Retailer Sustainability Vendor Requirements & Benefits to Green Marketing for Guatemalan Textile and Apparel Association
September 25, 2014 Guatemala
Agenda 1. Overview 2. Recognizing Risks within the Supply Chain 3. Retailer and Brand Sustainability Initiatives A. Abercrombie & Fitch B. Gap Inc. C. Ralph Lauren D. Adidas E. Nike F. Target G. Walmart 4. Industry Consortia 5. Labels & Examples in Green Marketing 6. How Can You Prepare 6. Questions & Wrap up
Gretchen Dudon
Overview 1. Basic Concepts 2. Key Drivers 3. Develop an Approach & Communicate Results
Gretchen Dudon
Basic Concepts
• Term “sustainability”
• Impetus behind sustainability movement
- limitation of natural resources
- global climate change
- consumer demand
- managing risks
Develop an Approach & Communicate Results
• Understand the impacts of your business
• Track facility information (energy, water, waste)
• Set target reduction goals & identify initiatives to meet those goals
• Initiate projects & track progress
• Report to your customers, make information available
Supply Chain Risk Examples “increasingly companies are focusing on sustainability in their supply chains to manage risk”
1. Tsunamis in Japan & Thailand shut down factories & hurt profits in automotive and electronic companies half way around the world 2. Protesters dressed as Ken & Barbie stalked Mattel’s HQ, saying the company’s toy packaging was promoting the destruction of the rainforests 3. Apple was accused of funding rape in Eastern Congo by sourcing components containing minerals controlled by warlords 4. Fires and the collapse of Rana Plaza in Bangladesh killed more than 1,000, injured more than 2,500 people & exposed several apparel brands’ social compliance transparency risks
Gretchen Dudon
A recent survey of supply chain experts from PwC, found 4 mains reasons for investing in sustainable supply chain management 1. To manage the risk of unintended environmental or social damage 2. To manage a company’s reputation & the expectations of its shareholders 3. To reduce costs & realize productivity improvements 4. To create sustainable products, thereby increasing revenues & enhancing the corporate brand
Gretchen Dudon
The Obstacles
1. supply chains can be complex 2. supplier engagement is more art than science 3. data challenges Follow the Golden Rule – A company cannot hold its suppliers to standards it does not itself uphold
Gretchen Dudon
Start by Setting Goals To get results companies are setting goals to improve sustainability within their supply chains 1. Nike has set supply chain goals for reduction of GHG, H2O use, waste & discharge of hazardous chemicals 2. Puma has a goal to reduce CO2 emissions in the factories that supply it directly 3. Walmart has set category goals & developed buyer incentives to reward employees in merchandizing who deliver improved environmental perfomance within their category 4. Gap Inc. has established a Preferred Mill Program which requires implementation of measurement technologies at key mills & will monitor investments in cleaner production technologies 5. Target is using HIGG Index scores as part of vendor annual scorecards 6. A&F asked key suppliers to complete HIGG self-assessment
Gretchen Dudon
Educate Suppliers sharing knowledge about sustainability best practices with suppliers is becoming more important 1. Kohl’s conducts webinars for its suppliers to teach tactics around improving energy efficiency 2. Walmart has provided energy efficiency training to factory managers 3. Walmart has hosted roundtables for factory and supplier representatives to share best practices & discuss how to execute an energy efficiency program 4. Gap Inc. has provided information to their suppliers on how to report on sustainability, where to find additional resources, and whom to contact at Gap should a supplier want to learn more about the reporting process.
Gretchen Dudon
Leverage Industry Standards
to combat supplier survey fatigue & to help raise the quality of sustainability data collected 1. CDP Supply Chain process to obtain GHG emissions 2. EICC questionnaires to gather info on conflict minerals 3. SAC – HIGG Index 4. In-house company developed questionnaires (Walmart/ Target/ P&G) 5. The Sustainability Consortium (TSC)
Gretchen Dudon
Using Scorecards for years corporate buyers have used vendor scorecards to rate & rank suppliers based on price, quality, performance, delivery time AND now are integrating sustainability into purchasing decisions as well 1. Nike Materials Sustainability Index - helps designers choose materials w/ appropriate environmental performance 2. Nike Manufacturing Index - to help assess manufacturers 3. Target Sustainability Scorecard – to rank suppliers 4. Walmart Sustainability Scorecard – to rank products Walmart recenly pledged that it will buy 70% of the goods it sells in US stores only from suppliers that use it’s Sustainability Index to evaluate & share the sustainability of their products
Gretchen Dudon
Build Industry Knowledge & Capacity improving sustainability in the supply chain requires a collaborative approach 1. Nike developed a H2O management tool called H2O Insight to support its own water program & then worked with a 3rd party to make it available to other companies 2. Many SAC Founding Members to help share industry knowledge of it’s factories – GAP Inc, Target, Nike 3. Roadmap to Zero – a zero discharge program of hazardous chemicals from supply chain by 2020 – H&M, Puma, Adidas, GAP Inc., Marks & Spencer, PVH, Benetton, Inditex and Nike 4. NRDC’s Clean by Design Program helps to improve efficiencies in the textile supply chain – Walmart, Nike and Target
