationalrisks, energy and fuel dependencies, human rights risks in the supply chain, and commodity price fluctuations.To track and report on their performance, top-performing companies measure their energy, material, plasticbag, and fuel usage; waste generation; greenhouse gas emissions; and supplier code of conductcompliance. They communicate through many channels, including their corporate website, intranet site, socialmedia, store signage, the Carbon Disclosure Project (CDP), and a sustainability report, which is assuredinternally.10
  11. 11. Chapter One: Managing Sustainability11
  12. 12. Team and Organizational Structures A sustainability team is the lifeblood of a sustainability program. Teams orchestrate the development of strategies, action plans, and implementation efforts by working with a diverse group, both internal and external to the company. Creating a multidisciplinary team that focuses on sustainability performance improvement is the first step on a path to success within an organization. KEY FINDINGS  Most companies have full-time sustainability teams. Teams are growing, and reporting levels are gaining seniority.  Sustainability teams mainly use their time to orchestrate internal efforts and develop strategies.  No single department stands out as being the champion of retail sustainability; instead each company places their team where it can be most effective.  The sustainability team either manages or has strong alignment with both the environmental regulatory compliance and social compliance functions.12
  13. 13. WHILE TEAMS GROW, SENIORITY RISES least one-third of working hours. Complying with federal regulations, interacting with seniorOf retailers surveyed, nearly two-thirds of companies management, reviewing environmental metrics, andhave full-time staff dedicated to sustainability. Sixty researching best practices collectively make uppercent of companies have part-time staff dedicated another third. While teams are reporting that theyto particular aspects of sustainability. spend less time interacting with suppliers, respondents say that supplier engagement willFigure 1. How is the sustainability staff structured within yourcompany? become more important over the next five years. % of top 0% 20% 40% 60% performers Figure 4. What percentage of your time is spent on each activity throughout the year? Full- and part-time… Full and part-time 57 Full-time staff only % of top 29 0% 10% 20% 30% performers Part-time staff only 14 Orchestrating… Orchestrating internally 22No sustainabilitypart-… No full- or staff 0 Developing strategy 12 Federal compliance Complying with… 2Of the retailers with staff, the full-time team grew on Engaging executives 12average from a little less than three to nearly five Complying with… Complying with local law 3people between 2009 and 2012. Stakeholder… Stakeholders comms Researching… 13 Researching trends Reviewing metrics 8Figure 2. How many staff members does your company devote tosustainability? Interacting with… Engaging suppliers 8 Staff of top Creating public… Creating public reports 5 0 2 4 6 8 performers Completing surveys 4 2012 Full-time 8.9 Creating internal… Creating internal reports 6 2011 2010 Part-time 10.8 2009 REPORTING STRUCTURE VARIESAs teams grow, so too does the highest reporting The sustainability team does not typically report tolevel of the team manager. Since 2009, 40 percent any single department within retail companies;of sustainability teams gained new director positions, instead the reporting structure varies based on aand 29 percent gained new vice president positions. number of factors. The company’s culture, theAs sustainability executives rise in seniority, they department with the biggest opportunity for impact,hold more influence and receive greater attention and the existing resources and enthusiasm all factorwithin the company. into the team’s location. For example, a retailer that is primarily focused on supplier engagement mayFigure 3. What is the title of the top full-time sustainability leader select the sourcing department as the sustainabilityat your company? lead, while a company focused on energy efficiency % of top 0% 25% 50% in its buildings will choose the real estate or facilities performers team to lead its sustainability efforts. EVP / SVP 20 Vice president 60 Through our survey’s ―Other‖ option, some retail 2012 Senior director 2011 20 sustainability teams indicated that they report 2010 directly to executive management, whether the Senior manager 2009 0 CEO, president, or another top executive. We intend to solicit this information through the survey moreTEAMS USE THEIR TIME FOR MANY TASKS directly in the future.All sustainability functions share common tasks.Together, orchestrating internal efforts anddeveloping a sustainability strategy account for at13
  14. 14. Figure 5. To what department does the sustainability leader at developed voluntary compliance to maintain properyour company directly report? working conditions and human rights throughout the % of top 0% 25% 50% entire supply chain, from raw material sourcing to performers the manufacturing process. Sustainability teams Public Relations 25 Human Resources interact with key internal departments to ensure that 13 Legal 0 environmental and social compliance programs Marketing 13 meet the expectations of all stakeholders.Facilities / Real/Estate Facilities Real… 0 Merchandising 0 In retail, environmental compliance considerations Supply Chain 13 mainly center on regulations from the U.S. Other 38 Environmental Protection Agency and Department of Transportation, and state and local jurisdictions.RESPONSIBILITIES ARE BROADENING Specific issues include facility construction and maintenance like stormwater runoff, employeeExpanding a sustainability team also increases its health and safety practices, and hazardous productbreadth of responsibility and interaction within the transportation and waste management.company. The two most common functions