Walmart’s green goals will impact chemical supply chain

The chemical industry welcomes Walmart’s new goal to cut greenhouse gas emissions in its supply chain

WALMART’S SUSTAINABILITY goals might mean an added cost burden all the way up to the chemical supply chain.

Chris Eyles

But so far, the chemical industry as a whole is giving its approval to the US retailing giant’s various green initiatives.

On top of the US-based hypermarket chain’s Packaging Scorecard program, which started in early 2008, and its Sustainability Product Index, which started on July 2009, Walmart announced on February 25 its goal of eliminating 20m tonnes of greenhouse gas (GHG) emissions from its global supply chain by the end of 2015.

The emissions reductions will come from any phase of its targeted product life cycles, including raw material sourcing, product and packaging manufacturing, transportation, customer use and end-of-life disposal. Walmart will focus on product categories with the highest embedded carbon footprint.

The retailer says it will not force its suppliers to cut their emissions. Walmart, with $405bn (€304bn) in fiscal 2010 sales, has more than 100,000 suppliers worldwide. Their carbon footprint, according to Walmart, is many times larger than the company’s operational footprint, and represents a more meaningful opportunity to reduce emissions.

“In many cases, our suppliers already have their own good ideas in cutting their emissions,” Jim Stanway, Walmart’s senior director of global supplier initiatives, noted during Walmart’s February press conference.

“We will be looking at a life cycle analysis of some products, but not all. There is certainly no requirement of all products to have a carbon footprint produced. Some companies may benefit from performing footprint analysis at a corporate level or even a product level, regardless of this program because of the insight it provides,” he added.

Walmart is collaborating with various US groups such as the nonprofit Environmental Defense Fund (EDF), as well as consultancies ClearCarbon of the US and the global PriceWaterhouseCoopers, the Carbon Disclosure Project and the Applied Sustainability Center (ASC) at the University of Arkansas, to implement the program. The groups will identify projects, quantify reductions, engage suppliers and ensure proper procedures will be followed for each GHG reduction claim.

“We are going to do this in a way that saves the most money possible in a transparent way,” said Walmart vice president Leslie Dach. “This is going to be measurable and we will be held accountable for it.”

SUPPLY CHAIN REACTION

At the end of the day, Walmart said its suppliers as well as customers would both benefit from cost reductions through sustainability.

“Sustainability and lowering costs are totally aligned,” said Lee Scott, Walmart’s chairman of the executive committee, during a question-and-answer session at the Fortune Brainstorm Green 2010 conference on April 14, in Laguna Niguel, California, US.

“We are looking at sustainability from a business standpoint – not from a standpoint of altruism. In fact, a lot of our suppliers are already way ahead of us when it comes to implementing sustainability,” he noted.

Trade group the American Chemistry Council (ACC) agrees, and points to some of its own members’ initiatives in reducing emissions and energy use – both from the use of their products and in their operations.

“More than seven years ago, ACC companies pledged to lower GHG intensity by 18% by 2012 using 1990 as a base-reporting year,” says Jennifer Killinger, senior director of sustainability and public outreach at the plastics division of the ACC. “The industry has exceeded that initial commitment and has reduced carbon intensity by 36% – double its original pledge. We also found, through a recently commissioned international carbon life cycle analysis study, that GHG emission savings enabled by the chemical industry outweigh the industry’s emissions more than two-fold.”

US-based producer Dow Chemical points out that Walmart’s sustainability goal is in alignment with its own objectives of decreasing its environmental footprint and maximizing product performance throughout the supply chain.

“Given the challenges associated with running a global chemical manufacturing supply chain, we have been focused on sustainability for a long time – not just our own but also how we address sustainability with our customers and our customers’ customers,” says Anne Wallin, director of sustainable chemistry and life cycle assessment at Dow Chemical.

“In fact, we have been very active in a number of sustainability efforts with Walmart to help them achieve their objectives.” One example, she notes, is Dow’s role in the development of Walmart’s packaging scorecard, which aims to globally reduce the reteailer’s packaging by 5% by 2013.

The scorecard is a measurement tool that allows suppliers to evaluate themselves relative to other suppliers, based on specific metrics that include, among other elements, GHG emissions, recyclability, innovation, product-to-packaging ratio, space utilization, transportation-related emissions, amount of renewable energy used to make the packaging, and material value.

