Going Green for selfish reasons

Big retail is suddenly hugging trees. Partly to look good, but also to save piles of cash.

Going Green for selfish reasons

On a brisk Friday afternoon last month, workers at a newly built Mountain Equipment Co-op store in Burlington, Ont., gently lowered a 14-ton solar array onto the building’s roof. Once fully up and running, the photovoltaic and thermal panels will generate 30 per cent of the store’s energy needs, while heating the building and its water. The crew had already installed skylights along the full length of the building to allow in natural light, and the store was outfitted with motion detectors so that lights can automatically be dimmed when no one is in a room. What’s more, the building will capture rainwater to be used in its gardens and toilets, cutting water consumption in half. In short, this isn’t your typical big box retail store. “There’s nothing like it in Canada,” says Gary Faryon, the Vancouver-based company’s senior manager of operations.

Some would say those are just the sort of eco-friendly initiatives you’d expect from a company that gives grants to environmental causes and has a customer base consisting largely of tree huggers. Yet, while MEC may have a particular emphasis on sustainability, a closer look at the larger retail industry reveals that a sea change is under way. It’s not just the so-called progressive companies that are going green—retailers such as Wal-Mart, long pilloried by environmentalists for enormous stores in far-flung suburbs and smog-spewing factories in China, are emerging to lead the pack. Yes, it’s partly because they’re looking to burnish their reputations with customers and they’ve suddenly discovered the colour green in their marketing materials. But there’s more to it than that. For many, the prime motivation isn’t boosting their green aura, it’s the dramatic improvement to the bottom line. “There are a lot of reasons to green your business, and a lot of pressure out there to do it,” says Andrew Winston, the author of Green to Gold, and an environmental consultant. “But those retailers that are going green have found they’ve been able to reduce their risks, as well as their costs.”

The past few months have seen a flurry of energy-saving announcements from North American retailers designed to help the environment while saving cash. In October, Best Buy said it would slash greenhouse gas emissions by turning to renewable energy sources such as solar for some stores, while installing a centralized system to track energy spikes across its stores and distribution centres. The electronics retailer predicts the initiatives will reduce CO2 emissions by eight per cent per square foot by 2012, while saving on energy costs. Other companies such as Kohl’s, Safeway and JCPenney have also begun to outfit their rooftops with solar panels in a bid to save on energy.

Such high-tech initiatives get headlines, but many retailers are finding that the solutions that save them the most money are decidedly low-tech, or as Winston calls them, “head-slappers.” For instance, earlier this year Home Depot announced that it would switch to compact fluorescent light bulbs in its in-store light fixture displays, and stand to save US$16 million a year by doing so. Wal-Mart is rethinking the frozen food aisle by installing motion detectors in some fridges and freezers that will turn off the lights when no one’s around. Such measures could add up to significant reductions in greenhouse gases. Climate Leaders, a group of 226 U.S. corporations that includes many of the biggest names in retail, has vowed to reduce emissions by the equivalent of nine million cars annually. The cost savings could potentially add up to hundreds of millions of dollars.

Back before green became the new black, some retailers were already finding that reducing their energy consumption made economic sense. In the late 1990s John Stanton wanted to find ways to cut down on overhead at his burgeoning chain of Running Room stores. He struck upon the idea of doing away with conventional spot lamps and replacing them with energy-efficient reflector lamps. The savings were immediately obvious. “In one store we were able to reduce our energy in one month by the amount it would take to run an 18-cubic-foot refrigerator for 2½ years,” says the founder and CEO of the Edmonton-based athletic chain. “It pays to do it, and from a footprint standpoint it also helps.”

Soon the company was looking for other areas to become more energy efficient. It replaced the rugs in its stores with hardwood floors—thus doing away with the need for electric vacuum cleaners and harsh cleaning chemicals—and lowered the ceiling in its warehouse to cut heating costs. The chain also transferred much of its running clinic training material to the Internet, cutting back on paper waste. Each change was simple and straightforward, but collectively, the company has saved thousands of dollars that can be plowed back into growing the business. “Some of the greenwashing in the industry has gone overboard and we haven’t bought into that,” Stanton says. “We start with what is going to help our bottom line while making a difference for the environment.”

