Greening the supply chain can be good for the bottom line
The prospect of greening an entire supply chain may seem like a daunting task, but by breaking the action down to small, easier-to-handle components, three very different Canadian organizations have demonstrated ecological and financial rewards can go hand-in-hand.
With a client list that includes names like Apple, CIBC and Encana, Teknion Ltd. is a Toronto, Ontario-based manufacturer of customized, high-end office furniture and interiors. Headquartered in Vancouver, B.C., Lush Fresh Handmade Cosmetics is a cosmetics company that not only operates 216 stores, but also manufactures its own products using fresh, natural ingredients. Although known as a seller of outdoor equipment, Mountain Equipment Co-op (MEC) in Vancouver, B.C. isn’t a traditional retailer even though it operates 17 stores in six different provinces. As its name implies it’s a co-operative with more than four million members. It also produces its own line of gear. Yet despite the very different business types, these three organizations have leaders when it comes to demonstrating that being sustainable can be good for the bottom line.
“Obviously it’s worth it. If I didn’t think it was worth it, I wouldn’t be driving this through my department,” says Mark Wagner, vice-president of materials, purchasing and facilities at Teknion.
One characteristic common to all three organizations is a belief in the value of communication. All three insist that sharing best practices is good not only for their own businesses, but for business and the environment in general.
In order to green its supply chain, Lush took the step of rethinking the design of its production facilities, says Katrina Shum, Lush’s sustainability officer for North America. She explains that during this past year, the company has built parallel production rooms at each of its Toronto and Vancouver plants. That way both locations can produce the same type of products. Now, instead of shipping soap, for example, from a lone plant on one side of the country to a store on the other side, shipments originate closer to their eventual retail destinations, reducing the number of miles the goods need to be transported and the corresponding emissions created when those goods are shipped.
Not only have the redesigned production facilities affected the company’s outbound operations, they have altered Lush’s list of suppliers as well, says Shum.
“In some cases, we are looking for some of the packaging and paper materials and trying to source them closer to each of the factories. Also, there may be separate vendors that are significantly closer to either Toronto or Vancouver, especially for things like fresh produce. Those types of items are sourced closer to the factory. It is only some of the longer lead items that come from further away.”
Even for those longer-lead types of items, Lush has been looking to find closer suppliers. Many of the company’s cleansers and lotions are sold in black plastic containers with screw-on lids that come from an overseas supplier. Currently, Lush has a pilot project underway to obtain 100% recycled Number 5 Polypropylene containers from a supplier just outside of Vancouver.
“A lot of our paper and gift materials have been sourced locally or within North America, which has taken a lot of time from our buying team in terms of identifying those relationships and finding the suppliers, especially when we are looking for things with 100% recycled content,” says Shum.
Recycling and using recycled material is an ingrained part of the company’s corporate values. Lush even helps its customers recycle by offering a return-to-store program for the black pots, awarding them a free face mask for every five pots they return. At this time, the returned pots are recycled into new items, once the new Canadian supplier is fully onboard, it will use the plastic in the creation of new black pots.
A large number of Lush employees are involved directly in ecological programs. It employs regional sustainability stewards, and each retail shop has a point-person in charge of green initiatives. As the sustainability officer, Shum is responsible for looking at Lush’s environmental impact in five separate areas: energy, water, waste, transportation and buying, and she works closely with what she describes as a “strong ethical buying team” which works not only with suppliers and vendors but also with the charity pot team. The company earmarks a SLush fund to finance programs and producer communities around the world with the goal of developing a “regenerative supply chain.”
While Lush has taken many steps towards sustainability, Shum knows her job is far from finished.
“Right now, we’re measuring benchmarks of where we are and setting some clearer targets around those. We’re in the process of doing that,” she says. “The first step is understanding what our footprint is right now.”
With the word co-operative right in its name, it makes sense that Mountain Equipment Co-op relies on the sharing of information and best practices in order to become more sustainable.
MEC is well aware that textile manufacturing puts considerable strain on the environment, and it is working with other clothing and footwear producers and retailers to lessen the negative effects associated with making attire. As a member of the Sustainable Apparel Coalition, MEC, along with companies such as Nike, Columbia Sportswear, Burberry, Levi’s, H&M, and Wal-Mart, has access to a decision-making tool known as the Higg Index that helps businesses “design a more benign product from the beginning,” says Tim Southam, public affairs manager for MEC. The index takes into account a variety of factors ranging from how sustainable the material is to how the final goods are packaged and shipped.
Another evaluation tool being used is bluesign, a Swiss-developed system for evaluating and eliminating chemicals before they are used in the production of textiles. MEC measures the number of its products in relation to both the Higg Index and bluesign. According to Southam, in 2013, MEC produced 658 styles with preferred materials (as classified by Higg) and 71 per cent of its apparel and sleeping bag materials were bluesign-approved (and the goal is reach 100 per cent).
MEC’s logistics and Customs manager, Ryan Yeung says the co-op also relies on organizations, programs and organizations like SmartWay and the Pembina Institute (a Canadian think-tank that verifies sustainability and environmental calculations) to ensure that it is accurately measuring and reporting data, including emissions, in its accountability reports.
Working with suppliers and shippers to reduce transportation emissions is an ongoing process, says Yeung. MEC has all but eliminated the use of air freight, it typically opts for slow steaming ocean routes, and tries to use intermodal for between 90 and 90 per cent of land-based shipping.
“There is always stuff we can do, even small things like asking to consolidate orders—asking vendors if they’ve got a backorder to roll it into the next big order. The repeating theme is it needs to make business sense for us as well. We tell vendors not to ship a small backorder via UPS—that’s going to cost us a lot of money, and it’s bad for the environment,” says Yeung.
