Supplier Scorecard Next Step in Sustainable Trend

The sustainability drive by Wal-Mart Stores Inc. will move to another level Feb. 1 as its buyers begin using the packaging scorecard as part of their purchasing decisions at the world’s largest company.

Wal-Mart’s suppliers – around 60,000 companies, give or take – have spent the past few months entering packaging data for their products into the scorecard software and in February will be able to see where they stack up against their category competitors.

The scorecard is the end result of a collaboration between more than 200 organizations making up Wal-Mart’s Sustainable Value Network as the Bentonville retailer tries to achieve a 5 percent reduction in packaging by 2013.

Such a reduction will save Wal-Mart an estimated $3.4 billion annualy throughout the supply chain, and it estimates that if just 10 percent of its competitors adopted similar goals the savings would be near $11 billion.

Meeting Wal-Mart’s goal will be the equivalent of removing 213,000 trucks from the road and saving 66.7 million gallons of diesel fuel each year.

It’s a good bet that more than Wal-Mart’s conservative estimate of its competitors will be adopting packaging reduction measures, if for no other reason than to keep pace with the already lean discounter coming off a clear win in the 2007 holiday season.

“That’s why sustainability is different than environmental regulation of the mid-90s or recycling of the mid-80s,” said John Spink of Mars Packaging Knowledge Group, which partnered with Wal-Mart to administer training programs and act as a dynamic conduit to the concerns of suppliers as they went through the scorecard process.

Mars PKG, a division of Southfield, Mich.-based Mars Advertising, has worked with hundreds of clients in preparation for the Feb. 1 deadline with its services such as customized education, product data entry, product modeling and scorecard improvement.

With its combination of expertise in both packaging science and the art of marketing and design, Mars PKG was a natural choice to pair with scorecard software authors ECRM.

“There are crystal clear business drivers behind it because we’re trying to grow in a resource-constrained world,” Spink said. “It is a bottom-line financial activity. If you don’t meet them, you’re at a disadvantage.”

Setting Benchmarks

Charles Walsh, who oversees sustainability and business solutions including the scorecard software for ECRM, said the rankings coming out in February will be a benchmark to track the progress of future improvements.

During training sessions, reps from ECRM and Mars emphasized to suppliers their scorecard ranking would not be a decisive factor in a buying decision, or even necessarily a tiebreaker. However, no one wants to be at the low end of the curve and competition will drive innovation.

Buyers are also on the lookout for the next CFL bulb, the energy-saving device Wal-Mart has sold more than 100 million of since November 2006.

Walsh said companies interested in changing their packaging to improve their score need to be in close contact with their buyer to make sure the end result is still a product consumers want and not one that adds cost or increases the chances of damage in transit.

Wal-Mart’s not out to eliminate products like bottled water, now under fire in some circles for the large amount of waste it generates and energy it takes to transport and refrigerate, but the scorecard can find ways to lessen its impact.

There have been bugs to work out, and Walsh called the scorecard a “living organism” that has been continually updated though supplier and industry input.

For one thing, a product that should have scored well on the scorecard – the concentrated laundry detergent – didn’t.

The reason?

The formulas were counting ounces of liquid, not uses, which threw off the final score.

The three foci of the scorecard are relatively simple: the kind of materials used in the packaging, the package-to-product ratio and the distance that material traveled before manufacture.

“When you understand it, you can change it,” Walsh said. “Its already driving innovation and it will only increase. It will be driven not by Wal-Mart, but by the industry.”

Whether PVC or corrugate, each material has a different value assigned based on the greenhouse gas emissions it creates to produce. How the packages are stacked on pallets, whether they can be double-stacked on a truck or if the package can be reused are all factors in the final score.

Wal-Mart has already applied the scorecard to its private label brands and by the third quarter of 2008 will take steps to completely eliminate petroleum-based PVC from those packages.

There has, of course, been some grumbling among suppliers, Mars PKG president Jane Severin said, but she’s been “very impressed” that more companies than not are embracing it with in-house sustainability experts and senior staff dedicated to it.

ECRM chief information officer Jim Rice said any skepticism he had at the onset of the SVN meetings in mid-2006 lasted all of about 20 seconds after he saw representatives from the likes of Blue Sky, Greenpeace and the Natural Resource Defense Council at the table.

“You could immediately see [Wal-Mart was] very serious about it,” Rice said. “The goals, at first glance, you may think it is overambitious. But when you see the drive and dedication that everyone has going forward, they’re going to achieve those goals.

“And some, they’re going to blow them away.”

Sustainability Sea Change

That passion Rice was talking about could be the most defining aspect of the sustainability movement.

Universally, the new champions of environmentalism can’t help but bubble over when talking about the possibilities in more realistic terms than their tie-dyed-in-the-wool predecessors could have ever dreamed.

Talking about sustainability is, well, sustainable.

The rapid rise and respect of the sustainability issue has been a long time coming for Severin, one of only 22 packaging science Ph.D.s in the world. Her once-obscure discipline went from “an afterthought” to the forefront virtually overnight.

“Packaging professionals are trained in how to approach the ‘eco’ aspect of packaging,” she said. “But as a packaging leader for 20 years, an eco idea on its own often wouldn’t go anywhere.”

With annual sales of $345 billion, the biggest electrical bill on earth and a truck fleet that travels millions of miles per year, Wal-Mart is likely the only entity in the world – corporate or state – with the power to affect this kind of sea change across virtually every industry so quickly.

Its demands for more efficient lighting and HVAC systems have already spurred new technology and Wal-Mart has rewarded companies that meet its goals with exclusive buying arrangements when retrofitting or constructing new stores.

In September 2007, just two years after Wal-Mart CEO Lee Scott had his “Road to Damascus” moment watching the horrific aftermath of Hurricanes Katrina and Rita, Wal-Mart began rolling out double- and triple-concentrated laundry detergent.

Even Wal-Mart’s staunchest critics would have to give it the nod for the savings achieved in just one brand line, Unilever’s Small & Mighty.

The triple concentrated formula will save 50 million square feet of cardboard annually, 6 million pounds of plastic and more than 800,000 gallons of diesel fuel.

The genesis of the concentrated detergent in technology that’s existed since the mid-90s is one example of how the packaging industry is well positioned to be a fast mover in the sustainability drive.

“Sustainability is not going away,” Spink said. “It’s not a one-year project.

“The business driver of raw materials costs will continue to go up, so if you want to keep up to your peers – who are excellent – you have to invest time, energy and money into being sustainable.”