Gretchen Dudon
Abercrombie & Fitch
Gretchen Dudon
Kim Harr, Director of Sustainability
Published Corporate Sustainability Report
Published Sustainability Goals
CSR Hub Ranking 52/100
Focused on eliminating logo attire from its US stores by 2015
Commitments
Gretchen Dudon
Reducing GHG emissions for US operations by 8% from 2008-2018
Advocate for greater attention to environmental stewardship with all companies they work with
Intend to implement practices which reduce their environmental footprint
Want to promote long-term sustainable partnerships throughout the world
Strategy
Gretchen Dudon
Reduce waste through conservation, collaboration, industry partners, and carbon emissions programs
Three R’s as a company policy – Reduce, Reuse, Recycle
Focusing on reducing energy use, internally and externally within supply chain
Tracking GHG emissions through the Carbon Disclosure Project
Initiatives
Gretchen Dudon
H2O Management: Complete water footprint of supply chain
Zero Discharge of hazardous chemicals from supply chain
2011 Implemented A&F’s Master Vendor Agreement (MVA) which includes language specific to RSL
2011 Published a new RSL online and sent a copy to all A&F suppliers
2012 Suppliers to provide a Letter of Guarantee stating their chemicals suppliers’ products will comply with RSL
2012 Verify ISO 14001 certification status for key suppliers
2013 Require key suppliers to complete Higg Index environmental self assessment
Reduce energy use at HQ, offices, retail stores and DC’s
Supply Chain Gretchen Dudon
Vendor Code of Conduct
Environmental Code of Conduct focuses on compliance with all relevant local laws & regulations
CA Transparency in Supply Chain Act
No Uzbek cotton
Conflict Minerals Policy
No Sandblasting
All Bangladesh factories required to go through an electrical audit w/ 3rd party monitoring firm
Audit Lifecycle
Factory Approval
Monitoring
Rating
Correction Action
Follow up
How Engage Suppliers Gretchen Dudon
3rd party monitoring firms audit factory
2 week audit notification and performed 1x per year
A&F’s sustainability team monitors each audit report & assigns the factory a rating. Tracks factory progress to help support those in greater need than others
VIP (Vendor Infrastructure Program) in place to work directly with factories to ensure compliance with Code of Conduct and local laws
Brand Collaboration Working Group implemented to decrease survey & audit fatigue
Conflict Mineral due diligence process 1x per year to ensure supply chain is reporting data pertaining to the source of its conflict minerals
Gap Inc.
Gretchen Dudon
Melissa Fifield, Director of Sustainable Innovation
Published Corporate Social Responsibility Report
Published Sustainability Goals
CSR Hub Ranking 63/100
Focused on “Do More” Than Sell Clothes campaign Founding member of the SAC
Commitments
Gretchen Dudon
Do More Than Sell Clothes campaign Reduce GHG emissions PACE program Volunteerism Human Rights Environment Reporting via Carbon Disclosure Project, Clinton Global Initiative,
Ethical Trading Initiative, UN Global Compact, Social Accountability International, and GAP’s public report
Strategy
Gretchen Dudon
Energy efficiency in US Stores & DC’s – lighting retrofits & solar energy
Waste reduction – paperless paystub program saved 400 miles of paper in 2012
Field Teams Grants - $817K in 2012 for various community organizations
Camp Old Navy
Partnership with International Labor Organization which led to development of the global Better Work Program
Completed supply chain footprint assessment – what gets measured gets managed
SAC Founding members
Strategy (cont.)
Gretchen Dudon
Created Sustainable Fiber Toolkit for designers & merchants
Advance H2O quality & conservation initiatives within supply chain
GAP’s internal Environmental Council meets quarterly to assess GAP’s impact on the environment
Utilize Higg Index in Brand, Product and Facility
Wise Wash Denim - jeans use 25% less H2O, electricity, and chemicals
Wish Wash program came out of findings from Higg
Refers to a manufacturing process that uses low impact manufacturing techniques
Initiatives
Gretchen Dudon
Align with UN’s Guiding Principals on Business & Human Rights
2011 created Brand Integration & Vendor Performance project
team to help GAP better leverage vendor data to drive business decisions, including order placement
Mill Engagement Program – social & environmental practices in fabric mills
Train all new GAP sourcing employees on the importance of responsible purchasing practices
Highlight case studies
Ensure factory orders are made w/ full understanding of impact on workers
Reduce absolute GHG emissions 20% by 2015
Supply Chain
Gretchen Dudon
Work with smaller, consolidated vendor base to facilitate deeper relationships
Complete supply chain H2O mapping and create a supply chain H2O strategy
Zero Discharge of hazardous chemicals by 2020
Preferred Mill Program
currently partnered with 3 key mills
extending to 15 more mills over the next 3 yrs
Rate factories performance against Code of Vendor Conduct to maximize understanding & improve factory performance
234 factories in 21 countries participated in environmental footprint assessment through partnership w/ NRDC
How Engage Suppliers
Gretchen Dudon
Supplier Reporting has been encouraged to all suppliers
GAP sent a letter to all suppliers encouraging them to issue public sustainability reports
