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02/22/2022

The big sustainability shift

From tackling waste across the value chain to broadening their social impact, grocers are reinventing what it means to be green

In the mid-2000s, the media declared that green was the new black, as environmental awareness surged and people sought to cool their impact on global warming (with much thanks to the Al Gore documentary An Inconvenient Truth). Magazine brands pumped out “green issues” (some on glossy, unrecyclable paper, nonetheless) and environmental claims like “all-natural” and “eco-conscious” took over the shelves and advertising airwaves.

And then, for reasons like greenwashing and the realization that people can’t consume their way out of the problem, green faded to black. But, what’s happening now in food retail is arguably bigger, better and greener.

“The industry is embracing sustainability strategically and we’re seeing it guide decision-making in virtually all areas of food and beverage businesses,” explains Shelley Balanko, senior vice-president of The Hartman Group. “Previously, whether it be retailers or food and beverage manufacturers, sustainability was siloed and compartmentalized. Now, it’s taking the same evolutionary path we saw with health and wellness 20 years ago. Wellness has to be part and parcel of everything you do in the organization...and that’s what is happening with sustainability.”

Retail consultant Carol Spieckerman calls it “sustainability’s second act.” “In the past, there was a lot of box checking and retailers would talk about sustainability primarily as a PR play,” says the president of Spieckerman Retail. “Now, they’re making longer-term, more specific commitments across more areas, from carbon emissions and food waste, to supporting local food banks, to community involvement.”

The reasons behind the sustainability push haven’t changed much since the green movement of 15 years ago: concern about climate change and consumer demands that companies do less harm to the planet. However, a few things are different now. “Retailers are now armed with better consumer data and more granular data,” says Spieckerman. “It’s to the point where it’s undeniable that new generations of shoppers truly care about sustainability—and on a number of fronts.”

In addition, whereas eco-advocates from back in the day sounded a warning bell on climate change, today’s environmental challenges seem more like a five-alarm fire. To wit: The 2021 report from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) projects climate change will increase in all regions in the coming decades. For 1.5° C of global warming, IPCC warns there will be increasing heat waves, longer warm seasons and shorter cold seasons. At 2°C of global warming, heat extremes would more often reach critical tolerance thresholds for agriculture and health, the report states.

On the big picture of climate change, Joe Solly, a partner with Deloitte’s risk advisory practice, doesn’t pull any punches. “We now have this notion of an existential threat, where there is a lot of fear the planet is going to heat up so much that we’re going to have a catastrophic failure of our ecosystems and our societal reliance on those and, therefore, of our continued survival,” says Solly, who is also the Ontario leader of Deloitte’s sustainability and climate change practice. “So, it’s a horrible story and a horrible picture all around, no matter how you look at it.”

If this seems grim, Solly also points out there’s a real business case for sustainability practices. More companies, for example, have begun to set net-zero targets, meaning the greenhouse gasses they put into the atmosphere are balanced by removing an equivalent amount. (The Paris Agreement mandates net-zero carbon emissions globally by 2050). “When you anticipate the future cost of carbon, the lower cost of lower-emitting technologies, government grants and incentives, and access to sustainability-linked loans, there is a positive business case to pursue net zero and reduce your emissions, in addition to meeting customer requirements,” says Solly.

While the pandemic put some green efforts on pause, the industry is getting serious about sustainability for the long term. Here a few key areas grocers and their suppliers are focused on:

Reducing carbon emissions: As the fight against climate change becomes more urgent, many industries are stepping up efforts to reduce greenhouse gasses. For grocery retailers, this could take shape in a number of ways. Deloitte’s Solly suggests: having energy efficiency programs and practices in stores and distribution centres; exploring on-site renewable energy generation such as solar rooftops; and reducing emissions from fleets with things like better route planning, fuel-efficient driver practices, and switching to electric vehicles.

As part of its sustainability strategy, Calgary Co-op has a strong focus on greater energy efficiencies and reducing greenhouse gas emissions. The retailer’s new Sage Hill location, for example, has LED lighting that uses 80% less energy and lasts 50% longer than traditional lighting. Calgary Co-op also upgraded its refrigeration systems to make them more energy efficient, and plans to do the same in its other stores.

CEO Ken Keelor says another highlight is the use of combined heating and power (CHP) systems at six Calgary Co-op locations. This energy-efficient technology converts natural gas into electricity. At the same time, it uses waste heat produced by natural gas to boil water that is used to heat or cool the building. In addition to significantly reduced energy waste and greenhouse gas emissions, there’s a real cost benefit. “We’ve cut our utility costs at these locations by 30% to 40%,” says Keelor. “That’s huge, as energy bills have been rising.”

Greening the supply chain: While retailers work to get their own houses in order, they also must consider the impacts of their supply chain. On the carbon emissions front, for example, research from non-profit CDP found that 90% of all disclosed emissions in the food sector come from supply chains (what’s referred to as “scope three” emissions), rather than stores and distribution centres.

