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The Sustainability Tidal WaveJeanne von Zastrow, FMI

UC Davis, September 18, 2008

Sustainability:

• What’s driving it?• Why do retailers care?• How are they responding?• How can UC Davis partner?

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What is Sustainability?Actions, lifestyles and products that meet current needs without sacrificing the ability of future generations to meet theirs.

Business strategies and practices that promote the long-term well being of the environment, society and the bottom line

FMI Sustainability Task Force Definition

A HEALTHY balance = People, Planet and Profits

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What’s changing in this “new world”?

A fundamental mind-shift:

From: To:Quantity of things Quality of lifeIndependent “me” Interdependent “us”Reactive ProactiveConfrontation CooperationCompliance Beyond Compliance Good to Do Have to DoBest practices Metrics and CertificationsImportant UrgentFringe Mainstream

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“Environmentalists”What a difference 30 years make!

THEN - Fringe

• Hippies• Wackos• Communists• Tree Huggers• Granola Heads

NOW - Mainstream

• Sophisticated and Educated• Socially Conscious• Eco-Preneurs, Eco-Travelers• Ethi-curians, Eco-Moms• Greeniacs & Locovores

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Forces driving this ….

• Fragile Planet • Developing World• Climate Change• Toxins• Globalization

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Our Fragile PlanetHumans are drawing on capital

rather than interest,and once that is exhausted, they will find Mother Nature

reluctant(and unable) to make a loan.

“Our lifestyle for everyone =

4 planets!”

Carter Roberts, CEO World Wildlife Fund

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Living beyond earth’s capacity is not sustainable…

• From 2008 to 2050 we add 3 billion people = demand doubles

• Water Wars - 80% of world fresh water = agricultural use

• Climate change is real - extreme unpredictable weather playing havoc on prices and supplies

• Fisheries in collapse – A global crisis - West Coast salmon fisheries shut down - if we stay same course = no fish by 2048

• Energy crisis – costs/shortages, food to energy

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Source: NWS

... in the eye of the hurricane

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WHO is driving the sustainability movement?

• Media• Advocacy Groups• Customers• Employees

• Government• Education• Business

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An Inconvenient TruthLike him or hate him… over 70% of Americans believe in climate change and want action NOW!

DRIVERS: Media – You can’t escape!

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•

From www.Oprah.com

DRIVERS: MediaOprah’s Advice:

Start making eco-friendly choices in the grocery store.:

Look for minimal packaging

Purchase organic produce

Bring your own bag to the store

Use reusable water bottles

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-10

0

10

20

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NGOs UnitedNations

Large LocalCompanies

NationalGovernments

GlobalCompanies

Who the Public Believes to Act in the Best Interest of Society

DRIVERS: Advocacy Groups Have Credibility

World Economic Forum 2005

% of “yes”minus % of “no”

Who the Public Believes to Providethem Accurate Information

Retailers Gov't0

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2030

405060

70

Activists FoodManufacturers

Fast Food

Source: GfK Roper Public Affairs & Media, December 2007

Who is Credible with the Consumer?

Activists are Having an Impact

Positive NGO + Business Partnerships

• World Wildlife Fund and Coca-Cola conserve and enhance fresh water resources around the world

• Unilever with Greenpeace HFC-Free Freezers

• Wegmans and Environmental Defense sustainable shrimp farming to help the environment and communities

• American Meat Institute Humane Society & Animal Welfare

• Wal-Mart hiring from NGO’s and collaborating with many

• NRDC offer to coordinate efforts on sustainable agriculture

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DRIVERS: ConsumersEmerging “Ethical” Consumers

• 89% customers interested in green products, 30% look for them

• 50% consumers buying local over organic, Farmers Markets have increased % over last _ years.

• Green consumers are twice as loyal to primary supermarket

• 63% increase in sustainable product sales 2005-2007

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More Green = More $Green$

$29

$98

$116$129 $133

Average Buy 1 Buy 2 Buy 3 Buy 4

Average Basket Size is 3x larger when GREEN is in

the basket

Source: Catalina Connection Builder, 12 Weeks Ending 7/29/07

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DRIVERS: Gen-Y Employees:Future Leaders are Increasingly Green

• 92% of graduating college seniors want to work for an environmentally/socially responsible company.

