The green team

An inside look at Loblaw’s strategy to get sustainable

"Here we go," Mark Schembri says, as we breeze by shoppers pushing carts inside Loblaw's spacious Superstore in Whitby, Ont., a fast-growing suburb east of Toronto. We push through back doors and into a tight, mechanical room. A dull buzzing sound gets louder with each step. I feel as if I've walked straight out of the store and into a submarine.

This is the expressor room explains Schembri, Loblaw's vicepresident of store maintenance. It houses the store's refrigeration equipment. But I can't shake that Hunt for Red October feeling. Especially when Schembri climbs a narrow ladder leading up to the ceiling. At the top, he opens a trap door and steps up and out. I gamely follow behind, light pouring in through the hole. Then, suddenly, I'm standing on the roof, surrounded by a sea of gleaming photovoltaic (PV) solar panels–1,800 of them to be exact-stretching as far as the eye can see.

These solar panels produce 433 kilowatts of electricity, enough to power 50 homes for a year. In theory, that's what's going on. Electricity from this store is shot into the municipal hydro grid through an agreement with the Ontario Power Authority. Loblaw gets a cheque for every kilowatt it generates. But in reality, says Schembri, the store uses every drop of the electricity.  e amount produced on this roof equals 30 to 40 per cent of the energy this supermarket drinks daily. "Everything that happens here is positive because we're reducing the pressure on the local grid, provincial grid and producing clean, renewable energy that will be carbon-free," Schembri says.

I'm not surprised to learn, then, that PV panels are popping up on more stores. Loblaw just added a 10-kilowatt system in Toronto; a 250-kilowatt unit in Ajax, Ont.; and a 500-kilowatt outfit in Ottawa. And there are plans to put solar panels on another 70 stores. "If costs have been in line with what we forecasted, and the production is what we forecasted, then the financial model will dictate where we take it to," Schembri says.

Welcome to the greener side of Canada's biggest grocery chain. For several years now Loblaw Companies has been increasingly investing and testing new ways to bring sustainability to its operations. Some of these initiatives are wellknown, such as the company's efforts to reduce plastic bag use or to help save endangered fish species. But many others aren't nearly as visible, like the solar panels, for instance, or work the company is doing to reduce waste at its stores and fuel consumption in its fleet.

As Loblaw delves further into sustainability, it's discovering what its archrival Walmart found when it began tackling green: that doing good things for the planet can also have a positive impact on the bottom line. Plus, when a retailer as large as Loblaw takes action, the positive spinoffs can be immense as suppliers and even competitors follow suit.

Hadley Archer, vice-president of strategic partnerships with the World Wildlife Fund-Canada, which has worked with Loblaw, says the grocery chain doesn't often get the credit it deserves for leading in sustainability. "If you look back over the past 10 to 20 years, Loblaw was the first to market things like PC Green and an organics product line. And even at a time in the '80s when it became less fashionable and a lot of companies were moving away from environmental initiatives, Loblaw hasn't really taken their foot off the gas."

Loblaw's green initiatives are broad but can be segmented into three buckets: energy and transportation efficiency; seafood sustainability; and package reduction. Loblaw is also expanding its long-standing line of President's Choice "Green" products. Thirty-seven new Green-branded items were introduced last year, including pet and stationery products made from recycled plastic. For sheer impact, though, it's hard to top Loblaw's
waste-diversion program.

Grocery stores create a lot of garbage, probably more than any other type of retailer. And with sales of more than $30 billion, twice its nearest rival, Loblaw creates mountains of the stuff–some 300,000 tonnes of organic and other waste annually. Yet less is ending up in landfills. Last year 59 per cent of the waste from corporate-owned stores across the country was diverted from garbage dumps and Loblaw wants to see that number reach 70 per cent. It's already hit that target at distribution centres. Meanwhile, at store support centres, the company is just six percentage points off its goal of 80 per cent waste diversion.

A big part of that effort involves cardboard. "When we divert cardboard, not only do we reduce the cost and the environmental consequences of sending it to landfill, it's all recycled and turned into a revenue for us," says Schembri. Last year, Loblaw diverted 120,000 tonnes of
the brown stuff.

Cardboard is a fascinating example of how a retailer as large as Loblaw must employ different tactics across the country to achieve sustainability objectives. "Logistically, moving cardboard around, we always have to be sensitive to how far we want to move it and the environmental footprints associated with putting it on a truck," Schembri says. So, in Quebec, cardboard is bailed in-store and reverse-hauled through the warehouse. In Toronto, compactors crush the cardboard at store level, then send it off to be bailed for recycling.