ofsustainability teams are strategic planning and Retailers’ environmental compliance programs aretactical implementation of sustainability programs. managed between sustainability and environmentalTo guide the strategic direction of their sustainability compliance operations, with half of companiesprograms, teams strategize, set goals, and report on holding both operations in the same department andsustainability initiatives, all while working to engage the other half in separate departments.both the company’s employees and externalstakeholders. This tactical strategy extends to Figure 6. How strong is the alignment between your sustainabilityrecycling operations, energy management, and environmental compliance functions?greenhouse gas reduction, and compliance with % of top 0% 20% 40%environmental regulations. performers Same department 0Specific initiatives vary greatly among retailers. Each Weak alignment 43company continuously defines and refines its focus Strong alignment 29 No env. compliance 29on issues material to its business. For example,while grocers may focus on sustainable seafoodsourcing, apparel merchandisers find addressing the Of those retailers with environmental compliance inworking conditions of their manufacturers’ a separate department from sustainability, theemployees more relevant. Often public awareness environmental compliance team is most oftenand policy guide these emphases, such as housed under loss prevention, asset protection,electronics retailers who find themselves legal, or environmental health and safety. Theincreasingly invested in growing e-waste recycling teams, while reporting to separate locations withinoptions. However, almost all retailers are uniformly the organization, frequently coordinate for updatesresponsive to such issues as legislation surrounding and strategy alignment. Two of every three retailersplastic bags since bag taxes or bans directly impact have an environmental compliance team that isa fairly ubiquitous feature of retail shopping. deeply aligned with the company’s sustainability initiatives.COMPLIANCE IS THE FOUNDATION OF While compliance is a familiar focus area forA SUSTAINABILITY PROGRAM retailers, important new issues are always emerging.The retail industry places significant priority on Increased awareness of chemicals of concern, ascompliance with both regulatory requirements for well as more comprehensive product safety and riskenvironment, health, and safety, as well as industry- mitigation, has led to an even broader emphasis on14
  15. 15. regulatory compliance for those who sell products focus their ethical sourcing efforts on their private-with hazardous properties. These teams are label products.responsible for ensuring that all products posing anyrisk are in compliance with appropriate laws. Over the past few decades, companies have continued to develop new strategies to educate,Social compliance or ethical sourcing can be defined train, and ensure—often through facility audits—thatas a continuous process in which companies refine their supply chain partners are making productstheir sourcing policies and practices to ensure the under conditions that meet their standards. Thosehealth, safety, well-being, and fundamental rights of standards are often documented and codified inall people employed throughout their supply chain. supplier codes of conduct, which are written andMost often focused on in developing countries, enforced individually or collectively through industrysocial compliance is driven by ethical associations.considerations, consumer interest, andnongovernmental organizations investigating the Nearly two out of three retailers report that theirworking conditions of laborers throughout the supply social compliance teams, like environmentalchain. compliance teams, are strongly aligned with their sustainability teams. Almost 80 percent manageSuppliers and retailers adhere to social social compliance operations in a separateaccountability standards, whether self-imposed or department, most commonly with the merchandising,legal, within their social compliance objectives. To legal, public relations, or supply chain groups. Thesedo so, companies create and implement ethical groups, often with direct visibility to the supply chain,sourcing policies and practices that extend beyond can be most effective in ensuring compliance totheir own organization into their product supply vendor’s codes of conduct. However, in recentchains, both domestically and abroad. Consumer years, the convergence of environmentalproduct manufacturers with well-recognized brand sustainability and social compliance functions hasnames will often have their own ethical sourcing begun to paint a complete picture of suppliers’policies and practices independent of the retailers environmental and social impacts.they sell to; therefore, retail companies typicallyPRACTICES OF TOP-PERFORMING COMPANIES DIMENSION TOP TRAIT(S) Top sustainability leader Vice president or above Size of sustainability team Average of nine team members Resident departments for Public and government relations, supply chain, merchandising, and part-time sustainability reports facilities, real estate, and construction How the sustainability lead Orchestrating internal efforts, communicating with stakeholder spends his or her day organizations, developing strategy, and interacting with senior managers15
  16. 16. Investing andBenefitingAll companies must rank their prioritiesbased on their strategic importance andbusiness benefits and allot them properfunding and resources. When it comes tosustainability, the costs of certain projects—whether efficiency upgrades, processchanges, consumer education, employeetraining, or otherwise—and the directresource savings are both quite tangible.However, the additional benefits can beeven more significant than simply lowercosts. Sustainability can increase brandloyalty and employee productivity andretention, mitigate risk, improve communityrelations, and more. Therefore, investmentin sustainability must weigh the direct costsand savings with a host of benefits, eventhose that are difficult to measure.KEY FINDINGS  Most companies’ sustainability budgets are remaining the same.  Most companies act on sustainability investments that they expect to generate a two- to three-year payback.  Companies see the primary benefits of sustainability as reduced costs, brand enhancement, and risk management.  Sustainability programs target the management of reputational risks and energy and fuel price risks.18