• 48% of employees would work for less pay and 40% for longer hours if working for socially responsible company

• 61% accept personal responsibility for making a difference in the world and 78% say companies have the same responsibility

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DRIVERS: EducationGreen is Hip and Stylish

• Increasing emphasis from K – Ph.D.

• More colleges and universities offering degrees and more students enrolled

• Colleges with “sustainability labs”1. Partner with business on research and strategies2. Sustainability “cottages” on campus3. Interns and employee pool

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DRIVERS: GovernmentGreen is the New Red, White and Blue!

• Both presidential candidates favor new regulation• Big companies have asked feds for carbon caps• 840 Mayors have endorsed the Kyoto Protocol• Ireland, China, Uganda, banned/ taxed plastic bags• Over 80 plastic bag bills in play, some passed

MANY Green Government & Business Partnerships

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Drivers: Business

“The entire food industry shares a responsibility to develop environmentally and socially responsible practices. Preserving the health and well-being of our customers, employees, communities and environment is a major business imperative of our times.”

Bob GarrityGiant EagleFMI Sustainability Task Force Chairman

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DRIVERS: BusinessMovers, shakers and pioneers:

If we aren’t at the table, we’re on the menu!

Why Do It? ECO-Advantages!Growth

• Increase Market Share• Build Customer Loyalty• Differentiation and Branding• Improve Employee Morale and Loyalty• Increase Efficiency/Productivity

Reduce Risk• Secure the Supply Chain for Future• Avoid Negative Public Opinion• Prepare for/ Be Ahead of New Regulations

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IInnd

How did FMI’s retailers get started?

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FMI’s Sustainability Task Force

Issues, priorities, tools, resources

26 companies working together can accomplish things that individual companies can’t do:

Giant Eagle, Inc. SUPERVALU INC. The Kroger Co.Hannaford Bros., Co Harris Teeter, Inc. Lunds Food Holdings, Inc.Unified Grocers, Inc. Publix Super Markets Wakefern Food CorporationTarget Corporation Save Mart Supermarkets Ukrop’s Super Markets, Inc.Buehler Food Markets, Inc. Wegmans Food Markets The Great A & P Tea Co., Inc.Schnuck Markets, Hy-Vee, Inc. Raley’s Family of Fine StoresWal-Mart Stores, Inc. Price Chopper Supermarkets Sobey’sLoblaw’s Associated Food Stores, Inc. Safeway, Inc.Winn-Dixie Stores, Inc. Ahold

After four meetings, and many “war stories”……the key learning's are ….

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Retail Food Industry Responding……

• Everyone has initiatives – energy, store design, sourcing – NO coordinated strategy

• About 50% developing strategy now

• Leaders strategy in place, identified a leader forming cross functional team

• Pioneers strategy; leader, team job descriptions; goals and metrics; working with stakeholders; educating employees and customers; seeing bottom-line results

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Sustainability, bigger than you think….

• Fair Trade and Local• Green Buildings• Energy• Sustainable Agriculture• Health and Wellness• Community Relations• Packaging• Recycling • Waste Management• Operations

• Regulations• Green Cleaning• Employee

Education• Customer

Education• Marketing• Supplier Relations• Supply Chain• Transportation

They say “sustainability is difficult”because it IS….

• A fundamental change in mindset and culture and not just a new initiative.

• Requires accountability for products upstream and downstream

• Unique to every company, no one-size-fits-all approach.

Framework for Sustainability

Stakeholder Mapping

Strategy Tune Up w/FMI Starter Kit LEED & Energy Star

CEO Communiqué

Reusable Bags

Sustainable Packaging

Highlights Across the Framework

Sustainability: Giant Eagle Approach

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What are Retailers already doing…..

Taking it To the TOP – Ahold, Giant Eagle, Wegman’s first to appoint senior management designated leaders.

Pushing the Envelope Wal-Mart 13 internal working groups; 70,000 suppliers; launching sustainability index plan October 2008.

“Leading” the Government Whole Foods, Giant Eagle, Harris Teeter and Publix partner with EPA’s Green Business Programs – Green Chill, Smart Way, Climate Savers

What are retailers already doing….

New Revenue Streams: 3 retailers made $50 millionrecycling plastics and cardboard, will double in 2008.