GAP provides info on how to report, where to find additional resources, & whom to contact at GAP if you want to learn more about reporting processes
Public sustainability reporting earns best practice credit on GAP’s Code of Conduct ratings
GAP “provides our own Social and Environmental Responsibility Report and so should our suppliers”
Ralph Lauren
Gretchen Dudon
Caren Mintz, Director of Environmental Sustainability
Published 1st Citizenship Report in 2014 due to pressure from a major investor
No Published Sustainability Goals
CSR Hub Ranking 43/100
Focused on integrating sustainability into all business decisions
Commitments
Gretchen Dudon
Environment
Energy & Climate
Materials & Recycling
Engagement Practices
Responsible Sourcing
Manufacturing of products
Vendor selection
Product safety & social compliance practices
Employees
Community
Strategy Gretchen Dudon
Carbon Footprint – measured & tracking scope 1 & 2 emissions
Materials and Recycling
Selecting different ways to transport products
Shipping more ocean and rail vs. air to reduce emissions
Shipment consolidation
98% of company controlled ground shipment moving via EPA’s SmartWay carrier
Utilizing efficient routing via end-end visibility & forecasting tools
100% of ocean carries are Clean Cargo Working Group
Initiatives
Gretchen Dudon
Recyclable packaging and packing materials that incorporate recycled content
Environmental preferred purchasing guideline
Recycling programs in all corporate offices
Monitoring progress
Advertising using FSC certified mailers and increased soy & veggie based inks
CA Transparency Supply Chain Act
Sourcing working closely with Global Human Rights Compliance (GHRC) department for selection of new business partners
Collaboration with other like-minded companies working within same factories to reduce audit fatigue
Supply Chain
Gretchen Dudon
Over 700 manufacturers worldwide with no one manufacturer providing more than approx 4% of RL’s total production
Regional sourcing breakdown: 9% Americas, 10% EMEA, 81% Asia
All vendors sigh RL’s Code of Ethical Conduct
All vendors agree to comply with Vendor Compliance Packet
local law adherence
Restricted Substance adherence with full transparency of records (Supplier Transparency Initiative)
Testing and production protocols of Global Testing & Quality Assurance Program
Supply Chain (cont.)
Gretchen Dudon
Environmental Sustainability must be integrated into all partners’ business decisions
Natural resources
Pollution prevention
Utilization of green technologies
Promote factory efficiency trainings to create greater ownership within production process
How Engage Suppliers
Gretchen Dudon
Vendor Scorecard – rates vendors via on-site evaluations before becoming a vendor
Factories undergo scheduled audits via 3rd party social audits
Key vendors undergo audits annually
Engage suppliers in Continuous Improvement Programs with 3rd party consultants
Nike
Gretchen Dudon
Hannah Jones, Corporate Sustainability Officer and VP of Innovation Accelerator
Publish Nike Responsibility Report Yearly
Publish Sustainability Goals
CSR Hub Ranking 63/100
Founding member of SAC Reducing environmental impact while continuing to grow in
revenue each year Introduced 1st product with ColorDry technology in June 2014
Targets & Commitments
Gretchen Dudon
Cut Energy
Empower Workers
Reject Toxics – Zero Discharge by 2020
Slash Water Use
Reduce Waste
Support Communities
Strategy
Gretchen Dudon
Nike Materials Sustainability Index – helps Nike choose materials with appropriate environmental performance
Nike Sourcing and Manufacturing Sustainability Index – used to assess manufacturers
Zero Discharge of Hazardous Chemicals
Energy and Carbon Program
Factory Code of Conduct includes environmental impacts minimized
Nike Colordry
Bluesign Bluefinder
The Making App
FlyKnit
Materials - Largest Impact
Gretchen Dudon
Used throughout value chain relates to materials – agriculture, processing & finishing; 21% from growing, raising, extraction or harvesting, 33% in processing and finishing
Of value chain water consumption relates to materials
1,500 different material vendors 57% of apparel material vendors
have signed commitments to green
Sourcing & Manufacturing Sustainability Index
Single evaluation system for manufacturing across all products and all brands
The MI integrates scores from key performance areas – quality, cost, delivery and sustainability – into a single dashboard rating
Groups factories as gold, silver, bronze, yellow or red The MI creates 1 overall score for each contract factory
Measuring Sustainability In Sourcing & Manufacturing
• Sustainability is incorporated into the MI as 1 component
• Nike assesses sustainability through the Sourcing & Manufacturing Sustainability Index (SMSI)
• Target is to source all products from factories reaching a minimum BRONZE standard
• In FY13, 309 apparel factories met bronze or higher out of 452 = 68% of factories
• The SMSI also gives a platform to incentivize performance improvements
• Factories that rate below bronze are required to pay for 3rd party audits until their performance improves
Zero Discharge of Hazardous Chemicals (ZDHC)
2012 launched Zero discharge goal by 2020 Working with other brands to create a roadmap to
achieve goal Raodmaptozero.com Continue to maintain RSL 2013 Nike formed a strategic relationship with
bluesign to provide Nike suppliers access to extensive information about more sustainable materials & chemistries
4,300 pre-screened blusign-certified textile chemical formulations (dye systems, detergents & other chemicals used in manufacturing)