“Through our work with the ACC, we were the first industry to supply complete life cycle inventory data for our products to support the scorecard initiative,” says Wallin.

Another example, she adds, is Walmart’s use of a secondary loop refrigeration system containing Dow’s DOWFROST inhibited propylene glycol-based heat transfer fluid, which reduces the use of refrigerant gas and limits potential gas leaks.

When it comes to Walmart’s Packaging Scorecard, the plastics industry was the first to provide detailed life cycle inventory data, says Killinger.

While Walmart continues its efforts to reduce plastics in packaging, plastics on the other hand, are also key to helping Walmart meet its sustainability goals, says Killinger.

“The ACC has presented several case studies to Walmart illustrating how plastics feature prominently in sustainability efforts such as saving on shipping costs and improving fuel efficiency through the use of lightweight plastics in packaging. Plastics generally emit fewer greenhouse gases during the manufacturing process too,” she adds.

German chemical major BASF, meanwhile, says it was the first chemical company to join and be a founding member of the Sustainability Consortium, which was established in July 2009 as a collaboration of suppliers, retailers, nongovernmental organizations and university institutions. The goal is to develop scientific sustainability measurement and reporting standards that will be the foundation for an index demonstrating product sustainability.

FOUNDING PRINCIPLES
These standards will likely be the foundation for Walmart’s Sustainability Index program, and are intended for industry-wide use by retailers aside from Walmart, says Charlene Wall, sustainability communications manager for BASF North America.

Other companies currently involved in the Consortium include US retailers Best Buy and Safeway, the US entertainment giant Disney, and Netherlands-based supermarket chain Ahold.

“The fact that Walmart is driving for quantification and sustainability standards really demonstrates that there is an economic business case for sustainability and we are strong supporters of this,” says Wall.

“The consortium is a wonderful opportunity for us to partner with the supply chain utilizing our expertise in science-based sustainability measurement systems needed to quantify life cycle aspects of products. We are engaged in sectors such as food, beverage, agriculture, computing and electronics, household and personal care, as well as future ones that retailers will be looking at in some way, shape or form,” she adds.

One of BASF’s tools is its Eco Efficiency Analysis, developed in 1996, which quantifies the sustainability of products, processes and system solutions accounting for both economic and environmental impact. The third-party certified analysis is based on six environmental impact categories, including energy consumption, emissions (air, soil, and water), toxicity potential, risk potential, raw material consumption, and land use.

Since the introduction of this tool, BASF says it has performed more than 400 comprehensive analyses for its business units, external partners and customers.

GREEN CHEMISTRY DEMAND
US industrial biotechnology company Genomatica is anticipating increased demand for renewable-based materials from Walmart’s customers as the US retail giant tries to achieve its sustainability goals.

“The rigor that Walmart is putting into its sustainability effort is tremendous,” says Dennis McGrew, Genomatica’s new vice president of business development and chief business officer. “Walmart’s program is one of the most important elements driving demand for renewable and environment-friendly solutions.”

McGrew is the former CEO of US bioplastic producer NatureWorks, where he says he had the opportunity to work with Walmart’s initial efforts on sustainable packaging.

More than any other factor, cost remains the most prohibitive component for chemical manufacturers in offering sustainable solutions to suppliers for low-cost retailers such as Walmart, McGrew says, noting a June 2009 joint survey taken by Genomatica and ICIS.

“Based on the survey, chemical companies acknowledged that their customers have expressed considerable inter

est in renewable-based chemicals but that the biggest perceived barrier is cost. In order to align with Walmart’s corporate value of ‘saving money and living better,’ we need low-cost biobased chemical intermediates with identical properties to their petrochemical counterparts which can be dropped in to the existing value chain,” notes McGrew.

Genomatica says this is its core value proposition. The company hopes its first product – biobased 1,4 butanediol (BDO) – will soon find its way into Walmart’s environmentally friendly product lines such as textiles, footwear, and packaging.

“Two big application for BDO are spandex for apparel applications and thermoplastic urethanes in shoe soles. The ability of Walmart to drive a desire for a more sustainable footprint for all of its products through their value chains can help transform the chemical industry,” says McGrew.

Read Doris de Guzman’s Green Chemicals blog