It’s one thing for a company the size of Running Room, with 92 stores across North America, to cut a bit here and a bit there. But when the trimming is done by a company the size of Wal-Mart—with operations so large it’s almost a country unto itself—the impact can be world-changing. Three years ago, the discount retailer laid out an ambitious plan to transform itself into a green giant: it would run its operations completely on renewable fuels, and cut its greenhouse gas emissions by 20 per cent over seven years. One way it plans to do that is by making its trucks run more efficiently. By 2015 Wal-Mart expects to double the fuel economy of its fleet, which could chop CO2 emissions by 12 million tons over the next 12 years. By improving the fuel economy of its trucking fleet by just one mile per gallon last year, Wal-Mart saved as much as $50 million. In Canada alone, Wal-Mart expects to save $25 million over the next five years. “Some suggest we’re just another company hopping on the green movement,” says Kevin Groh, a spokesman for Wal-Mart Canada. “But our green focus is as beneficial to the business as it is to the environment.”

As for the stores themselves, Wal-Mart Canada plans to roll out new, not-so-big-box versions starting next year. At 175,000 sq. feet, they’re nearly 20 per cent smaller than existing stores, resulting in an immediate reduction in heating and lighting costs. The stores will be partly heated with waste energy diverted from refrigerators, and solar panels are being installed at some locations. At least one store in Burlington will be heated with geothermal energy, and all of the chain’s 310 Canadian stores will have their heating and cooling systems controlled by a central computer in the Mississauga, Ont., head office. Wal-Mart expects the new stores will be 30 per cent more energy efficient than the old ones.

Those changes are all good, but where Wal-Mart can truly flex its green muscles is in its global supply chain. Just one-tenth of its environmental footprint comes from its own operations, the rest comes from its army of suppliers. For example, two years ago the company worked with suppliers to trim one square inch of packaging from its Kid Connection line of toys. In 12 months the move reduced the amount of packaging material used by roughly 3,500 tons and saved the equivalent of 1,000 barrels of oil. Better yet, Wal-Mart saved about US$3.5 million in transportation costs.

Then, last month, Wal-Mart CEO Lee Scott met with 1,000 of its Chinese suppliers in Beijing with a simple message: “Meeting social and environmental standards is not optional.” To that end the company has told its 200 largest Chinese suppliers that they must become 20 per cent more energy efficient by 2012. And on a worldwide basis, suppliers must source 95 per cent of their production from factories that receive the highest ratings in environmental and social audits. “Doing business with Wal-Mart is a substantial carrot for a lot of companies, so from that perspective we have a lot of pull with how the world of supply works,” says Groh.

Environmental groups are encouraged by what they’re seeing in the retail sector, but they’re also wary of easing their pressure on companies. Pierre Sadik, a senior policy adviser with the David Suzuki Foundation, says retailers must do even more to rethink their global supply chains. Shipping raw materials from Canada to China to be turned into gadgets and shipped back to North America is not a sustainable business model, he says. “We’re in the very early stages of this phenomenon,” says “Retailers have a long way to go in greening themselves.”

In the meantime, companies like Mountain Equipment Co-op are powering ahead. “We’ve been building green stores for 10 years now, from when some people thought it was a bit nutty to now when it’s in vogue,” says Faryon. “The things we’re already doing that have a fast payback are the ones that smart retailers are now looking at and realizing there’s money to be had. But we’re also testing new technologies where the return will come later.”

Some of those innovations will be incorporated into MEC’s second new store, which will open in Montreal next year. There, the goal is to have the building itself generate every volt of electricity needed to keep the lights on. The company doesn’t yet know exactly how it will do that—be it improved solar panels, wind turbines or some other alternative energy source. But Faryon says they’ll find a way. After all, as MEC’s discovered, what’s good for the environment is often surprisingly good for the bottom line.