69% of apparel material vendors have signed the commitment to writing green chemistry practices
ColorDry
A resourceful invention to reduce H2O use Investment with Dutch DyeCoo Textile Systems High-tech equipment that eliminates use of H2O &
process chemicals from fabric dyeing with replaceable CO2 Traditional dyeing process uses an est. 100-150 liters of
H2O to process 1 kg of textiles – or about 30 liters of water to dye a single t-shirt industry analysts estimate that more than 39M tons of
polyester will be dyed annually by 2015
The MAKING App
Informed decisions lead to more sustainable design Powered by Nike MSI
(Material Sustainability Index) 4 key impact areas: chemistry,
energy/GHG, water/land, & physical waste
Discovery tool for designers & creators to make informed decisions in the materials they use
Make with Less
Gretchen Dudon
Used per unit of footwear made over 5 yrs ending FY13
Used per pair in footwear manufacturing from FY11 – FY13
* 57% of apparel materials vendors have signed commitments to green
Reuse
Gretchen Dudon
Pairs of shoes processed through Reuse-A-Shoe and turned into Nike Grind since 1990
Of cardboard used in Nike shoebox is recycled content
28 Million
Adidas Group
Gretchen Dudon
Frank Henke, Global Director of Social and Environmental Affairs
Publish Sustainability Report
Publish Sustainability Goals
CSR Hub Ranking 62/100
Member of the SAC
Social and Environmental Affairs (SEA) Team solely focused on ensuring environmental compliance & implementation of environmental initiatives within supply chain Implemented a SMS texting program for factory workers
Targets & Commitments
Gretchen Dudon
People: 60% of all direct suppliers to meet 3C (good) or better and 80% of strategic suppliers to meet 3C or better
Product: DryDye technology uses zero H2O, 50% fewer chemicals & 50% less energy compared to conventional fabric dyeing, using virtual images in place of physical samples helps reduce natural resource use in sample production.
1.5M fewer physical samples were made using virtual imagery
Planet: increase ISO certifications within supply chain and focus on more rigorous audits to help suppliers address most significant environmental impacts
Partnership: creating an industry wide audit tool
Supply Chain
31% of supplier training sessions focused on sustainability in 2013
Sustainability training based on needs assessments
2013 Guatemala - 4 Adidas supplier factories out of 1,214
2013, Adidas performed 1,489 factory audits, visits & training sessions
2013 Guatemala had 2 initial assessments
Not only do we try to reduce the environmental footprint from our own sites, we encourage our suppliers to do the same. We want them to tackle the environmental impacts from the manufacturing process and be smart in their use
Supply Chain Environmental Guidelines
Gretchen Dudon
Measure and assess the environmental performance & risks at
factories Follow Legal Requirements & Environmental Permits for
Guatemala Adopt Environmental Management System Sustainable Resource Use water conservation, energy efficiency, material efficiency, waste
management Reduce emissions Monitor Manage Calculate a carbon footprint
Measure and Report http://www.adidas-
group.com/media/filer_public/2013/07/31/environmental_guidelines_english.pdf
Product Sustainability
Gretchen Dudon
40% Better Cotton use by 2015 and 100% Better Cotton use by 2018
50% reduction in colors used within the Sports Performance division
Virtualization project to drive reduction in samples in design process
Optimize packaging solutions
Establish full transparency of more sustainable materials – continue to monitor process of suppliers’ compliance and set clear strategy to implement Adidas’ Sustainable Material Tracking Tool to suppliers
Support SAC and integration of Higg Index into Adidas Better Place tools
How Engage Suppliers
Gretchen Dudon
Multi-level monitoring & enforcement process
Rating system for assessment of suppliers
Rating results shared with Sourcing to decide how many future orders to give factory
SMS texting program to provide open communication for factory workers and Adidas Group
Supplier Training Programs for sustainability
Use of letters to take action over poor factory performance
1st letter warning – fix problems
2nd letter if problems aren’t fixed – stop orders
3rd letter – Sourcing Team stops working with factory and a letter goes out to the local government
Target
Gretchen Dudon
Kate Heiny, Corporate Social Responsibility Executive
Publish Corporate Social Responsibility Report
Publish Sustainability Goals
CSR Hub Ranking 55/100
Founding member of the SAC
Recent news Target and Walmart join forces on supply chain sustainability to drive innovation & remove harsh chemicals from household cleaners, personal care & beauty, and baby care products Developing a Sustainable Product Standard
Commitments
Gretchen Dudon
Education
Sustainability – goals mainly focused on efficient operations, transportation, packaging, sustainable living, organic food, sustainable seafood, and sustainable products
Health and Well-Being
Responsible Sourcing – supply chain goals are focused around increasing Higg participation from suppliers
Safety and Preparedness
Team Members
Volunteerism
Strategy
Gretchen Dudon
2013 Global Reporting Initiative (GRI) reporting
Materiality – formalized their assessment to prioritize top corporate sustainability issues for Target and stakeholders
Performed LCA on Target brand made garments
Founding member of the SAC and played a key role in developing the Higg Index
Clean by Design – NRDC’s best practices for dyeing