  17. 17. INVESTMENT MODELS Reducing waste is another; it lowers costs and can even generate new revenue streams. Finally,Developing a strong business case for sustainability partnering with suppliers may uncover resourceprograms remains an important objective for efficiencies that also translate to lower costs,companies. Retailers most commonly seek a return whether by reducing energy, water, material, oron investment for sustainability projects that is waste. (Refer to the supply chain operations sectionsimilar to all other investments. Across the industry, for a thorough discussion of supplier collaborationthe average minimum payback period for a around sustainability.)sustainability project is two to three years. Topperformers, however, plan with a longer time Figure 8. In which of the following ways have your sustainabilityhorizon, and most often look for paybacks as far out activities proven to be beneficial?as three to five years. 0% 50% 100% % of top performersMany companies expressed that projects with Reduced costs 100 Brand enhancement Brand… 100environmental and/or social benefits often have ahost of ancillary benefits that may difficult to quantify Risk management 100 Employee… Employee enthusiasm 63in the direct payback calculations. Programs must Stay Stay ahead of… ahead of regs 88also anticipate other factors like shareholder New innovations New sources of… 75interests, future consumer or regulatory trends, or Satisfy stakeholders Satisfy… 75potential risks to properly finance sustainability- Increased revenue 88related projects. 88 Increased profits SatisfySatisfy consumer… consumer demand 75Figure 7. Generally, what is the minimum payback a capital Enter new markets 50improvement project related to sustainability must show beforebeing approved? % of top 0% 10% 20% 30% 40% Beyond lowered costs, brand enhancement and risk performers mitigation are also crucial benefits. Seventy-one 2-3 years 13 percent of companies report that they use 1-2 years 25 sustainability activities to benefit their organization in 3-5 years 38 those ways. 6 months to a year 0 No minimum…No minimum required 13 A retailer’s corporate brand is among its most valued More than 5 years 0 assets. Retailers invest a significant amount of resources to enhance their brands with consumers,PRIMARY BENEFITS government, and other key stakeholders. Doing soRetailers are reporting five primary benefits of keeps the company’s brand at the top of consumers’sustainability programs: reduced costs, enhanced minds when they are deciding where to shop, and itreputation, risk management, employee enthusiasm, builds trust in the communities in which retailersand proactive regulatory strategies. On average, operate. So, it is not surprising that retailerstop-performing companies recognize a wealth of recognize the corporate reputational rewards thatbenefits that extend to increased revenues and sustainability brings.profits. Risk mitigation, or seeking to protect the brand’sNearly 90 percent of respondents mentioned that reputation, is another crucial business objective fortheir sustainability efforts are lowering costs, retail. Retailers manage risks like brand reputation,primarily by improving business and resource energy and fuel dependencies, human rights issuesefficiency. Increasing the store, distribution center, in the supply chain, and commodity priceand trucking fleet’s energy and fuel efficiency are fluctuations through their sustainability programs.only a few examples that translate to lower costs.17
  18. 18. Figure 9. What risks to your business are you explicitly the burden on local energy and landfill infrastructure.addressing through sustainability initiatives? Companies that proactively address these issues will 0% 50% 100% % of top be positioned to succeed when other such performers Reputational risks regulations emerge. Top performers especially 100 Energy / fuel…Energy dependencies recognize this advantage. 75 Supply chain…Factory human rights 75 Commodity price…Commodity fluctuations 75 SUSTAINABILITY BUDGET Employee employee… Drop in recruiting 25 Sustainability budgets reflect company priorities. Financial instability 38 Many retailers report that their most recent budget Weather conditions Weather… 38 for sustainability activities will not change for this year. However, more than a quarter of companiesFostering employee enthusiasm for recycling, expect to grow their budget in the coming year.philanthropy, volunteerism in the community, andteam building through meaningful projects are also Figure 10. Did your sustainability budget increase, decrease, orbenefits. Sustainability projects can give employees remain the same for 2012?a sense of personal pride and fulfillment, which 0% 25% 50% % of top performersimproves retention, draws in the best new talent, Increased in 2012 38and promotes interdepartmental collaboration. Decreased in 2012 0 Remained the same 25Companies will often develop individual or industry No dedicated budget No dedicated… 25voluntary programs to reduce the need forgovernment regulations. If a retail companyminimizes its waste generation, energy and fuel Furthermore, most companies report thatusage, land-use footprint, and other environmental sustainability continues to become more important toimpacts, and strives to improve the labor conditions their organization. Nearly three out of every fourof the workers across its product supply chains, it respondents say so, while