RILA Conference

Design & Manufacturing

The ecological performance of a product, from manufacturing through consumer use and finally disposal, is significantly influenced by the product’s design. Depending on the product category, retailers calculate that a significant percent of their total environmental footprint can be traced to their supply chain and consumer use. Labor conditions must also be assessed and monitored in the supply chain to ensure that working conditions are fair and conform to accepted standards.

The challenge of sustainable design and manufacturing is that, while retailers can directly affect their immediate operations, influencing the supply chain can be much more difficult. Private label product design is under a retailer’s control, but the design of the majority of products sold is not. And consumer product value chains are complex webs that span the globe, from raw material sourcing through manufacturing and distribution. Materials flow through numerous countries and cultures, making product components difficult to track and social compliance important to enforce.

However, consumer product and retail industries are fostering more transparent, communicative supply chains with the aim of advancing social and environmental responsibility. In an effort to be strategic and proactive, retailers are developing technology and process infrastructures that promote continuous improvement in supply chain costs, risks, safety, quality, and innovation—from design through manufacturing.

ENGAGING MANUFACTURERS IN THE CONVERSATION

Retailers are factoring sustainability criteria into their private label product design, as consumers look for product attributes like organic, sustainably sourced, high recycled content, and energy efficient. Many retailers now offer a line of more environmentally-friendly products, such as Staples’s Eco Easy line or Safeway’s Bright Green natural product line, which earned the right to display the EPA's Design for the Environment label.

In addition, a number of retailers are looking beyond dedicated product lines to integrating sustainability across all offerings. IKEA, for example, has implemented an “e-wheel” to understand and track the impact of its products throughout their lifecycle. Product lifecycle assessment can evaluate environmental impacts from design to use to disposal and identify hot spots that offer the greatest potential for improvement.

When it comes to manufacturing, most products are supplied by third parties. The retailer-supplier relationship of the past was characterized by an arms-length transaction between the retail buyer and supplier based primarily on the supplier’s price and ability to satisfy product requirements. Today’s emerging retailer-supplier relationship, however, is defined by increased collaboration and by deeper conversations about supplier practices, including eco-efficiency and working conditions—promoting continuous improvement and reducing risk for both parties.

Leaders are assessing, reporting, verifying, and addressing the social and environmental impacts of their product supply chain. Some modes of engagement include:

Codes of conduct guide manufacturers in acceptable labor, health, safety, and environmental practices. Gap Inc.’s Code of Vendor Conduct has a focus on the health and labor standards within factories. To verify implementation, retailers audit manufacturing facilities to ensure that they meet standards and expectations. This process includes in-person audits as well as questionnaires integrated into risk management processes.
Restricted substance lists help ensure that no chemicals of concern are used in goods production. NIKE’s Sustainable Chemistry Guidance is intended to ensure that products comply with the strictest global legislation, to limit or eliminate targeted substances, and to enable greener product innovation.
Vendor surveys can help identify suppliers that are going beyond compliance in their environmental and social programs.
Building manufacturers’ management capacities enables them to effectively improve the environment, health, and safety of their operations.
Technical assistance and financing to retrofit plant energy systems. Walmart’s Supplier Energy Efficiency Project (SEEP) conducts energy audits and retrofits of its suppliers’ facilities. SEEP aims to save supply chain costs by sharing Walmart’s energy-efficiency expertise with its suppliers (25).
Supplier forums, conferences, meetings, etc. help retailers explain their evolving sustainability priorities and solicit questions and feedback from supplier community.
Reporting impacts, goals, and progress is another key component of retail’s supply chain strategy. Reporting informs stakeholders about retailers’ sustainability efforts and creates public accountability. Public metrics-based goals can add further clarity to long-term objectives, demonstrating a credible commitment to stakeholders.