Initiatives
Gretchen Dudon
Big campaign around washing in cold H2O – Target found growing, harvesting, spinning raw materials and consumer laundering have the greatest impact on H2O and Energy
2013 added a reminder to labels of Target brand apparel “consider cold-water wash” to save energy and $
Switched Target labels to polyester made from recycled H2O bottles
Reducing carbon footprint within supply chain via product development, packaging and transportation
2012 Target began asking vendors & Target brand factories to use the Higg Index
2013 a second round of Higg surveys were completed with 97% response rate
Supply Chain
Gretchen Dudon
Using Higg Index scores as part of vendor annual scorecards
2012 Clean by Design piloted in 3 high volume textile mills in China for 1 year – savings found in water, energy & materials
Expanding Clean by Design best practices to 2 more cities in China in 2013
Conflict mineral transparency policy
Standards of Vendor Engagement in which all vendors, sub-contractors, and suppliers are required to uphold
Vendor Performance Overviews (VPO) as a tool to make educated sourcing decisions
Adopted a “coaching stance” with suppliers to recognize progress, inquire about obstacles, & encourage improvement
How Engage Suppliers
Gretchen Dudon
Offers web-based training programs on topics like preventing underage labor, working hours, & health and safety management
Provide self audit forms to help vendors improve their performance
Intensive compliance, education, evaluation, and execution program for a limited number of vendors to improve their audit results
Target scorecard is in a spreadsheet format – when answers are updated your score changes immediately
Walmart
Gretchen Dudon
Jeff Rice, Senior Director of Sustainability
Launched the Sustainability Index in 2009 in collaboration with The Sustainability Consortium (TSC)
Publish Supplier Sustainability Goals
CSR Hub Ranking 50/100
Recent news Target and Walmart join forces on supply chain sustainability to drive innovation & remove harsh chemicals from household cleaners, personal care & beauty, and baby care products Developing a Sustainable Product Standard
Commitments
Gretchen Dudon
Energy
Targeting Zero Waste
Sustainability Index
Water
Truck Fleet
Sustainable Food
Greenhouse Gas Emissions (GHG)
Acres for America
US Manufacturing
Strategy
Gretchen Dudon
By Dec. 31, 2020 procure 7 billion kWh of renewable energy
Reduce use of plastic shopping bags
By end of 2013 reduced plastic bag waste by 38%
= 10 billion bags annually
Responsible packaging – Reduce, Reuse, Recycle AND Rethink to develop product packaging solutions that cut unnecessary waste and save $
Launches The Sustainability Consortium in China to set supplier targets
2013 Walmart requires buyers to set specific sustainability objectives that will be tied to their annual reviews
Initiatives
Gretchen Dudon
More than 500 suppliers to participate in the Sustainability Index
NRDC Clean by Design “best practice” mill implementations
Track scope 1, 2 and 3 emissions
GHG emissions (scope 3) from supply chain are > than corporate emissions (scope 1 & 2)
Committed to eliminate 20 million MTCO2e rom global supply chain by the end of 2015
Use the Sustainability Index to spur innovation, track & measure GHG emissions, and create accountability
Target zero waste
Initiatives (cont.)
Gretchen Dudon
Improve water efficiency through better facility design and operational improvements
Jan 2013, Walmart pledged over the next 10 yrs to invest $250B in products that support American jobs
Effort to grow US manufacturing
Encourage the creation of US jobs
Acres for America in partnership with the National Fish and Wildlife Foundation 10 yr commitment
Invest $35M to purchase and preserve 1 acre of wildlife habitat in US for every 1 acre of land developed
Supply Chain
Gretchen Dudon
Recently pledge that Walmart and Sam’s Club will buy 70% of the goods it sells in US stores only from suppliers that use the Sustainability Index
More than 700 categories covered by the Index
Index score improvements year over year in all major business units
Responsible Sourcing Program to include transparent supply chain
Buyers are now incentivized in their annual reviews (5% of a buyer’s bonus) to source more sustainable products and set specific category sustainability objectives
Supply Chain (cont.)
Gretchen Dudon
Increase the use of recyclable plastics
Remove harsh chemicals from health & beauty, household cleaners and baby products
Reduce fertilizer use in agriculture
Expand Sustainability Index to international markets
Improve energy efficiency of supply chain partners with shared projects
How Engage Suppliers
Gretchen Dudon
Sustainability Index initiative in collaboration with The Sustainability Consortium
Sustainability HUB
Resources & tools
Learn how to get started with the Sustainability Index
Ask questions
Share success stories
Developing buyer incentives around improving environmental performance in their category
Adding specific sustainability objectives to its global sourcing merchants’ annual evaluations
Based on KPIs developed by the TSC dependent on product category
Implemented by buyers within their product category
KPI’s address issues up and down the supply chain
Index constantly evolving Index launched 1x per year – Feb. 2015 next
launch intent is to see incremental progress
from suppliers over time 70% of all categories covered except apparel
The Sustainability Index
“If we work together, we can create a new retail standard for the 21st
century."