Loblaw also needed to come up with a solution for a rather slippery problem: the wax on produce boxes. A system now takes the wax off of the cardboard before it's recycled. Fifty-two stores in Western Canada are involved in that program, says Bob Chant, Loblaw's vicepresident of corporate affairs. "And we're also moving into tote projects that use plastic reusable, foldable containers."

In packaging, two important targets have been set: to reduce overall packaging of control brands by five per cent, and to increase the recyclability of all its packaging to at least half. Loblaw is taking the lead in several areas here. Clamshells are a good example. The thermoformed packaging material used in clamshell isn't recycled by most municipalities. So by the end of summer Loblaw will have moved all of its clamshell plastics to PET, which a growing number of towns do recycle.

Loblaw also led the industry in agreeing to a protocol for adhesive use to eliminate contamination from glues and labels. As of January 1, 2012, the Retail Council of Canada's grocery group will require all labels to meet the Association of Post-consumer Plastic Recyclers' certified adhesives standards. Meanwhile, Loblaw's plastic bag initiative has helped to cut plastic bag use by 73 per cent, or the equivalent of 2.5 billion bags, since 2007.

Another Loblaw priority is to divert more organic waste from landfills. Organic represents about 20 per cent of total garbage output, and the retailer is coming up with new ways to recycle and profit from everything from spoiled produce to the brown grease from its plumbing lines. Schembri outlines a project underway at the Whitby store and 29 other outlets: essentially organic waste, including outdated produce, trimmings and bakery waste, is fed into a machine that is part green bin, part trash compactor. It granulates matter so fine that it essentially becomes a liquid. The resulting goop is then transferred into an underground storage tank, and later a truck picks it up to be mixed with the brown effluent grease at a facility with a farmbased anaerobic digester. The resulting methane gas is captured, and fed back into the electricity grid again.

Such schemes show the impact a retailer as large as Loblaw can have, especially when its energy-saving and waste-diversion programs are put in place across all its operations. An example: cutting the amount of gasoline used in delivery trucks. In 2010 Loblaw improved fuel efficiency 2.3 per cent as measured by litres consumed per 100 kilometres. This year's target is a further five per cent reduction.

Part of the improvements to date have been due to equipment upgrades, says Rob Wiebe, Loblaw's senior vicepresident of transport. But Wiebe says he's also been able to conserve gas by training drivers to more wisely manoeuvre their 18-wheelers. A program that was launched at the end of 2009 teaches Loblaw's truckers to be more efficient drivers by, for instance, downshifting gears on hills rather than braking.

A year ago, Wiebe's team also experimented with a hybrid 18-wheeler. The initial results were good; fuel efficiency improved between seven per cent and 10 per cent. Hybrid technology, however, is still relatively new and the capital costs of investing in hybrid trucks is also high. For the moment it "is more the bleeding edge than the leading edge," Wiebe says. In the meantime, fuel efficiency has been improved using some simpler devices. Sideskirts on trucks, for instance, cut wind coming up under the trailer, which causes drag. "We've invested capital on things that are going to get the best return," he says.

Of course, the best way to save on fuel is to have those trucks spend less time on the road. That's some of the thinking behind Loblaw's local-food initiative. Produce shipped from California can take four to five days to reach a store and much of that time is spent bumping around in the back of trucks. With the grown local program the retailer is able to in some cases deliver produce within 24 hours of being picked to stores, says Mike Venton, senior vice-president of produce.

Venton says the company is also working behind the scenes to get more local food onto tables. In May, for instance, the company put together a deal with the Ontario Cattle Feeders Association to sell more local, corn-fed beef at 150 of its grocery stores in Ontario. Venton also cites a trip to California his team made with Ontario peach growers. There, they learned more advanced peach growing techniques from California farmers. The idea, he says, is to help improve the peach crop in Ontario so that less of the fruit needs to be imported from far away in the Golden State.

On a hot Thursday morning, just before the Canada Day long weekend, I'm pulling into the parking lot of Loblaw's Great Food store in Hogg's Hollow, a tony Toronto neighbourhood. Homes here sell for seven figures and gleaming Porsches and BMWs seem to be in every driveway. The local Loblaw's store fits right in. The exterior is made of wood, like a grand Muskoka ballroom. Inside, a soaring vaulted ceiling, also of wood, is brightened selectively with skylights. If Frank Lloyd Wright had designed a grocery store, this is what it would have looked like.

