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June 10, 2011

Sustainability: Getting Down To Business

Jeff Dlott, American Vegetable Grower
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The five leading US retailers (Walmart, Kroger, Costco, SuperValu and Safeway) and three leading foodservice management companies (Compass Group, Aramark and Sodexo) all have active sustainability initiatives.  Each has published sustainability or Corporate Social Responsibility (CSR) reports that often describe in detail what the organization is doing and how they are measuring various aspects of economic, social and environmental performance.  Why?

The answer I hear most often is retailers and foodservice companies are responding to consumer demand.  I don’t think this answer alone holds much water.  Sure some consumers make choices of where to shop and eat-out based on a company’s sustainability efforts, but I don’t think enough do so in order to justify the type of investments these companies have made in sustainability initiatives.  Don’t get me wrong, consumer demand is a huge deal as we are talking about millions and millions of shoppers spending close to $500 billion dollars at the top five US retailers in 2010.  The potential lost revenue of missing the consumer demand mark and having shoppers shop somewhere else or buy less is enormous.  I just think there is a more compelling reason why all of the leading food companies, retailers and foodservice companies have embraced sustainability; two words—continuous improvement.

Many of these large companies have continuous improvement programs in place under the guise of Lean Manufacturing, Six Sigma, Total Quality Management, Kaizen and others, and have been on a mission to drive out costs using these proven management approaches. What they may be finding is that sustainability is about measuring and monitoring inputs to manage an optimized output. Simply put, it is just good management to be moving towards greater efficiencies of operations as long as it does not impact the consumer experience negatively. Oh, and the consumer encourages the efforts of these companies to do so as a means of minimizing their overall environmental impact. To use an overused cliché, this sounds like a classic “win win” situation for all parties.

Continuous improvement efforts where performance metrics are identified, measured and managed toward goals are not new.  What is new and compelling is that the union of continuous improvement and a sustainability framework provides a more expansive view of operational performance and focuses the spotlight on key resources such as energy, materials and water.   Such a spotlight fosters innovation and improved operational skills to drive out inefficiencies.  The majority of the leading food, retail and foodservice companies have reported cost savings in the areas of energy and waste management that they attribute to their sustainability efforts.  Reducing costs, improving operational performance, encouraging innovation and in the process, making your company more appealing to some portion of your consumers, are powerful business drivers to deliver value to employees, management, boards, and shareholders.  What is not to like! 

Back on the farm, the question is does a continuous improvement approach using a sustainability lens deliver similar business value under the unique and demanding conditions found in vegetable production?  In our experience, there are opportunities to increasing the efficiency of critical (and increasingly expensive) resources including energy (fuel and electricity), water, fertilizers and other necessary inputs. We’ve seen companies that have management systems (people, processes and technologies) in place, and are executing on continuous improvement initiatives.  There is a second group of companies that are adapting their management system to drive continuous improvement efforts.  We think these two groups are getting down to the business of creating a sustaining competitive advantage to manage costs, steward resources, and increasingly meet customer needs.