Multi-Stakeholder group
Evaluates factory facilities, products & brands in different modules
Focus is on the Higg Index – a suite of assessment tools that standardizes measurement of environmental and social impacts in value chain
Registration is Free, easy to set up an account Self-assessment tool (scoring based out of 100 total points and
each module is scored independently) to help guide & improve
Attempts to be a single industry standard
Data is not shared – you own your Higg Index data
Sustainable Apparel Coalition
Members:
Adidas Group Hanes
Levi’s Columbia
Nike Adidas
GAP Inc. A&F PPR
VF Corp H&M
Inditex Khol’s
Nordstrom Target
Walmart
Sustainable Apparel Coalition
Members:
Adidas Group Hanes
Levi’s Columbia
Nike Adidas
GAP Inc. A&F PPR
VF Corp H&M
Inditex Khol’s
Nordstrom Target
Walmart
Sustainable Apparel Coalition
Members:
Operational Focus Area Weighted Scoring
Environmental Management System 14.3%
Energy Use & (GHG) Emissions 14.3%
Water Use 14.3%
Wastewater/Effluent 14.3%
Emissions to air 14.3%
Waste Management 14.3%
Pollution Prevention/Potentially Hazardous Substances
14.3%
Supplier Facility Module Questionnaire Adidas
Group Hanes Levi’s
Columbia Nike
Adidas GAP Inc.
A&F PPR
VF Corp H&M
Inditex Khol’s
Nordstrom Target
Walmart
Sustainable Apparel Coalition (SAC)
Gretchen Dudon
Rapid Design Module – beta was released in 2013
Streamlined version of the Product Module from Higg Index 1.0
Used to help designers during product creation make more informed decisions about the potential environmental impacts of their designs
Assesses materials through the MSI (Material Sustainability Index – based on Nike’s original tool creation)
New and Current Changes
Multi-Stakeholder Membership – 80 members
Addressing sustainability on all product categories
Focused on building a scientific foundation to drive innovation & improve consumer product sustainability
2 Tools Category Sustainability Profile (CSP): summary of
the best available, scientific info on a product over its entire lifecycle
Key Performance Indicator (KPI): questions retailers can use to assess & tack the performance of brand manufacturers on critical sustainability issues
Clothing, Footwear & Textiles working group – Feb 2013
Members:
The Sustainability Consortium
Clothing, Footwear and Textiles Working Group (CFT)
Members:
Focused categories Nylon, polyester, rayon, & cotton clothing 1st working group having research conducted in
China 2 Product Sustainability Toolkit Cotton – CSP & KPI’s Cotton textiles – CSP & KPI’s
Examples of other product categories include Air freshener, apples, butter, bread, cheese, CD’s &
DVD’s, board games, beef, bananas, beans/lentils/peas, baby wipes, baby diapers, eggs, dairy, display monitors, hand tools, plastic toys
Carbon Disclosure Project (CDP)
International non-profit organization
Provides a global platform to measure, disclose, manage & disclose environmental information
A tool to quantify & compare companies’ carbon emissions management & strategies
Works with investors, companies, cities, & governments
Climate Change program
Supply Chain program
Water program
Forests program
Carbon Disclosure Project (CDP)
Supply Chain Program
“CDP offers our suppliers an industry standard global platform for reporting their climate strategies, and data, improve supplier scores on the sustainability index and empowers Walmart to efficiently capture the positive impact that the company and our suppliers’ efforts are having in our supply chain”. Jeff Rice, Senior Director, Sustainability, Walmart
Supply Chain Statistics
Carbon Disclosure Project Signatories
Current Apparel Companies utilizing CDP for tracking & reporting on climate change (carbon emissions), water, & or forests
Nike
Adidas
Target
Wal-Mart (AND Supply Chain Member)
Abercrombie & Fitch
Gap Inc.
Climate change program engages 767 signatories with assets of US $92 Trillion Water program engages 573 signatories with assets of US $60 Trillion
California Transparency in Supply Chains Act (SB 657)
Gretchen Dudon
Effective: Jan. 1, 2012 (signed into law by Governor Schwarzenegger in Sept. 2010)
Purpose: Law requires large retail sellers & manufacturers doing business in California (global sales > $100M) to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale
Disclosure must be placed on website for public to see
California Transparency in Supply Chains Act (SB 657)
Gretchen Dudon
Vendor Requirements: Be prepared for announced & unannounced audits to
evaluate & address risks of human trafficking & slavery. Obtain certification from suppliers that materials used to
manufacture products are not produced with slave labor, are not connected with human trafficking, and comply with laws of the country in which you are doing business.
Provide certification that your products sold are not produced with slave labor, are not connected with human trafficking, and comply with the country laws in which you are doing business.