I'm here to meet Paul Uys (pronounced Ace). Uys is a Loblaw's vet, recruited from South Africa's Woolworths in the 1980s by then-president Dave Nichol. Since then he's worked on some of the retailer's highest-profile programs, including Blue Menu and President's Choice Organics. Now he oversees Loblaw's ambitious seafood sustainability program.

Uys arrives smiling and remarkably relaxed for someone up against a big deadline. Two years ago, Loblaw became the first major Canadian grocer to pledge a commitment to preserving the world's oceans, announcing that by the end of 2013 it would only sell seafood harvested using methods that weren't going to drive fish, or other aquatic species, to extinction. Uys has another two years and change to make it happen and he's confident. "We're definitely on track," he says.

To prove it, we walk over to the seafood freezer. An array of frozen fish sticks and such already carry the blue, oval logo of the Marine Stewardship Council, one of a handful of groups that set seafood sustainability standards. MSC standards, which are third-party audited, are based on preserving healthy fish stocks. So on Canada's Atlantic Coast a fishing boat trolling for haddock might need to employ fishing methods that don't snare juvenile haddock. For Alaskan salmon it might favour what's called purse seine netting, in which a net is pulled around a school of fish and then scooped up, rather than, say, longline netting in which nets many kilometres long will catch salmon but also indiscriminately ensnare endangered species of fish as well as turtles and dolphins. Last year Loblaw more than doubled the number of MSC products on its shelves to 60.

But that's just a start. Overall, Loblaw has identified some 2,500 products from 250 vendors that contain seafood and over the last year has been in contact with suppliers to start ensuring their products get certified. Many of the larger manufacturers, such as Janes and High Liner are already well along the way to meeting Loblaw's goal. Uys says he expects very few of Loblaw's suppliers won't take part and in those rare instances, he says "we'll part ways with them."

Loblaw's seafood strategy was developed and honed at its Brampton, Ont., headquarters starting around 2008. At the time Uys was in charge of Loblaw's fresh business but said he became interested in seafood sustainability after observing British grocers, notably Marks & Spencer, which had already made great strides on this issue. Unbeknownst to Uys, Loblaw's executive chairman, Galen Weston, was also paying attention. "One day Galen said to me that we need to have a more definite position on seafood," Uys recalls. That led to a series of meetings and in May 2009 the company announced its 2013 timetable.

Most other Canadian grocers have since come out with their own seafood sustainability pledges. However, one thing sets Loblaw apart: Its plan doesn't just apply to fresh or frozen fish, as some No Name and President's Choice canned fish are already MSC certified. It also encompasses any product that contains even a hint of seafood–from tinned cat food to omega supplement products. "If you want to set the world standard, this is what you have to do," says Uys.

He's right. Sarah King, oceans campaign co-ordinator for Greenpeace says Loblaw in particular has done a good job through its policies of tackling the issue of preserving so-called forage fish. These are the smaller species of fish such as herring, mackerel and anchovy that are turned into fish meal and fish oils and used in thousands of everyday consumables. These fish are an important part of the oceans' food chain and it seems pointless to try to preserve the big fish without saving these little fish that the bigger fish need to survive. Loblaw's policy extends beyond seafood for direct human consumption and therefore products that have not received a lot of attention to date, like pet food and health supplements that contain a lot of forage fish meal and oil, will have to meet sustainability criteria, she says.

Greenpeace has both praised and criticized Loblaw on seafood. Last year, when the environmental group ranked Canada's grocers in this area, Loblaw came in second, behind Overwaitea Food Group. This year it ranked No. 1–even getting a passing grade of 62 per cent, versus 43 per cent last year (Overwaitea, no slouch on seafood sustainability, came in second, also with a pass–59 per cent.)

Why the better mark? King says that early on Loblaw seemed wired to blindly following MSC certification standards and didn't want to go beyond them. Now it's making decisions based on what's good for the oceans, not just to get a "seafood sustainability" stamp. She cites Loblaw's policy to only carry swordfish caught using the harpoon method, rather than more destructive techniques.

Uys says Loblaw is relying more on experts to make decisions too, notably Jeff Hutchings, a respected biologist at Dalhousie University. Not long ago, Loblaw stopped carrying four specific species of endangered fish: shark, skate, orange roughy and Chilean sea bass. The latter could be certified as sustainable, but Hutchings flatly told Loblaw officials that sea bass stocks are in a precarious state and shouldn't be sold. "Jeff really holds our feet to the fire," Uys says.

