Feeding the Green Machine
Consumer demand for earth-friendly packaging has started a green manufacturing chain reaction
BY BILL WALSH
“Smaller is better” is not a phrase you would immediately connect with the world’s largest retailer, Wal-Mart. But with today’s push for green manufacturing, Wal-Mart is using its unique position in the marketplace to force manufacturers to reduce the size of their products’ packaging and the amount of energy used to produce them. Wal-Mart’s focus on packaging is creating a green manufacturing ripple effect—from the store shelf, to the company that packages the goods, to the manufacturer, all the way back to the maker of the packaging machinery.
A few years ago, Wal-Mart brought together more than 200 experts in the packaging industry to help them create a packaging scorecard focused on the new buzzword in green manufacturing: sustainability. The scorecard lets suppliers know how their packaging stacks up against peers and competitors over nine different metrics that cover everything from the greenhouse gas emitted during production of the packaging the amount of recycled material found in the .
The scorecard was developed with an eye toward the seven R’s of packaging: remove, reduce, reuse, recycle, renew, revenue and read. Suppliers receive an overall score relative to other suppliers, as well as relative scores in each category. So a company can receive high scores for some metrics and lower scores for others, depending on the nature of the packaging. After a one-year trial period, suppliers are now required to enter scorecard data into the Wal-Mart system so consumers can judge the sustainability score of a product before purchase.
As of Jan. 30, 2008, more than 97,000 products have been entered into the scorecard by 6,371 vendors, all part of Wal-Mart’s goal to achieve a 5 percent reduction in their packaging by 2013.
“The packaging scorecard helps everyone make better decisions that are good for business, our customers and the environment,” Matt Kistler, senior vice president of sustainability at Wal-Mart said in a press release. “It’s important to us that our suppliers see the intrinsic value behind sustainability, both for their business and the environment. We’ve made significant progress throughout the first year of the scorecard and it is a key responsibility of our suppliers to input new products and update packaging changes on an ongoing basis.”
Whether Wal-Mart’s motive is to actually protect the environment or simply free up shelf space for more products, the reality is its sustainability effort is driving change throughout the whole supply chain, which effectively changes the way everyone does business.
COMPANIES HAVE TO ADJUST
Schmid and Son Packaging of Cottage Grove is one company trying to help its customers meet the standards of the Wal-Mart sustainability scorecard. Ultimately, it’s the packaging companies that have to change their materials and processes when a retail giant like Wal-Mart demands new standards from its suppliers.
If you walk through any retail store today you’ll see many products in blister packs or clamshells made from PVC plastic. The PVC (polyvinyl chloride) used in these packages protects the product as it is shipped across the world and stored for months before finding its way to the store. But it also stays in the landfill for years and contains toxins believed to be harmful to the environment.
According to Steve Schmid, President of Schmid and Son Packaging, “[PVC] has become a bad word in our industry” and companies are now moving toward a new biodegradable product known as PLA, or polylactic acid. Made by Cargill subsidiary Nature Works, PLA film is being used mostly for packaging food items. According to Schmid, the product is more expensive and does not work as well with their machinery, which was manufactured to work with the traditional petroleum-based plastics such as PVC.
These changes in materials are causing companies like Schmid and Son Packaging to turn to the manufacturers of their machinery such as Douglas Machine Inc. in Alexandria to demand more energy efficiency and compatibility.
ENERGY EFFICIENT MACHINES
One of the six business propositions that accompany the mission statement at Douglas Machine Inc. states: “Business activities must be characterized by respect for the domestic and global environment. We understand this to mean that business activities should promote sustainable development and avoid environmental degradation and waste of non-renewable resources.”
Douglas Machine Inc. lives up to this proposition both in how the company is run and in how it manufactures machines to meet customers’ increasing demands for energy efficiency. According to Douglas Machine Inc. CFO Tom Wosepka, it’s just good for business.
“First, we look for ways to lower our internal costs through energy efficiencies in our plant and offices. We also focus on making equipment that is more energy efficient for our customers, which increases sales,” said Wosepka.
For example, in the latest generation of shrink wrap machines (which consume a lot of energy), Douglas Machine Inc. moved the heat source to the bottom of the machine and improved the insulation of the tunnel in order to offer more energy efficiency to its customers.
At Douglas Machine Inc., everything used in the manufacturing process is recycled—from the excess scrap metal and aluminum on the shop floor to the cardboard and paper in the office. It also recently changed out some of its lighting and is exploring the possibility of switching to LED lighting as the next step in energy efficiency.
Schmid and Son Packaging also upgraded its lighting using an interest free loan from Xcel Energy, even though their facility is less than five years old. Schmid says the energy savings from the lighting change will be realized in less than two years.
Tax savings were not a motivation for Douglas Machine Inc. (they are 100 percent owned by an employee retirement trust) or Schmid and Son Packaging, but there are tax breaks out there for companies interested in making their facilities more energy efficient.
Businesses are eligible for federal tax credits for buying hybrid vehicles, for building energy-efficient buildings and for improving the energy efficiency of commercial buildings.
One provision in the Energy Policy Act of 2005 allows a tax deduction for energy-efficient commercial buildings that reduce annual energy and power consumption by 50 percent compared to the American Society of Heating, Refrigerating and Air Conditioning Engineers 2001 standard. The deduction would equal the cost of energymefficient property installed during construction, with a maximum deduction of $1.80 per square foot of the building.
Minnesota companies can also take advantage of a rebate program sponsored by the Center for Energy and the Environment and Xcel Energy. Rebates range from 15 percent to 60 percent of the installed cost of retrofitting the lighting of a commercial building.
SAVING THE GREEN
Despite perceptions that “going green” is just a trend, improving the bottom line remains the primary motivation for businesses to launch green initiatives. As consumers demand higher environmental standards from retailers, the trickledown effect is felt throughout the manufacturing process. Because when companies like Wal-Mart say “jump,” suppliers, packaging companies and manufacturers say, “how high.”