Jim Harris

Business Sustainability

A Little Less Cardboard Can Save You Millions

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Using sustainability as strategy can drive change within a company’s supply chain by engaging suppliers and service providers with the resulting savings running into the millions of dollars a year.

A case in point: one of Canadian Tire’s most popular products is a six-foot folding utility table, selling many tens-of-thousands a year. The company collaborated with its supplier on product redesign and packaging to use less raw materials to make and package the product. Now, the tables use 11 per cent less plastic in their construction and occupy 15 per cent less volume for shipping. The annual savings for Canadian Tire: more than $375,000 a year as a result of reduced material, packaging and shipping costs.

Employee Engagement

Sustainability as strategy can also engage employees. In 2010, Canadian Tire’s Senior Vice President of Merchandizing invited all the company’s buyers to the conference centre for an afternoon departmental meeting. Employees thought it was to discuss organizational restructuring. Before the start of the meeting, the conference centre was very quiet.

The goal, it turned out, was to engage buyers in a creative way — to shake things up — to facilitate some disruptive innovation on something that should have been a core element of their business activities, but at the time wasn’t.

Corporate thinking is often to execute on a perfect plan — in this case, we wanted to take buyers out of their usual, comfortable environment and see what insights could be developed by briefing them on a subject and then turning them loose in a store to see how they could apply it. We wanted our buyers to see things with new eyes.

At the conference centre the buyers learned the real purpose of the event: to gain new insight into how packaging sustainability can affect profitability and the environment. After a couple of presentations, the group boarded buses to a local Canadian Tire store where the goal was to discover examples of “stupid packaging” — examples of too much packaging, improper packaging, or even too little packaging resulting in damaged product, waste, squandered energy use, and excessive greenhouse gas emissions from shipping damaged product that can’t be sold.

The buyers identified over 3,000 examples and calculated the potential savings to the company of improving the packaging into the millions annually in cost avoidance. One of the best finds: the company sold a tool for opening plastic clamshell packaging. And guess what? The tool came in a thick plastic clamshell.

Prior to the session buyers really hadn’t seen the relevance or value of packaging to profitability. The session kicked off a disciplined, systematic focus on package right-sizing that each year results in hundreds of packaging changes and is generating more than $3 million annually in avoided costs.

In 2011 and 2010, Canadian Tire completed 320 packaging changes that saved the company $6.3 million in costs, while reducing greenhouse gas emissions by more than 4,300 tonnes each and every year the products are stocked.

Of course to sustain such an initiative requires more than just a bus trip, it also requires the systems and structures to support and foster the ongoing effort, such as good measurement, reporting — and aligned incentives — now going into a third year.

Mitigating Risk

There’s another reason for companies to focus on cutting unnecessary packaging. Extended Producer Responsibility (EPR) costs are rising dramatically. Since 2004 stewardship fees charged to companies and the associated cost of managing dozens of different EPR programs across Canada have grown at a cumulative average rate of 38 per cent.

This dramatic rise has been driven by four factors: 1) implementation of EPR legislation in provincial jurisdictions across Canada; 2) increasing rates being charged for products and packaging under EPR programs; 3) a shift of those costs from government to business, and 4) the data management, point of sale and other systems and resources required to manage them.

The cost of the Blue Box program used to be shared equally between companies and the government. But today, corporations are paying all the blue box fees. For Canadian Tire in 2008, fees alone were $8.9 million and these basically have doubled to $18.5 million in 2011. In 2008 only 4,000 products had environmental fees and this has grown almost six-fold to 23,541 at the end of 2011 with many products being attached to multiple programs in different provinces.

Fees are based on the type of material used and the weight and volume of packaging. Having a disciplined focus on packaging materials and right-sizing can decrease the fee rates applied and the volume and weight of packaging, dramatically mitigating costs and the risk of increasing EPR fees.

Of course there is a balance that needs to be achieved: packaging can’t be reduced so much that it results in higher damage rates to the goods being sold.

Rightsizing packaging also resonates with customers, as the number one complaint re sustainability from customer is excessive packaging

So using sustainability as strategy is a way of engaging employees, suppliers and service providers in a concerted effort to drive innovation within retail, to drive out waste and inefficiency, and to lower the corporate footprint and reduce the liability to extended producer fees. We believe all retailers should be aggressively pursuing sustainability as strategy.

Original Article

In Business, Don’t Waste a Crisis

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Many Canadians are trying to do more with less during this economy of thrift. But we all face essential expenses — those costs associated with “keeping the lights on” — often, literally.

Whether you’re managing a household or a large corporation, energy — that stuff that enables your car to move from one place to another, keeps your beer cold and your shower hot — is generally regarded as an essential expense. Sure, you could drink warm beer and take cold showers; but really? There’s got to be a better way.

During a poor economy, it can be a challenge for a business to increase profitability as competition for the “cautious consumer” intensifies and there is increasing pressure on margins. But a recession offers the perfect opportunity to question the way things have always been done — and drive out waste and inefficiency. One of Jim’s favourite slogans is: “a crisis is a terrible thing to waste.”

While most are cautiously optimistic about the North American economy today, it was a different story in the latter half of 2008 when Canadian Tire launched its Business Sustainability Strategy with an aspiration to profitably grow the business without increasing energy use or contributing to an increase in the carbon footprint of the economy.

And the company has been somewhat successful: energy and fuel used to move product from vendors to stores is nine per cent lower, despite a 22 per cent increase in tonne-km of product shipped. And energy use for buildings and operations has been cut nine per cent despite more than a nine per cent increase in the amount of real estate square footage.

So sustainability cut costs and mitigated risk against rising energy prices. So how did Canadian Tire achieve this?

The first step was insight and political will. Business leaders need to view sustainability as a way of driving out waste and inefficiency — and a strategic tool in engaging employees and suppliers in transforming operations.

Second was measuring the energy and carbon footprint of the business and its supply chain — after all, what gets measured gets managed. This quickly identified two core operational functions responsible for most of the energy use: heating, lighting and cooling over 34-million square feet of retail space, and moving billions of dollars worth of product from over 50 countries from all over the world to a store near you.

The third step was to recognize that innovation is a social process. Employees formed “sustainable innovation networks” around buildings and operations, product transportation, and products and packaging, bringing together people from Corporate Strategy, Marketing, Merchandizing, Packaging, Real Estate, Supply Chain, Strategic Sourcing and Transportation.

These teams broke through their traditional silos to examine and optimize the systems that are Canadian Tire’s extended value chain, identifying inefficiency and waste. They brainstormed what more streamlined, energy efficient operations would look like in three, five and 10 years. And then the teams brainstormed the projects and initiatives that would get them there.

With the path revealed, they began their journey and started reporting progress quarterly and measuring economic and environmental benefits.

Three years and more than 1,350 business sustainability projects later, the energy use of Canadian Tire’s operations have become significantly more efficient. The amount of energy used to transport a tonne of product one kilometre has decreased by more than 26 per cent, and the amount of energy used to heat, light and cool a single square foot of real estate has decreased by 18 per cent.

That’s like having more cold beer at a lower cost while doing your part for the environment — it’s a win-win-win — or, for Canadian Tire, it’s the equivalent of realizing the net profit of three and a half additional stores without actually having to build and operate them.

So sustainability is a strategy that business should be pursuing, especially in a recessionary market.

Original Article