no company says thatwill have a competitive advantage when regulations sustainability is becoming less important.are developed. Recent federal regulations require Figure 11. Is the importance of sustainability increasing,companies to track the origin of forest products decreasing, or remaining the same at your company?through their supply chains and to publicly report on % of top 0% 50% 100%the potential for the sourcing of certain conflict performersminerals in their products. California legislation Increasing 100requires companies to report on certain human Decreasing 0rights performance standards in supply chain. And Remaining the same 0municipalities are updating building codes to reducePRACTICES OF TOP-PERFORMING COMPANIES DIMENSION TOP TRAIT(S) Sustainability budget Increasing budget Project payback threshold Three- to five-year payback Benefits of sustainability programs Reduced costs, increased risk management, staying ahead of regulations, increased revenues, and increased profits Risk mitigation Addresses risks related to reputation, energy and fuel dependency, human rights issues in the supply chain, and commodity price fluctuations18
  19. 19. Prioritizing and Planning Prioritizing, planning, executing, and evaluating are crucial phases to the success of every company’s program. Since the breadth of opportunities for sustainability programs is extensive, it is more important than ever to properly set priorities and plan for the long term. Doing so will ensure that companies are pursuing the opportunities with the greatest impact given the resources. When implemented correctly, these strategies have a significant payoff. The return may be in terms of measured lowered costs like reduced energy usage or intangible benefits like brand enhancement or a more engaged workforce. KEY FINDINGS  Sustainability functions will increase in scope significantly over the next two years.  Setting goals is an important component of a sustainability strategy.  The typical planning horizon for sustainability strategies is five years.1
  20. 20. BROADENING EFFORTS improvement. All of them also define sustainability to include ethics and governance issues. Within theirEach company’s definition of sustainability reflects supply chains, they are all focusing on improving theits business, customers, and long-term strategy. environmental performance of their productHowever, most retailers are pursuing a core set of transportation and on using fewer plastic bags andsustainability functions. More than 90 percent of chemicals of concern. And they all engage theirrespondent companies are pursuing waste communities, suppliers, and partner NGOs throughreduction, energy reduction, and community their sustainability programs.engagement initiatives. While every company develops its program in aNotably, companies indicate that a number of different way, retailers follow a typical progression.sustainability priorities will grow significantly over the They first tackle store, distribution center, andnext two years. Those priorities that are expected to transportation performance, specifically with regardreceive attention from 20 percent more companies to waste, energy, and fuel reduction. Thesewithin two years include water usage; manufacturing environmentally beneficial activities generate easilyenvironmental and human rights impacts; business quantifiable financial benefits and quick returns.model innovation; product design, use, take-back, Next, retailers engage employees and the outsideand lifecycle impact measurement; government stakeholders necessary for a comprehensiveaffairs; customer education; and investor relations. program. The companies that are making the most progress around sustainability are focusing on issueWe defined top-performing companies as those areas like product development and supply chainretailers who prioritize over three-quarters of the management. These may include, for example,issues related to their facilities (Figure 12), products ecological assessments in cotton mills, sustainabilityand supply chains (Figure 13), employees (Figure audits in foreign factories, or increased use of14), and community (Figure 15) in their sustainability recyclable materials in products.strategies. Nearly all of the top-performingcompanies are engaged in all aspects of facilitiesFigure 12. Facilities - what are/will you work on? Figure 13. Products - what are/will you work on? % of top % of top 20% 40% 60% 80% 100% 20% 40% 60% 80% 100% performers performersWaste and recycling 100 Transportation 100 Now Energy usage 100 Chemicals of… Chemicals of concern 100 2 years Green buildings 100 Packaging design 88 Greenhouse gas… GHG emissions 100 Product take-back 88 Water usage 75 Manufacturing… Manu. env. impacts 75 88 Product design 63 Land Landand… use use Factory Factory labor… labor conditions 75 Sourcing locations 63 Product use & disposal Product use and… 75 Business innovation 50 Now Measuring life cycle 2 years 5020
  21. 21. Figure 14. Internal organization - what are/will you work on? Figure 15. Stakeholder engagement - what are/will you work on? 20% 40% 60% 80% 100% % of top 20% 40% 60% 80% 100% % of top performers performers Executive…Executive engagement EngagingCommunity… communities Now 100 Now 100 Store employee… Store engagement 2 years Philanthropic… Philanthropic donations 2 years 88 88 Health & safety Health and safety… 88 Engaging suppliers 100 Ethics and…Ethics & governance 100 NGO engagement 100 Diversity programs 88 Government affairs 88 ConsumerConsumer… education 88 Investor relations 88PLANNING AND SETTING GOALS external stakeholders (those who provide resources, guidance, and services).For any business initiative, companies must plantheir activities up to a certain horizon. One third of The areas and rigor for setting goals depend on theretailers report that they typically plan their retailer. Some are motivated to reduce greenhousesustainability activities five years in advance, and gas emissions, water use, or waste, while othersanother third plan for four year or fewer. look beyond operations to supplier engagement. Some retailers set their sights on absolute reduction,Figure 16. What is your sustainability strategic planning horizon? % of top while others pursue normalized improvements. 