Because working with the supply chain involves numerous parties with varying levels of control, collaboration is crucial. Best Buy, Gap Inc., jcpenney, Safeway, Target, REI, VF Corporation, Walmart, and many others are finding collaborative working groups like The Sustainability Consortium, the Sustainable Apparel Coalition, and the Outdoor Industry Association’s Eco Index to be essential for developing comprehensive and consistent industry and product standards. These groups bring the business, government, nonprofit, and academic sectors together to share their expertise and resources. Doing so greatly adds to their combined efforts, but can be logistically and organizationally challenging.

A LOOK INTO THE FUTURE

As consumer and regulatory pressures grow, product design will incorporate multiple environmental attributes, appropriately weighing energy, carbon, material, chemicals, recyclability, water, waste, and other needs, with functionality and performance criteria. Green chemistry, “cradle-to-cradle,” and design for the environment techniques will become increasingly prevalent in the design process for both private label and branded products.

The level of transparency in consumer product supply chains will continue to rapidly expand, increasing visibility into working conditions, human rights, and environmental impacts in product manufacturing. A host of factors will drive this trend, most notably consumer, regulator, and investor demands for product and manufacturing information.

Relationships between retailers and suppliers built on trust will foster more open and free information sharing, especially where the retailer has made the commitment to work with their suppliers over the long term. Collaborative groups like The Sustainability Consortium and the Sustainable Apparel Coalition will bring the business, government, nonprofit, and academic sectors together to share their expertise and resources.

Both parties will develop and share supply chain goals to align priorities and track progress. Ultimately, retailers and their suppliers will continuously improve product manufacturing to reduce the process’s environmental and social impact.

THE ROLE OF PRODUCT MANUFACTURERS

With manufacture often serving as the most significant component of the product lifecycle impact, retailers seek to continually reduce the environmental impact and improve the working conditions of manufacturing operations. In particular, retailers will look to suppliers to:

Measure and actively reduce their energy use, GHG emissions, water use and wastewater discharge, emissions, solid waste, and hazardous material footprints.
Implement environmental management systems and set targets for reducing impacts.
Identify and resolve human rights issues in production; ensure strong working conditions throughout the supply chain.
Engage their subcontractors in more environmentally and socially responsible operations.

References around sustainable manufacturing operations and how to get started engaging your suppliers include:

Sustainable Apparel Coalition Apparel Tool, currently in private beta but based on the Outdoor Industry Association Eco Index and the Nike Materials Assessment Tool
The Sustainability Consortium
The Fair Factories Clearinghouse
The Fair Labor Association
Verité’s Fair Labor Toolkit

Additionally, you can work with your industry’s trade association to develop industry-wide programs that address your needs and conform to the leading standards.

Do you have questions or comments? We welcome your feedback.

STUDY: HOW WALMART SET & ACTS ON ITS GOAL TO REDUCE CARBON EMISSIONS IN ITS SUPPLY CHAIN

In February 2010, Walmart set a goal of removing 20 million metric tons of GHG emissions from its supply chain by 2015. For the year prior to launching that public commitment, Walmart worked with its NGO partners to research and select the ambitious and meaningful goal. The commitment was determined as 150% of Walmart’s projected operational carbon footprint growth (scope I and II), and was intended to be a tool for Walmart to engage its suppliers and customers in dialogue around sustainability.

Walmart’s supply chain GHG reduction strategy includes three approaches. First, it has reviewed its most major product categories by volume to estimate the value chain carbon flows and seek hot spots. Identifying the areas with the most potential allows the company to target their resources and have the greatest impact. Efforts have been launched across many categories, developing projects and systems that are transferable across suppliers and countries.

Second, Walmart seeks to find innovative approaches from outside organizations like nonprofits and expert consultants. The diverse sustainability networks that Walmart has formalized introduce thought leadership, expertise, and resources that it cannot access on its own.

And finally, in parallel, Walmart is educating merchants about carbon reduction objectives and strategies. Merchants, who are the direct touch point to Walmart’s suppliers, can educate their suppliers in turn.