California Transparency in Supply Chains Act (SB 657)
Gretchen Dudon
“Verification of Product Supply Chains and Certification of Compliance with Laws (SB 657). At Target, we hold ourselves and our vendors accountable to high ethical standards wherever we do business. Target works diligently to ensure Target’s products are produced ethically by our suppliers and in accordance with Target’s Standards of Vendor Engagement(“Target’s Standards”) and Target’s Vendor Conduct Guide, which Target suppliers are subject to as a condition of doing business with Target. Target’s Standards expressly prohibit our suppliers from utilizing any forced or compulsory labor. They also mandate that workers receive fair wages and benefits in compliance with all applicable local laws. Target suppliers also warrant that all the products they supply to Target are manufactured in accordance with all applicable laws, regulations and standards – both of the United States as well as their country of origin”. http://m.target.com/HelpContent?help=/sites/html/TargetOnline/help/orders_and_shipping/more_help_with_orders/CA_SupplyChain_Act.html
California Transparency in Supply Chains Act (SB 657)
Gretchen Dudon
“…. As part of our commitment to be a responsible company, the Ethical Sourcing
program was established in 1992. A key part of that program is our Standards for Suppliers, which are Walmart’s fundamental expectations of its suppliers on social and environmental practices. The Standards cover topics including: compliance with laws, voluntary labor, labor hours, hiring and employment practices, compensation, freedom of association and collective bargaining, dormitories and canteens, and the environment. Walmart requires every supplier to sign an agreement that they, their contractors and subcontractors will abide by these Standards. Factory audits are used to verify suppliers’ compliance with the Standards in those facilities producing merchandise for Walmart…. ” http://corporate.walmart.com/global-responsibility/ethical-sourcing/california-transparency-in-supply-chains-act
Corporate Disclosure in Compliance with SB 657 California Transparency in Supply Chains Act (Human Trafficking and Anti-Slavery)
Summary of Programs
Energy GHGs Water Waste Chemicals Social Natural
Resources
The Sustainability Consortium
SB 657 – CA Transparency in Supply Chain
Sustainable Apparel Coalition
NRDC
Nike (SMSI)
CDP
Labels & Marketing
Product sustainability as a point of differentiation
Green Labels Eco Criteria
GoodGuide Green Marketing Guidelines (FTC)
Examples of Green Marketing
Product sustainability - Consumer Perspective Q. How do you know a product is green? Q. Are you searching for greener products? Q. Are you seriously searching for more sustainable apparel? Q. Where are you searching for more sustainable product?
Product Sustainability - Consumer Perspective
How do you know a product is green?
49% read product ingredients & statements about energy
reduction on the packaging
31% it’s made by a company with a strong environmental reputation
25% it’s been certified by an independent 3rd party
Product Sustainability - Consumer Perspective
Are you searching for greener products? Greener defined as
more energy efficient, natural or sustainable? 70% responded yes in 2012 This is flat from 2011 where 70% of consumers also said yes
but trending upwards from 2009 where only 60% responded yes
Product Sustainability - Consumer Perspective
Are you seriously searching for more sustainable apparel?
20% said yes – seriously to indicate a strong
commitment and intent in 2012 This number is down from 3 yrs ago, however
consumer behavior is generally trending downwards attributed to the economic recession
Product Sustainability - Consumer Perspective
Where are you searching for more sustainable product? 38% Big box retailers (Target or Walmart) 22% Online 5% Specialty boutique (Patagonia or Aveda)
• Brands, Retailers, Investors and Shareholders are increasingly concerned about the effects of climate change and water scarcity to doing business. • What was the most costly natural disaster in the past 100 years? • With the reality of rising global population and resource constraints we must manufacture differently. Companies fear consumers perception if their success has consequential impacts.
Product sustainability – B2B Communications
Green Labels
Energy Star 55%
Green Good Housekeeping 29%
USDA Certified Organic 27%
Consumer Reports Greener Choices 23%
UL Environment 6%
MBDC Cradle to Cradle <1%
Vary by country you are selling into Common List
Eco Criteria
Eco Fashion is a holistic concept that refers to all fashion products that have been created in such a way to contribute to a healthier and more equal world
Vegan: products that have been made without the use of leather or animal tissue products
Ethically produced: ethical fashion that has been produced with respect for people & environment. This is an option for smaller companies who are taking significant action but don’t qualify for existing Organic and Fair Trade
Eco Criteria Fair Trade Certified: Organized movement that promotes standards for international labor, environmentalism, and social policy. Focuses on exports from developing countries to developed countries.
Organic: Natural fibers that have been grown without any pesticides and other toxic materials. The process of organic grown can be certified by various organizations. USDA Organic is common one in USA
Recycled: Anything made from already existing materials, fabrics, fibers or metals; often reclaimed from previously made clothing and reworked into new ones. Re-spun, re-purposed.
GoodGuide
Provides information on health, environment, and social impacts of consumer products
Search and browse over 200,000 products
Use scientific expertise and rating system based on 0-10 iPhone app available
Reviews products and categories – apparel category available
Federal Trade Commission
Environmental Claims: DO’s DO specify environmental benefits when using seals or certifications DO use environmental certifications or seals that convey the basis for the certification DO have reliable scientific evidence to support carbon offset claims
Federal Trade Commission
Environmental Claims: DO’s DO be clear about your compostable claims and where your product can be composted DO ensure if you make degradable claims that your product will completely break down and return to nature within 1 year DO provide competent and reliable scientific evidence that your non-toxic claim is safe for both people and the environment
Federal Trade Commission
Environmental Claims: DO’s DO qualify recyclable claims when consumers have limited access to recycling facilities. DO make recycled content claims only for materials that have been recovered or diverted from the waste stream during the manufacturing process or after consumer use. DO qualify claims for products or packages made partly from recycled material ~ “made from 30% recycled material”.