0% 25% 50% Some set ambitious and aspirational goals with only performers 1 year 0 minimal up front research on how they might be able 2 years 0 to achieve those goals, while others set analytically 3 years 13 derived goals, ensuring they have a roadmap to 4 years 0 success before launching. Some goals are public— 5 years 50 promoting awareness and accountability—while 6+ years 25 others are only announced internally.Retailers often see tangible sustainability goals as Table 1. Types of sustainability goalsan integral part of their business and sustainability GOAL TYPE EXAMPLE PURPOSE Ambitious Become carbon Aspirational andstrategy because the process of setting goals will neutral inspirationalgain buy-in and alignment throughout their Grounded Reduce waste by Can develop aorganization. The sustainability team facilitates 15 percent by 2015 roadmap to achievenearly 60 percent of corporate sustainability goals, Normalized Reduce packaging Achievable and by 25 percent per incorporatesand most often the team develops them with a five- product sold company growthyear horizon in mind. Absolute Reduce carbon Makes emissions by 20 environmentalFigure 17. What is your company’s process for formulating your million metric tons benefit explicitcorporate sustainability goals? % of top Not surprisingly, the most commonly reported type of 0% 20% 40% 60% 80% performers goal among retailers relate to reducing energy Sustainability team 63 usage and/or greenhouse gas emissions. Those are No sustainability…No sustainability goals 13 the focal points of most early sustainability programs C suite 38 because of their tangible, quantifiable savings. Functional… Functional dept(s) 25 Through the process of setting or achieving energy reduction goals, companies realize the potential forTo achieve their goals, retailers must develop goals in other areas like waste reduction, productstrategies to engage both internal functional teams sourcing, and supply chain management.(those who make the business decisions) and21
  22. 22. Table 2. Stakeholders necessary to engage for each goal type GOAL TYPE EXAMPLE EXAMPLE INTERNAL EXTERNAL STAKEHOLDERS STAKEHOLDERS Reduce Facilities, real Landlords, utilities, energy use estate, and energy and service procurement providers Reduce Facilities, real Landlords, waste waste estate, and store haulers, and employees distributors Manage Procurement, Suppliers, supply sourcing, logistics, transportation chain and product design services, and wholesalers Engage the Store employees, Local nonprofits community community affairs, and city service and departments communicationsPRACTICES OF TOP-PERFORMING COMPANIES DIMENSION TOP TRAIT(S) Facility focus areas Reducing energy usage, land use and develop impacts from construction, and waste creation, and promoting green-building design Internal programs Senior management engagement, ethics and governance, store employee engagement, diversity programs, and health and safety programs Product and supply chain Transportation efficiency, plastic bag reduction, materials management programs (including chemicals of concern), packaging design, and product take-back Stakeholder engagement Suppliers, NGOs, and community engagement programs Goals Set by sustainability team Strategic planning horizon Five-year horizon22
  23. 23. Measuring andReportingIn order to track and report on the progressof sustainability programs, relevant financial,environmental, and social metrics must beselected. As with all business programs,measurement can be used to holdorganizations and individuals accountable.When corporate sustainability goals are set,metrics and milestones are used to trackprogress in areas like energy or wastereduction or percent of suppliers incompliance with a company’s code ofconduct.Furthermore, external interest in corporatesustainability performance has fueled theneed for more accurate measurement andreporting methods. Doing so allowscompanies to open dialogues with theircustomers, communities, investors, andsuppliers, making their strategies knownand strengthening trust in their brand.KEY FINDINGS  Most retailers measure energy, fuel, material usage, and waste generation. More than 25 percent more retailers will begin to measure code of conduct compliance, water usage, suppliers audited for social compliance, renewable energy generation, and chemicals of concern over the next two years.  Companies communicate their sustainability plans and performance through websites, intranet sites, and annual sustainability reports. 23
  24. 24. MEASURING KEY SUSTAINABILITY METRICS progression of their programs, they are able to make adjustments to their strategies to ensure success.The adage ―what gets measured gets managed‖ isas true for sustainability as it is for all corporate ACTIVE SPEAKERS FOR ACTIVE LISTENERSinitiative. And given that retailers focus first on theirown operations, it is not surprising that the three As retailers continue to integrate sustainabilitymost commonly tracked metrics—facility energy measures into operations, they are also moreconsumption, transportation fuel usage for private or creative in their communication strategies.third-party fleets, and waste volumes—represent the Achievements in sustainability can engageimpacts of company buildings and trucking fleets. consumers and other stakeholders, driving demandThese metrics ensure that operational issues are for products that are healthier, safer, and moremanaged and that company managers are held environmentally friendly, as well as interest inaccountable for their performance. companies that have strong sustainability programs. In turn, that demand can drive sales and investment,While companies will continue