Investing in the Future: Wegman’s owns an organicresearch farm. Focus local and sustainable sourcing.

Creating “Sustainable Customers” Hannaford’s Guiding Stars = nutritional evaluation ranking of every product, rated l-3 to promote wellness of customers and employees.

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Not just the big retailers….

Took a Risk that Paid Off – New Leaf Market and Fishwise launched a sustainable seafood marketing program that increased loyalty, sales and profits.

Selling Sunshine - Market of Choice, selling extra solar power back to grid, showcasing results to customers on monitor at entrance.

Paved the Road Less Traveled Puget Consumers Coop signage tells their sustainability story throughout store + first to voluntarily eliminate plastic bags

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Sustainability Success Plan:

Learning's from Task Force Companies

• Focus on balanced “triple bottom line”• Commitment: top to bottom, bottom to top • Allocate $$ resources• Strategy + Leader + Team• Recognition, accountability and incentives• Get smarter….faster, use existing resources • Create unique partnerships with stakeholders• Start with “easy wins” and build on current success

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FMI Task Force PrioritiesGet our “house in order” first

1. Internal education up and down, create team and strategy2. Sharing best practices – starter kit, new research, summit3. Plastic bag policy – focus on reusable

Our Carbon Footprint1. Develop educational tool & basic calculator 2. Share with industry, aggregate, benchmark3. Consider voluntary reduction goals

Engage in Supply Chain Opportunities1. 80% of opportunity is here2. Industry cooperation via working groups (seafood,

agriculture, packaging, carbon footprint, etc.)3. Focus on upstream and downstream reductions – natural

resources, biodiversity, social issues

The FMI Sustainability Starter KitThe “How”

• A guide to develop strategy

• Practical tips and advice

• Best practices and examples

• Tested with 5 retailers

• Available in PDF with live links

Sponsoring companies of the FMI Sustainability Starter Kit

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FMI’s Website –fmi.org/sustainability

• Sustainability OpportunityThe “What and Why”

• Sustainability Starter KitThe “How”

• LOTS of Free Research

• Resources - Conferences, Publications, NGO’s…

Sustainability Summit

•Leading-edge pioneers •Success stories•Ideas and best practices•Brand-new research •Networking•Created for “teams”•Walk away with a plan

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Next …the hard work startsbeyond our four walls !

• Identify, evaluate and engage with stakeholders (NGO’s, government, community groups, Educational institutions, suppliers, associations, etc.)

• Start setting specific goals, metrics and accountabilities

• Begin measuring and reporting

• Continuous innovation and improvement

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Universities can help business “Get Smarter Faster”

Industry Partnerships• Reach out to business – share resources, propose initiatives• Course tracks focusing on sustainability careers combining

scientific background with business strategy• Internships in food industry – example U of A, Penn State• Offer your experts to be science advisors to retailers & assns.• Teams with different disciplines to collaborate on “big picture”Conservation and Restoration• Use science based expertise to help industry develop metrics and

goals to reduce use of resourcesInnovation• Innovative new ideas and technologies to reduce/maximize

resource use (processes, design, technology, new systems)

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Example: University of ArkansasApplied Sustainability Center

• Mission: a catalyst for “sustainability” innovation in retail and consumer goods industries

• A cross disciplinary team = “whole system” collaboration to solve complex problems(experts in engineering, energy, agriculture, logistics, technology, mathematics, etc)

• Develop research, theories and practices(life cycle analysis, environmental footprint assessment, supplychain metrics and measurements, etc)

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FMI Encourages Entire Food Industry to Engage and Collaborate

“A rising tide floats all boats” We seek engagement.

• (ANTAD) Mexico’s National Association of Retailers• American Meat Institute• National Turkey Federation• Western Association of Food Chains• Retail Owned Food Dealers Associations• FMI Midwinter Executive Conference (top food industry executives) and

other FMI meetings (Energy, Consumer Affairs, Store Development)• State Association Meetings• Universities – Cornell, Florida State, UC Davis, University of Arkansas• International Chamber of Commerce• National Fisheries Institute• American Association of Association Executives• National Pork Board

“It is not the strongest species that survive, nor the most intelligent, but the

ones who are most responsive to change.”

-Charles Darwin-

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Questions?

Jeanne von Zastrowjvonzastrow@fmi.org

435-259-3342