“Collaborating with other like-minded organizations to get at some of the larger problems like climate change and energy use or how products are made is helpful,” says Southam. “You really have to approach these things with others. MEC can’t do that by itself. We’re not big enough, and I don’t believe any one company is big enough to do that by itself. We’re all better to be working with others.”
Even on its own, however, MEC is constantly looking for things it can do to diminish its environmental impact. For example, it devised a way to ship garments in a way that reduces the amount of packaging required. Rather than wrapping each item individually, MEC now requires suppliers to use the sushi roll approach—roll the item up and tie it with a string.
“It saves a huge amount of plastic on an ongoing basis, and eliminates it from the supply chain,” says Southam. “And the garments are no worse the wear for it.”
Even actions to improve MEC’s business processes can be viewed in terms of environmental benefits, says Yeung. Becoming a CSA importer, for example, means “we get our stuff faster, we spend less hours shuffling paper, and it’s probably more green because we don’t need to print out stacks and stacks of B3s anymore.”
Offering customized products means when Teknion places an order its supply chain needs to react quickly.
“Our average lead time is three-to-four weeks. That’s very, very short,” says Wagner. “If I’m lucky, that allows me, on the procurement side, maybe five-to-ten business days to bring the raw material in, then our plants manufacture and ship.”
Given the compressed timeframe, Teknion doesn’t have time to verify suppliers’ green credentials after the fact. Instead, the office furniture manufacturer vets potential partners early.
“We have a comprehensive pre-approval process we put in place a number of years back, which deals with multiple areas from the management to the engineering department at the vendor to the sustainability programs they have within their organization. From the green side, we really upped the ante by making it a much heavier weighted area within this audit.” According to Wagner, there were two good reasons for taking this step: customers putting more sustainability requirements in their RFPs and Teknion’s owners wanting to be good corporate citizens.
One of the requirements Teknion wants to see is formal programs in place. Suppliers need to be ISO 14000 or QS certified. And if they’re too small to make participation in those programs practical, the suppliers must demonstrate compliance with the goals and practices of those types of certifications and prove they have things like recycling programs in place. Teknion has a habit of sending officials on supplier visits to help develop sustainability programs, but also to check that the promised practices are actually taking place. This is especially true for suppliers in the Far East. “It’s not that we don’t trust people, but I want to be able to put my hand over my heart and say, ‘yes, I know these companies are compliant on the environmental side, and on other things too, like child labour. Obviously we won’t deal with any of those organizations, and the best way to do that is show up with one or two days’ notice and say, ‘we’re here,’” explains Wagner.
Even vendors who provide the company with office supplies like pens, batteries, photocopy paper or building equipment like lightbulbs have to have recycling programs in place to collect the items once it is time to dispose of them. Wagner says things like the pen recycling program, which prevents the writing implements from winding up in landfill, help instill the message to all of its employees that Teknion takes recycling and sustainability seriously.
One area where the company has expended a lot of effort to make itself more sustainable is packaging. With local vendors, it prefers to use returnable packaging such as metal bins or steel racking, eliminating the need for expendable dunnage. More distant suppliers who still use wooden pallets are given engineering drawings and specifications to create pallet sizes that match the ones Teknion uses, thereby allowing the imported pallets to go into the company’s pallet inventory. On the outbound side, Teknion has incorporated corrugated honeycomb pallets, which not only cost less, but are 100% recyclable by the customer. “If you think of an office building in downtown Toronto, they aren’t accustomed to receiving wooden pallets for product. They didn’t really have a disposal method in place. Getting rid of honeycomb pallets is like getting rid of corrugate,” explains Wagner.
Teknion has also moved away from stocking an assortment of standard-size boxes, which often needed to be padded out with things like air pillows before shipping, and instead uses a box-maker to create custom-sized boxes out of recycled corrugate. “Now I’m making a smaller box that fits the order, or a larger box rather than two smaller boxes because it’s more economical to make one larger box and it takes up less space on the truck, so I’m burning less fuel to deliver it. There is less of an issue at my customer’s. It’s a win-win-win,” say Wagner, adding that even with the cost of buying the corrugate, Teknion has realized a savings of $100,000 per year by making its own boxes.
Another area where Teknion managed to save money while making a change that benefits the environment was in transportation. The company has been adding more and more “milk runs” to its network. “A large percentage of our suppliers are local to us in the GTA, but that became a challenge in multiple respects because we had so many trucks coming to our doors. We tried to define delivery times and have windows, but that was very, very difficult because of rush orders and other reasons. So what we’re doing now is setting up milk runs. Instead of allowing the vendor to FOB Teknion (“Free on Board Shipping Point.”), we’re now co-ordinating pickups so I have one truck show up to my dock, which in some cases, can take four or five trucks off the road and replace it with one, which we think is a great green initiative,” says Wagner.
Teknion began using milk runs in southern U.S. states to collect fabrics from textile mills, and although it was more difficult to implement them in Canada, Wagner says the effort to organize them and to negotiate price reductions (to account for the eliminated shipping costs) has paid off.
Overall, he says the company’s efforts to be sustainable are good for customers, good for Teknion’s bottom line and good for company morale.
“If two things are the same price point, or almost the same price, I don’t think there is anybody out there who wouldn’t choose the more environmentally friendly product….So if Teknion is in the position where we can provide that solution at a cost neutral, there is that competitive advantage. And net, at the end of the day we’re doing what’s right ,so we can feel good about it.”