to track these three simultaneously elevating the value of internalmetrics over time, nearly every company will be sustainability efforts and creating a need for eventracking the 11 key metrics identified in the survey more stakeholder communications—fueling aby 2015. Water usage, suppliers audited, renewable virtuous cycle.energy generated, and chemicals of concern will seea significant uptick in measurement over the next Figure 19. Growth cycle for sustainability messagingfive years—from 50 percent or fewer of companiestracking them now to more than 70 percent by 2015. SustainabilityNotably, most top-performing companies are already messagingtracking the majority of these metrics. Retailers usethis breadth of data to trace improvements in theiroperations and examine the effectiveness of theiroperational and supply chain strategies. Stakeholder Sustainability interest and activitiesFigure 18. What sustainability metrics does or will your company demandmeasure? % of top 0% 50% 100% performers Energy usage 100 Fuel usage Sales of 88 sustainable Waste generation 88 products Material recycled 100 Greenhouse gas… GHG emissions 88 Plastic bag usage 100 Retailers access a variety of channels to reach their Code of conduct…Supplier CoC compliance 88 customers, employees, and other stakeholders. Water usage 75 Many choose to highlight their efforts publicly on Suppliers audited…Social compliance audits 88 websites and privately through employee-only Renewable energy 75 intranet sites. Sustainability reports and social media Now Chemicals in… Chemicals of concern 25 are also common information outlets. Nearly half of 2 years companies report to investor groups throughInternal measurements are most often reported mechanisms like the Carbon Disclosure Projectacross an organization on an annual basis and are (CDP) and Dow Jones Sustainability Index (DJSI).reviewed by the sustainability team and other Few companies are communicating sustainabilityrelevant functional departments. As teams track the through television or radio, though the use of those24
  25. 25. channels is expected to rise more than threefold While about two-thirds of companies currentlyover the next five years. produce reports, by 2015 nearly 95 percent are expected to be reporting on sustainability issues.Figure 20. How do/will you communicate your sustainability Most retailers reporting now, including the topefforts? performers, are publishing reports on an annual % of top 0% 50% 100% basis. Reports can be a point of pride for retailers, performers prompting key stakeholders like employees, Company website 100 executives, investors, customers, and suppliers to Intranet site 100 join in the conversation. They typically cover Report 63 relevant financial information extracted from investor Social media 100 reports, as well as the company’s environmental and Store signage 88 75 social objectives and performance. These reports, Print media 75 often using the Global Reporting Initiative’s (GRI) Product labels 88 reporting guidelines as a framework, also provide an Reporting (CDP…)Reports to investors 75 organizational profile, governance indicators, Answering surveys Now management approaches, and more. TV or radio 2 years 13 Currently, the data reported in a sustainability reportTHE EMERGENCE OF THE REPORT can be difficult to gather, since it resides in manyInvestors, consumers, and other stakeholders are parts of a business and lacks a common system tobecoming more sophisticated at evaluating account for it. Therefore, most companies focus oncompanies’ efforts. To respond to the need for gathering the data internally in a format that they canincreased transparency, companies publicly share use for consistent reporting. As internal accountinggoals, strategies, milestones, and progress updates systems become more sophisticated and industrieswith stakeholders in the form of an annual report and develop and adopt data standards, data accuracyon their website. These reports go by a variety of will become increasingly important. While more thannames, including corporate social responsibility 60 percent of companies currently assure the(CSR) report, corporate sustainability report, or a accuracy of sustainability reports internally, externalseparately branded document. assurance will double in the next two years. Figure 22. How does/will your company seek assurance onFigure 21. How often does/will your company produce or update sustainability metrics?your Sustainability Report? % of top % of top 0% 50% 100% 0% 50% 100% performers performers Internal assurance Now 88 Monthly 0 External assurance 2 years 50 Quarterly 0 Annually 50 Every two years Now 0Not producing report Not producing… 2 years 50PRACTICES OF TOP-PERFORMING COMPANIESDIMENSION TOP TRAIT(S)Metrics being tracked internally Energy use, volume of materials used, plastic bag use, fuel use, waste generation, greenhouse gas emissions, and supplier code of conduct complianceCommunication methods Website, intranet site, social media outlets, store signage, and CDP reportReporting assurance Mainly internal assurance with a trend to external assurance25
  26. 26. Chapter Two: Implementing Sustainability26
  27. 27. Building OperationsRetail stores and distribution centers varysignificantly in size, design, and location, butthey all have one thing in common: thereare significant opportunities to cut expensesby reducing energy and carbon use andwaste production. New technologiespromote energy management and accuratetracking of energy use. Store employeesand consumers are becoming ever moreconscious about sustainability, especially asit relates to recycling.Implementing recycling, energymanagement, and other sustainabilityinitiatives in retail facilities have benefitsbeyond cutting costs—when done well, theyalso generate profits and improve thecomfort, indoor air quality, employeeproductivity, and customer experience in thestore.KEY FINDINGS  Waste and energy reduction are the top facility-related improvements retailers are undertaking.  Green-building practices and management of greenhouse gas emissions and water use will grow significantly over the next two years.  Green leases can unlock waste- reduction and energy-saving opportunities.  The highest impact energy-efficient upgrades include lighting, HVAC (heating, ventilation, and air- conditioning) systems, and refrigeration units.  Waste and energy reduction initiatives in stores and distribution centers energize retail employees. 27