A few feet over from the freezer, the fresh fish counter beckons shoppers looking for Canada Day grilling ideas. It's also the next stop for Uys. This Loblaw's store is one of some 20 in the chain that carry MSC-certified fresh fish. It's only seven or eight SKUs right now–Atlantic haddock, Pacific halibut, Alaskan salmon and a few others. But Loblaw is working to add more species–some 40 items in total–across more of its stores.

The task is an accountant's nightmare. Every time another fish species is added, the supplier and Loblaw's own facilities must be certified. At this Loblaw's store, the MSC fish must be ordered separately and kept apart from non-certified fish in the stock room. Records must also be kept for three years and the third-party certification company can walk into any store at any time and ask for proof of certification, Uys says.

A mistake can be damaging. Last year, the CBC news program Marketplace analyzed 153 fish samples bought at Canadian grocery stores and found 34 were mislabelled. In one case a fish labelled Pacific halibut was purchased at a Loblaw's store in Quebec. DNA testing found it was actually Atlantic halibut, which environmentalists consider endangered. Marketplace found mislabelling at Metro, Sobeys and other grocers as well.

One area Loblaw has excelled at in seafood sustainability is consumer education. The company is having staff behind the seafood counter trained, so they can talk to shoppers about the difference between certified and non-certified fish. Recently, seven stores that carry fresh certified fish held cooking classes using only sustainably caught fish. And in a splashy move last year, the company left certain trays at the seafood counter empty, with only a sign left to tell shoppers that this species would no longer be sold because it was endangered.

Environmentalists want to see more, of course. Greenpeace's King would like to see better traceability so customers can find out how and where their seafood was caught. She also wants Loblaw's Asian supermarket chain, T&T, to catch up to its parent company's seafood policy. But as Loblaw and other grocers push seafood sustainability, it will hopefully force the world's fisheries to improve their practices. "When retailers do this, it sends a strong message to the industry," she says.

After leaving the roof of the Whitby Superstore we drive a short distance to another Loblaw's store in the town of Ajax. Here, Schembri tells me that renewable electricity is just one part of Loblaw's energy-efficiency strategy; conservation is the other.

Take refrigeration, which often accounts for up to half of a supermarket's energy use. A few years ago the company began pursuing alternative methods of designing its refrigeration systems in anticipation of the changing focus from the ozone to greenhouse gas (GHG) emissions. Loblaw is targeting a five percent reduction in GHG emissions associated with refrigerant leaks in 2011; it met that target last year.

Refrigerant leaks still represent a significant part of Loblaw's carbon footprint, representing about 187,000 tonnes a year. And every pound of refrigerant used in its stores has the equivalent GHG emissions of about 3,800. To cut back, Loblaw came up with a secondary loop on its medium temperature systems that reduces the amount of refrigerant circulated throughout the stores as most of it stays in the refrigeration room, while the heat is taken out of the fluid (that is environmentally friendly propylene glycol). Instead of evaporating when it leaks, like traditional refrigerants, the propylene glycol drips, making it easier to detect. About 60 stores have adopted this strategy.

"Loblaw is a standout for me compared to other retailers on the refrigerant side because it's a little known fact that the gas that leaks from refrigerants can be upwards of a thousand times more potent than carbon dioxide as a greenhouse gas," says Hadley Archer at WWF-Canada. "So the fact that they're aggressively working on that is a positive thing."

As part of the retailer's target of reducing energy consumption three per cent this year, another 70 stores are getting lighting and energy retrofits. Schembri admits seeking energy efficiency through lighting comes with pitfalls for a company that's in the business of selling groceries. Customers expect supermarkets to be bright places. Dimming lights is a turnoff. For instance, when 465-watt metal halide lights were replaced with a 290- watt fluorescent system at this Ajax Superstore, Schembri worried that the fluorescent lighting's linear source would create a flat effect versus the metal halide's directional light, which generates a more dynamic "Pop!"

The verdict? "We are still generating somewhat of a directional source," says Schembri. "It's an acceptable compromise." Close to 100 corporate stores will be retrofitted nationally with fluorescent lighting, about one-quarter of Loblaw's corporate fleet of stores.

Schembri is more excited about the potential of LED lights. Three different options are being tested in the frozen cases of the Ajax store that Schembri believes will be a major game-changer in retail lighting. In a not so tongue in cheek sort of way, Schembri remarks, "We're confident that we're going to flip the switch very soon."

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