Sourcing With A Conscience

An environmental expert weighs in on environmentally responsible sourcing for store brand products.

The ingredients, environmentally raw materials responsible and finished sourcing products of is a critical part of the sustainability equation. But how can a store brand buyer tell the difference between the "real deal" and an imposter?

Scot Case, vice president of TerraChoice Environmental Marketing Inc., Ottawa, Ontario, and market development director for UL Environment (TerraChoice joined forces with UL Environment Inc., Northbrook, Ill., in 2010) discussed this issue and more with Progressive Grocer's Store Brands.

Case has spent years helping organizations improve environmental performance. He managed EcoLogo, one of North America's largest environmental standards development organizations, testified before Congress on green business issues and advised the Office of the Federal Environmental Executive during the administrations of Presidents Clinton and G.W. Bush.

PG's Store Brands: Why should retailers be concerned about the environment when it comes to sourcing their store brand products?

1. Scot Case: There are four inter-related reasons retailers should be concerned about the environmental issues associated with their store brand products: Rise of Green Consumers: An increasing percentage of the customer base is concerned about environmental issues. Depending on which study is referenced, between 6 and 20 percent of consumers express concern about the environmental impacts of their purchases. While environmental issues are not the only consideration for most consumers (even for many of those who self-identify as green consumers), environmental issues can be an important differentiator when choosing among brands in product categories where consumers perceive very little practical difference among products.
2. Green as a Measure of Quality: Properly presented, consumers perceive specific environmental claims as important indicators of quality. Organic food, energy-efficient electronics and cleaning products certified as meeting a tough environmental standard all convey a message of quality that can help convince skeptical consumers to try a store brand or to remain loyal to a store brand when facing aggressive price competition from nationally or regionally branded products.
3. Green as a Supplier Metric: While few consumers understand concepts such as “carbon footprint," these measures can provide retailers with valuable insights into supply chain efficiency. Carbon footprint metrics, at their core, are measures of energy- efficiency. Suppliers with smaller carbon footprints are likely to have invested heavily in energy- and fuel-efficient measures because they are the most cost-effective way to reduce carbon footprint. More efficient suppliers will likely have lower overhead costs and will be more insulated from rising energy costs.
4. Green as a Risk Mitigation Strategy: In a world of instant communication, legitimate concerns or rumors about the human health or environmental impacts of a product, supplier or a specific factory can quickly threaten a brand. Green supply chain strategies include establishing procedures to identify and mitigate potential risks with specific product formulations, suppliers or manufacturing sites.

PG's Store Brands: What product categories are of most concern, environmentally, when it comes to store brand sourcing, and why?

Case: From a consumer perspective, the most serious risks will always be associated with any product that a consumer or consumer's family (including the family pets) will consume, apply or inhale. Consumers are increasingly concerned and have access to information about specific product ingredients and their associated health risks. It is imperative that the retailer understands and mitigates these risks so that they can provide consumers and consumer advocates with relevant information.

Retailers should pay particular attention to any product category for which there is an existing environmental leadership standard such as those developed by UL Environment (www.ulenvironment.com), EcoLogo (www.ecologo.org), GREENGUARD (www.greenguard.org) and others. Environmental leadership standards are developed for product categories in which consumers have particular interest or in which there are known environmental risks.

Given the relative ease with which consumers have access to these standards, it is very easy for consumers to ask whether their favorite brands, including store brands, are capable of meeting them.

Case: There are a variety of

strategies being employed to help retailers mitigate the risks from diverse supply chains. While there are multiple variations, the strategies can be grouped into the following categories:

1. Develop supplier scorecards. Brand owners can develop a supplier scorecard highlighting areas of concern and ask that suppliers complete them. One of the challenges with this approach that needs to be mitigated is that suppliers can interpret the questions differently from each other or differently from the brand owner's intent.
2. Develop in-house expertise. Brand owners can empower leadership teams within an organization to vet suppliers against industry best practices, including conducting on-site audits to ensure suppliers are meeting the best practices that have been identified.
3. Seek independent third-party certification. Brand owners can rely upon third-party certification to determine whether suppliers and their products meet tough environmental leadership or social responsibility standards. Environmental leadership standards exist for a growing number of products from organizations like UL Environment, EcoLogo, GREENGUARD and others. In addition, UL Environment is developing a standardized manufacturer scorecard that can be used to assess the environmental and socially responsible activities of a supplier. It is currently being piloted by a number of manufacturers with the support of a select number of retailers.

PG's Store Brands: How can retailers best communicate store brand-related environmentally responsible sourcing efforts to consumers, and how do they avoid greenwashing?

Case: Humility is an important part of any communication strategy. Environmentally and socially responsible sourcing initiatives are more complex than many consumers understand. What is important to some consumers is unimportant to others. This complicates consumer communication because simple, catchy messages can be misinterpreted in ways that mislead consumers and could result in legal challenges with the Federal Trade Commission (FTC).

Approaching consumer communication with a message that conveys a company is concerned about environmental and social issues and, like the rest of the world, is struggling to understand them. Talk in broad terms about the brand's environmental and social aspirations, but in specific terms about what the brand has actually accomplished.

One of the most effective ways of communicating specific information is to refer consumers to well-known and well-respected standard certification programs. This includes programs like UL Environment, EcoLogo, and GREENGUARD. It also includes organizations like Fair Trade (www.fairtradefederation.org), Energy Star (www.energystar.gov), WaterSense (www.watersense.gov) and USDA's BioPreferred (www.biopreferred.gov).

PG's Store Brands: Speaking of greenwashing, what do retailers need to know to avoid problems with the FTC?

Case: One of the most important things for retailers to recognize is that some suppliers lack education around the FTC guidelines. As part of a consulting engagement, we discovered that suppliers for one catalog company overstated or misstated the environmental benefits of their products 78 percent of the time. The most common reason was that the suppliers were unaware of the FTC rules on greenwashing. Other suppliers were aware of the rules, but perceived themselves as being at a disadvantage compared to competitors who were unaware or who were ignoring the rules.

With the FTC strengthening and enforcing its Green Guides, including a recent action against Kmart for claims made by a private label supplier, it is imperative that retailers aggressively enforce strict adherence to FTC guidelines. Some retailers are adopting training protocols to ensure suppliers understand the guides. Others are establishing independent third-party review of all suppliers' environmental claims to ensure compliance.

All retailers and suppliers should be familiar with FTC's own website, including its Green Guides. Many have also found the "Sins of Greenwashing" reports (www. sinsofgreenwashing.org) created by TerraChoice, an environmental marketing and consulting firm, to be particularly helpful because they communicate the same messages in a more digestible format.

PG's Store Brands: Retailers typically source store brand products from many different private label suppliers, and from manufacturing facilities located across the country and even across the globe. How can they truly ensure suppliers have the environment in mind when sourcing ingredients/raw materials, manufacturing products and more?

'One of the most important things for retailers to recognize is that some suppliers lack education around the FTC guidelines.'