  28. 28. RECYCLING AND WASTE MANAGEMENT waste are the two types of goals retailers most often set. Specific commitments range from reducingFigure 23. Facilities - what are/will you work on? % of top waste by 25 percent by 2015 to aspirational goals 20% 40% 60% 80% 100% performers like sending no (zero) waste to landfills.Waste and recycling 100 Now ENERGY IMPROVEMENTS Energy usage 100 2 years Green buildings 100 Stores mainly use energy for lighting, heating, Greenhouse gas… GHG emissions 100 cooling, and, in the case of grocers, refrigeration. Water usage 75 Since each of these functions affects the shopping Land Landand… use use 88 experience, it is crucial to reflect on the customer’s perspective when determining how to upgradeRetail stores generate a host of material wastes, energy systems. However, there are significantmainly from product packaging for transportation. opportunities for energy reduction—and saving costsTransportation packaging plays the crucial function and mitigating greenhouse gas emissions—throughof keeping the product safe through transportation efficiency measures and renewable energyand consists of materials including cardboard, development that can also enhance a customer’sshrink-wrap, mixed paper, plastic, scrap metal, experience.aluminum, wood and plastic pallets, organicmaterials, and more. Minimizing retail waste requires Figure 24. Energy-saving progressioneconomical recycling or reuse options for thesematerial commodities. Opportunity Measurement Execution identificationWaste reduction efforts begin with analyzing wastestreams to identify the most prevalent commodities Tools: Criteria: Internal partners:and then developing an action plan that accounts for  Submeter  Cost-benefit  Facilitiesregional hauling costs and commodity values.  Smart meter analysis  Real estateUltimately, upstream reduction efforts—namely to  EMS  Relevance to  Operations stakeholders  Constructionredesign products and packaging to incorporate  Benefit tofewer materials or less material volume—will further customersreduce hauling needs, saving truck space andlowering costs related to waste. Reducing energy use begins with measuring it. Most companies are currently measuring or estimatingNearly all surveyed companies are currently their energy usage. To do so accurately requiresimproving their environmental performance by direct access to energy meters—which arereducing waste and increasing recycling. In fact, occasionally unavailable in leased spaces—andmore companies have founded recycling initiatives systems to track monthly energy use. Companiesthan energy reduction initiatives. Recycling at stores use an EMS to track and analyze energyreduces costs and engages the store employees— consumption, allowing them to compare stores tosome of its biggest advocates. Most companies determine the best- and worst-performing locations.measure or estimate the amount of waste they This analysis often requires that the companygenerate and the volume of material they recycle. consider different store designs and local weather profiles. Some EMSs also have the capability toSetting waste reduction goals is another useful tactic control store lighting, temperature, and otherto align the organization and demonstrate the systems.company’s commitment to these goals to itsbusiness partners and employees alike. Reducing Companies then identify the highest paybackenergy use and greenhouse gas emissions and opportunities for energy-efficient retrofits. Most retailers focus on high-efficiency lighting systems28
  29. 29. like LED (light-emitting diode) bulbs with significantly Interior space build outs require the installation ofimproved lifetimes and energy performance; motion electrical wiring and lighting fixtures, space heatingsensors and other automation systems to control the and cooling, and refrigeration for food products. Inartificial lighting, depending on the outside addition to these features, new buildings may alsoconditions; as well as retrofitting HVAC systems. require parking spaces and access to transit,Incorporating daylighting (mainly through skylights) stormwater management, and landscaping. Whensaves energy and improves the customer developing a new site, there are numerousexperience in stores. Retailers with grocery opportunities to implement green technologies andoperations have upgraded food refrigeration processes, such as building on brownfield sites,systems to improve efficiency while recognizing using recycled, certified-sustainable buildingcustomer and employee usage trends. materials, or recycling construction wastes. Some companies may choose to install solar panels whenBeyond efficiency, a growing trend is to generate they move into the space as well.renewable electricity onsite or purchase greenpower from a third-party generator. Solar power is Depending on their goals, retailers may followthe most common form of onsite renewable power, green-building standards like the U.S. Greenmainly because retailers operate stores and Building Council’s (USGBC) for Leadership indistribution centers with large rooftops. Some Energy and Environmental Design (LEED)companies are testing onsite wind power, either with framework. The Commercial Interior (LEED-CI) andmicroturbines on store roofs or larger turbines LEED for Retail certifications are particularly relevantlocated at distribution centers. Sourcing renewable for retail stores. Also, the LEED Volume Program isenergy allows retailers to offset electricity bills and especially