Federal Trade Commission
Environmental Claims: DON’Ts DON’T make broad, unqualified environmental benefit claims, like ‘green’ or ‘eco-friendly’ ~ too difficult to substantiate DON’T claim “green, made with recycled content” unless you analyze the trade-offs ~ do the environmental benefits outweigh the risks and costs?
Federal Trade Commission
Environmental Claims: DON’Ts DON’T make unqualified renewable energy claims “made with renewable energy”, unless all, or virtually all, the significant manufacturing processes involved in making the product or package are powered with renewable energy or RECs DON’T make product or package reduction claims without a basis for comparison ~ “10% less waste than our previous product”
Examples of Green Marketing
Directly from your Client’s Corporate Sustainability Reports
“our paperless paystub program saved 400 miles of paper in 2012” GAP
“By recycling and composting at our San Francisco HQ, we diverted 75% of our building waste from going to landfill” GAP
“Since fiscal year 2009, we reduced our global air mix by more than 1/3, avoiding more than 20,000 metric tons of CO2 emissions in the latest fiscal year alone” Ralph Lauren
Examples of Green Marketing (cont.)
“Reducing our global air mix AVOIDED 20,000 MTCO2e of emissions from being released into the air, the equivalent of emissions from 18,000 homes’ energy use for 1 year” Ralph Lauren
“Through the use of intermodel solutions, we avoided emissions equal to to Co2 emissions from 390,000 gallons of gasoline” Ralph Lauren
“Making labels more sustainable by switching to a polyester made from recycled water bottles, diverted around 9 million water bottles from landfills each year” Target
Examples of Green Marketing (cont.)
“2 billion water bottles recycled in material used in Nike Brand apparel product since FY10 … equivalent to covering over 2,000 soccer fields” Nike
“Adidas has used more than 2M yards of DryDye fabric, saving 50 million liters of H2O, or 20 Olympic-sized swimming pools” Adidas
“A program evaluation from the International Center for Research on Women found that GAP PACE is changing women’s lives, with 1.5 times as many women saying they felt more confident in their ability to accomplish tasks at work and at home and nearly 50% more women reporting a higher level of self-esteem after they participated in the program” GAP
Can Suppliers Meet Retailers’ Rising Sustainability Expectations
• Khol’s VP of Corporate Sustainability sees a clear segmentation among suppliers & their approach to sustainability
– “our vendors fall into 3 buckets” – John Fojut
• They either consider (sustainability) part of their core values
• They see it as something that gives them a competitive advantage
• They see it as something they have to comply with
Can Suppliers Meet Retailers’ Rising Sustainability Expectations
• A positive attitude – rooted in the realization that improved environmental & social performance can help make any business smarter, stronger, and more profitable
– Excellent foundation for future growth
– Long term viability depends on continuous improvement & innovation which includes sustainability
– Shifting from a compliance perspective to this can actually add value to my business
• Many of your client’s are adopting sustainability as a corporate directive
– What category will you fall into? Wait-and-see or act now and get ahead of the curve?
Act Now or Wait and See? Which are You?
• Despite mounting evidence that commitment to sustainability is deepening & accelerating in the retail world, many suppliers have been slow to out of shift neutral gear
• Some adopted the “wait-and-see” holding pattern
• reasoning that “once our customers sort out these requests, initiatives and standards, then we’ll start moving”
• Others made no secret of their plans to do as little as possible
• reasoning they assumed sustainability would fade in importance
• “we get a different buyer every few years; the next one probably won’t care about this”
• This is just another fad; retailers won’t care about this next year
Act Now or Wait and See?
A simple test to reveal whether the wait-and-see approach is right for you.
To assess the likelihood that retailers/brands will stop caring, lets ask 3 simple questions:
1. Is the customer of tomorrow likely to care more or care less about sustainability than the customer of today?
2. Are product contents and manufacturing locations likely to be more visible or less visible to retailers and the public 10 years from now?
3. Are costs of essential inputs like energy, clean water, and raw materials likely to increase or decrease for the foreseeable future?
Act Now
1.Build a Team
2.Assess your top client’s and percentage of business coming from each
3.Inquire about their supplier sustainability directives
1. How do you engage your suppliers?
2. Are you following a specific index?
3. How do you reward your compliant suppliers?
4. Do you have any educational / joint programs / resources for your suppliers?
4.Start measuring and understanding your environmental impact
1. Energy
2. Water
3. Waste
4. Chemicals
5. Social
Act Now
5.Put procedures in place to manage data
6.Create goals once you have measured and began tracking
7.Ask your operational managers and directors what they have already been doing (most likely your current operations are already following sustainability index initiatives)
8.Create a Corporate Sustainability Report
9.Share with your clients
10.Start small and make progress over time – baby steps
11.Keep it simple
12.Engage a sustainability consulting firm – ask for help and create the budget from operational savings
Wrap Up Gracias, Buena suerte!!!
Gretchen Dudon, President Dudonova Group and Associate Advisor with Walter Wilhelm and Advisors [email protected] +1 303.589.8760