COVER STORY: Green Issue Overview: Green is the new black

Maybe it was that moment when former vice president Al Gore's pet project, "An Inconvenient Truth," won the Oscar for best documentary. Or when Wal-Mart announced it was rolling out "high-efficiency" Supercenters, along with a new packaging scorecard demanding more environmentally friendly packaging from its suppliers. Or when Whole Foods and Wild Oats decided they'd be safer joining rather than fighting each other as elements of their operating philosophies increasingly turned up in the playbooks of "conventional" competitors.

In any event, it's become clear that the "green" movement has found a prominent place in mainstream business strategy.

The word du jour for green in corporate America is "sustainability." Companies ranging from General Electric to General Motors are beginning to think about the future of their businesses in a new way, taking an introspective look at all aspects of the supply chain.

It's a mindset that certainly applies to the food retailing industry -- ranging from where and how products are made, to what energy is required to get them to the retail level, to the energy efficiency of stores.

At a time when retailers are more concerned than ever about energy costs, and their consumers are beginning to pay more attention to how food is produced, it seems that the stars have aligned, and they're throwing off a bright-green glow.

While there are almost no green standards for businesses to follow -- one of the few is the Leadership in Energy and Environmental Design (LEED) Green Building rating system -- that hasn't stopped companies from jumping on the bandwagon.

The major trends that have emerged to date include energy-efficient stores, organic and locally grown foods, sustainable agriculture, Fair Trade practices, eco-friendly nonfood products, and biodegradable, recyclable, reusable, and minimal packaging, including a debate over paper vs. plastic bags.

Of course, green retailing itself won't be sustainable as a strategy unless there are true cost benefits involved. The experts say there are.

"Ultimately, this has to be about how to turn sustainability into a source of business value," observes Joel Makower, founder of GreenBiz.com and a consultant to General Electric, General Motors, Hewlett-Packard, and Nike. "It can't be just about doing good."

Makower spoke on "Greening Your Business and the Bottom Line" during the Natural Products Expo West show last month in Anaheim, Calif., noting then that while companies have been concerned to various degrees about the environment for the past several decades, the next wave of green in corporate America could be called "natural capitalism."

To be sure, with the world's largest retailers -- Wal-Mart and Tesco -- getting deeply involved, cost savings are clearly a requisite.

Pure energy

For the global chains, as well as stateside players such as Kroger, Food Lion, Giant Eagle, and Pathmark, energy efficiency is one of the top green concerns -- and one that appears to have a more immediate, measurable return.

In the Food Marketing Institute's 2005-06 Annual Financial Review research, 87.5 percent of retailers reported an increase in energy costs from the previous year. Not surprisingly, 64 percent said they're creating more energy-efficient stores when building or remodeling.

Bentonville, Ark.-based Wal-Mart just opened its second so-called "high-efficiency" Supercenter in Rockton, Ill. (The first of four high-efficiency stores planned for 2007 opened in Kansas City, Mo. in January.) Wal-Mart expects the new store to use 20 percent less energy than a typical Supercenter, thanks to advancements such as integrated heating, energy-saving cooling and refrigeration systems, and lighting innovations.

Wal-Mart's making no secret of its ambitions: It wants to design and operate a prototype in the field that's 25 percent to 30 percent more efficient, by 2009. In a sustainability fact sheet posted on its Web site, the chain also says it aims eventually to be supplied 100 percent by renewable energy.

Other retailers are likely to benefit, at least to some degree, by Wal-Mart's strategy, as the chain has already declared plans to share its learnings with "the entire commercial industry, including our competitors."

One retailer that's done a lot of its own homework on energy efficiency is Salisbury, N.C.-based Food Lion, the largest U.S. subsidiary of the Brussels-based Delhaize Group. Food Lion claims to have far more Energy Star stores, as designated by the U.S. Environmental Protection Agency, than any other U.S. retailer. The company was named Energy Star Partner of the Year in 2001 and 2002.

Its latest demonstration of commitment is its participation in EPA's GreenChill partnership, an initiative in which companies pledge to go above and beyond regulatory requirements in protecting the ozone layer and reducing greenhouse gas emissions.

Food Lion estimates that since 2000, it has successfully reduced energy consumption by more than 25 percent, or 2.45 trillion BTUs -- a sales equivalent of nearly $1.34 billion.

With such dramatic cost savings tied to energy-efficient technology, it's no wonder that Cincinnati-based Kroger recently opened what it calls its greenest store in Miami Township, Ohio. The unit features 100 six-foot skylights and other environmentally friendly technology, which Kroger estimates will help it save roughly 82 percent on monthly utility bills.

Supply-side equation

Wal-Mart is going beyond energy efficiency in its quest to become a better environmental steward. The retailer has begun evaluating its suppliers on the sustainability of their packaging, and offering suggestions for improvement. In the "packaging scorecard" program's first month, 2,268 vendors had logged on to its site, and 117 products had been entered into the system.

The scorecard implementation is Wal-Mart's next step in moving toward achieving a 5 percent reduction in packaging by 2013.

A number of suppliers are taking on green initiatives of their own, of course. Mainstream vendor Smithfield Foods, for one, has joined the Chicago Climate Exchange, the world's first -- and North America's only -- voluntary, legally binding greenhouse gas emissions reduction, registry, and trading program. In doing so, the Smithfield, Va.-based company is committing to cut its greenhouse gas emissions in the United States by a minimum of 6 percent by 2010.

Austin, Minn.-based Hormel Foods Corp., meanwhile, has incorporated the movement into the executive suite, adding the position of director of environmental sustainability and appointing Dennis L. Boik, who joined Hormel in 1971 as a plant engineer, to the new post.

Likewise, major distributor United Natural Foods, Inc., based in Dayville, Conn., has appointed Thomas A. Dziki v.p. of sustainable development.

Looking more closely at its own practices, Northfield, Ill.-based Kraft Foods is working with the Rainforest Alliance to help farmers in Cote d'Ivoire, the world's largest producer of cocoa, meet the conservation organization's standards for eco-friendly and socially responsible cocoa farming.

For many organic suppliers, sustainability is a natural business objective. Nature's Path Foods, based in Richmond, B.C., has reduced its package sizes by 10 percent without reducing net weight -- which has the effect of saving water and trees, and reducing transportation/fossil fuels by 20 percent. The company also has intensive recycling programs at its factories, which has helped it reduce its trips for landfill by up to 60 percent.

"We are committed to carbon output reduction of 20 percent less than 2005 levels by 2012, and we ultimately want to be carbon-neutral by or before 2020," says Jyoti Stephens, sustainability and stewardship manager at Nature's Path. "Our next plant will be LEED-certified."

Also in the Pacific Northwest, Salem, Ore.-based Kettle Foods is home to one of the largest commercial solar power arrays in the region. Its 616 solar panels generate 120,000 kilowatt-hours of electricity -- enough to make 250,000 bags of Kettle Potato Chips every year. The remaining energy the plant consumes is 100 percent wind power, the company says.

To benchmark industry practices in sustainability, the Grocery Manufacturers Association and Food Products Association has tapped Deloitte Consulting, LLP for a new research project. The study will measure GMA/FPA members' practices, assess retailer expectations, and identify models of success in environmental sustainability management.

"Sustainability is a key focus area for manufacturers and retailers," notes Grant LaMontagne, v.p. of sales at the Clorox Co. and chairman of GMA/FPA's sales committee. "We see this report as a starting point for our industry. It will greatly assist us in developing joint manufacturer and retailer responses to this important issue."