valuable for retailers, since it allowsmeet carbon emissions-reduction goals. companies to streamline the certification of numerous building projects.Similar to reducing waste, companies are settinggoals to reduce energy use and greenhouse gas GREEN LEASINGemissions. Some goals are aimed at improving the While it may seem that retail brands control theirper-square-foot performance over time, while others waste operations and energy performance,seek to obtain absolute reductions. oftentimes changes in these operations require partnerships with landlords, utility companies, wasteDESIGN AND CONSTRUCTION haulers, and other business partners who manageSelecting a site is the first step toward opening a the retailers’ buildings and infrastructure. Retailers innew store. Sites are selected based on a number of leased locations, like malls or shopping centers,criteria, including proximity to specific customer must interact with their landlords for certaindemographics and related stores, lease cost, operational improvements.building type, availability of parking and alternativetransportation, and more. Once they have selected a Green leasing presents an opportunity for retailersstore location, retailers will either contract with third- and their landlords to make improvements that canparties or work with their own in-house teams to reduce operating costs. The definition anddesign and construct stores from the ground up or implementation of these leases vary across thebuild out existing spaces. Because new locations United States and by company, but lease provisionsare only profitable once their doors are open, it is that foster reduction of energy use and wasteextremely important that the time to design and build creation will become more common as the influencea new space is minimized. Therefore, companies of certifications like LEED or ENERGY STAR (a jointdevelop store-design prototypes, which they use as program of the U.S. Environmental Protectiona basis for the development or build out of their new Agency and the U.S. Department of Energy)spaces. increase in public recognition. While every lease is29
  30. 30. different, leases that incorporate green provisions The most common obstacle that retailers andwill typically address the issues shown in Table 3. landlords typically face is that of aligning the financial incentives between the parties to reduceTable 3. Components of a retail green lease energy use in stores and common spaces. ToIMPROVEMENT PURPOSE address that need, New York City and otherDIMENSION organizations have developed the Energy Aligned1. Improve base Improve the energy, water, andbuilding efficiency waste efficiency of the base building, Clause, a publicly available provision that property including the common areas. owners can conveniently insert into leases that Includes insulation, windows, allows the developer to recuperate energy-retrofit rooftops, parking lots, etc.2. Align incentives Develop financing and payment costs through savings in tenant energy use. Such mechanisms that encourage each lease language is immediately beneficial to both the party to reduce energy and water retailer and the developer. Another common use and waste. obstacle that retailers and landlords face is that of3. Improve tenant Support the resource efficiency of aspace tenant’s space, consistent with the defining who has access to and control of key areas premises’ requirements if available. on the premises like the rooftop or parking lots. Includes tenant build out and Defining in which instances the retailer has access operation. to the facility’s roof allows them to more easily install4. Make resource Make energy and water use anduse more waste generation visible to both rooftop solar units.transparent parties.5. Clarify access Define which party(ies) will have Few retail companies are currently addressing greento and control of access to important spaces like thekey spaces rooftop and who has the control to leasing in a holistic way, but many are beginning to implement capital projects such as focus on one or more of the aspects mentioned rooftop solar units in those spaces. above. We expect to see both retailers and landlords integrate more green provisions into their contracts over the next couple years.PRACTICES OF TOP-PERFORMING COMPANIESDIMENSION TOP TRAIT(S)Facility improvements Reducing waste generation, energy use, greenhouse gas emissions, and land use and designing facilities according to green-building standardsPrograms to reduce waste generation Redesigning products and packaging and developing recycling programs, occasionally with backhauling capabilitiesPrograms to reduce energy use Retrofitting lighting, HVAC, and refrigeration systems to make them more efficient30
  31. 31. Supply ChainOperationsThe consumer product supply chain is anextensive and complex global network.Supply chains span countries and cultures.And retail’s greatest environmental impactsand social performance challenges are in itssupply chain.Therefore, true sustainability is achieved byintegrating it throughout the product supplychain. Retailers have many opportunities toimprove business performance in the supplychain. Through incentives, trainingprograms, and collaborative projects,suppliers and retailers have begun tointegrate sustainability into the supply chain,leading to benefits like stronger retail-supplier relationships, lower transportationcosts, greater transparency, and mitigatedrisks and costs.KEY FINDINGS  Supply chain improvements have focused on transportation, materials including chemicals of concern, and packaging design. Managing all aspects of the product life cycle, from design through use and disposal will become increasingly prevalent practices over the next two years.  Transparency into the social and environmental impacts of product supply chains is a growing practice.  Risk mitigation is a major benefit of supply chain sustainability programs. 31

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