Elliot Morris, partner at EY, says retailers can make an impact with their wide network of suppliers in key areas such as plastics, packaging and food waste. Not only is there an obvious environmental benefit, but research also shows consumers are willing to spend more on sustainable brands. “[Retailers] need to collaborate more across their supply chain to be able to provide transparency to the end customer,” says Morris. “When the customer has the right information, they will feel empowered to make choices for themselves.”

Walmart is one major retailer that’s putting a big push on suppliers to be more environmentally friendly. Project Gigaton, which Walmart launched in 2017, aims to remove one billion metric tons (a gigaton) of greenhouse gasses from Walmart’s supply chain by 2030, through everything from energy and waste to packaging and product design. Last year, Walmart expanded the project to include suppliers’ fleets.

Responsible sourcing is another key part of building a more sustainable supply chain. Deloitte’s recent report, “The future of food: A Canadian perspective—the sustainability conviction,” notes that consumers are paying more attention to where their food is coming from—they’re asking if it is ethically produced and are striving to buy more local foods. “These trends are also pushing food companies to ensure their suppliers respect human rights standards and avoid involvement in unsafe working conditions, unfair wage practices, human trafficking or slavery,” the report states.

Longo’s places a big emphasis on responsible sourcing as part of its wide-ranging sustainability efforts. Last year, Longo’s became the first North American retailer to only offer Fairtrade bananas, through a partnership with banana importer Equifruit. The company has also committed to using sustainable palm oil in its packaged private label products by 2025, and is committed to sustainably sourcing 100% of its fresh and frozen seafood by 2025.

“When our guests are shopping in our stores, they’re not only looking for high-quality, curated products, but also they’re trusting us that we’re sourcing those in a manner that reduces environmental impact along the way and protects things like human rights,” says Longo’s sustainability specialist, Danielle Reid.

Reducing waste: Retailers are also digging into the challenge of reducing waste on all fronts: food, plastics and packaging. “When it comes to packaging and single-use plastics, while retailers had a pass at the beginning of the pandemic, they don’t any longer,” says The Hartman Group’s Balanko.

Calgary Co-op, which eliminated plastic shopping bags at the start of 2020, has ramped up its composting and recycling efforts, including electronics, cardboard, plastic and paper. “Overall, our waste generated is down 10% from 2019,” says Keelor. “For example, in 2020, our cardboard, paper, plastics and organics recycling and composting diverted 91% of our total waste.”

Longo’s has set a target of 90% of its waste diverted by 2025 and is investing in developing various diversion streams for materials like cardboard and plastics. “We’ve also been working with our vendor partners on what’s coming into the stores in the first place to ideally try to reduce that waste,” says Reid. “If we’re not able to, we want to ensure that the packaging is compatible with one of our streams.”

With food waste, retail consultant Spieckerman points out another thing that’s different about today’s sustainability movement: there’s a proliferation of third-party providers that can help. “That wasn’t the case before: it was pretty much all on retailers to make it happen,” she says.

Apps like Flashfood, Too Good To Go, and Sauvegarde, for example, offer customers discounts on food nearing its “best by” date, and if not sold might end up in a landfill. Spieckerman says these digital marketplaces provide “plug-and- play” sustainability options for grocers. “On one hand, it makes it easier for retailers because they have a growing roster of partners that can help them achieve their sustainability goals,” she says. “On the other hand, it’s a challenge because there are no excuses not to do it.”

For Deloitte’s Solly, reducing food waste takes a whole value chain approach, including: working with farmers to reduce waste; supporting regenerative agricultural practices; selling expiring products; donating to food banks; and upcycling, which is the process of making food and beverage products with certain ingredients that would otherwise go to waste.

Solly has some advice on a couple of fronts. “Retailers need to get better at displaying [nearly expired foods] in stores because when you walk into a grocery store, it’s really difficult to find those items,” he says. “So they need better practices in stores and they need to leverage [food waste] apps to create customer awareness and push those products.”

Creating social impact: While climate change, pollution and extreme weather events tend to garner the headlines, sustainability increasingly includes social impact and people’s well being. For Calgary Co-op, this includes food-drive programs, offering the community physical spaces to gather, partnering with local social agencies, and giving through the Calgary Co-op Foundation.

Calgary Co-op recently conducted a pilot with long-time partner Calgary Food Bank at six stores. Perishables that would otherwise go to compost were donated to the food bank, which collects food five days a week. Keelor said the project is being expanded to all Calgary Co-op stores, and the donations now include dairy, deli, meat, produce, bakery, frozen and grocery.

“Our compostable product will go down because we are able to divert it for actual [human] consumption,” says Keelor. “Calgary has a lot of people who are homeless or living in shelters and need that support. So, this to me is the biggest initiative we’re doing that helps both the social and environmental pieces.”

Looking ahead, Balanko says consumers will one day see the social and environmental elements as less distinct and more interrelated. One example is people seeing environmental sustainability as being tied to their personal health: if fish are consuming micro-plastics in the ocean and people consume the fish, it affects their personal health. “That’s how the most trend-forward consumer thinks right now,” says Balanko. “We anticipate the mainstream consumer will start thinking that way and seeing the environment and personal health as one in the same in the not too distant future.” 

Generation Next Thinking is an ongoing series that explores the cutting-edge topics that are impacting grocery retail today and in the future.