A simple burger patty may not seem like much of an environmental culprit. But take a look at what goes into making it - around 14 000 litres of water for every kilogram of beef, which is transported, chilled, stored, hacked, packed and transported yet again to the nearest supermarket or fast food supplier - and it's a different story.
This chain, which uses considerable energy and resources along the way, is the invisible mechanism that brings most consumer products from source to shelf.
The supply chain - broadly defined as the network of retailers, distributors, transporters, storage facilities and suppliers participating in the production, delivery and sale of a product - often forms the sole of a company's carbon footprint. Try as they might to shrink the toes, it's only possible to reduce so much by focusing on direct activities.
Peter Kilbourn, senior lecturer in the department of transport and supply chain management, at the University of Johannesburg, says greening the supply chain is going to become increasingly important for local companies, particularly those involved in the import and export of products.
“We're really going to have to look at our strategies and how we manage things, to get our house in order. We need to collaborate across the supply chain.”
One event that's highlighted the local supply ecosystem is the deal between global retail giant Walmart and South African player Massmart. Walmart announced the completed purchase of a 51% stake in the local company on Monday.
While the effect on labour, jobs and local suppliers were all closely scrutinised by the country's competition authority, sustainability requirements received less attention.
Doug McMillon, president and CEO of Walmart International, said in a release marking the closing of the deal that it aims to grow its presence in Africa, and in the process support local suppliers. The companies have also agreed to establish a R100 million supplier development fund.
In its other territories, Walmart has introduced programmes to work directly with local farmers, and McMillon says the company hopes to bring these practices to SA. Sourcing food from locally-based agriculture will also help reduce carbon emissions, a key component of Walmart's strategy. It remains to be seen how rigorously this will be enforced in Massmart's operations.
]Walmart has embarked on a significant drive to reduce its environmental footprint in the past decade, officially introducing a sustainability programme in 2005. Four years later, it began work on a Sustainability Index, with the goal of establishing the environmental impact of its products throughout their lifecycle.
Last year, the retailer pledged to cut 20 million tons of greenhouse gas emissions from its global supply chain by 2015. The decision was partly based on the fact that 90% of its emissions come from its more than 100 000 suppliers.
In response, Walmart implemented a dual strategy. The first route involved focusing on the 10% it has direct control over, by moving towards 100% renewable energy, implementing a zero waste system, and introducing or redesigning products that are more sustainable.
The second route was to focus on greening its supply chain. The company is working with suppliers to adopt cleaner and leaner processes in the design, sourcing, manufacturing, and transportation of products. This involves examining how the item makes its way from cradle to grave, and all the accompanying environmental impacts.
It also began sending a 15-point sustainability assessment to its US suppliers, to determine everything from GHG measurements to waste reduction policies. The retailer plans to eventually develop a label to indicate to consumers how sustainable products are.
The question is how far Walmart's sustainability policies will extend into Massmart's operations, given the conditions of the deal, as well as increased management influence. While Walmart has asked current chairman Mark Lamberti to remain, it has appointed three Walmart executives as non-executive directors to the Massmart board.
Walmart spokesperson Julian Gwillim says while Massmart remains the representative company in SA, Walmart will share best practices and lessons learned in other regions. Gwillim adds it's still too early to know exactly what form the sustainability approach will take.
Q&A
Massmart, however, is not exactly a newcomer to the area of sustainable business practices, and its various divisions are required to submit annual environmental reports. Corporate affairs executive Brian Leroni says selected suppliers currently participate in Massmart's administered environmental and ethics surveys.
“This said, we are very keen to leverage Walmart's extensive sustainability knowledge and expertise in a variety of areas, including energy efficiency, packaging rationalisation and the promotion of affordable sustainable products to consumers.”
He explains that surveyed suppliers are chosen according to their risk profile, with a detergent supplier, for example, posing a higher risk than one producing baked beans.
According to Leroni, the survey covers a variety of topics, including questions around penalties for environmental misdemeanours; water usage and water-saving programmes; measuring and reporting carbon emissions; to strategies for reducing packaging and improving recycling.
“There's a scale of responses, with the first being 'We're just talking about it', which is a way of saying they're not doing anything about it, to having fully implemented strategies,” explains Leroni.
“So packaging, for example, 'Are you just talking about it, have you developed a packaging policy, are you piloting a project, or have you aligned all products along sustainable packaging guidelines?'
“Depending on how they respond to each question, we can compile an environmental index of the suppliers doing nothing and those which are doing a substantial amount,” he adds.
Any efficiency you bring into the supply chain has an impact on the environment.
Peter Kilbourn, University of Johannesburg
Environmental policy is handled by the group corporate affairs executive, in collaboration with Massmart's sustainability committee, who follows up with selected suppliers. “It's not our responsibility to police what suppliers do, but it is our policy to advocate better practices.
“We often find that after answering the questions, suppliers come back to us and ask what our expectations are and try to understand their role.”
Leroni says Massmart will now start engaging with Walmart on sustainability policies, with one of its key interests being packaging rationalisation. It will also look into incorporating and adapting programmes that have been successful in other regions.
It's not our responsibility to police what suppliers do, but it is our policy to advocate better practices.
Brian Leroni, Massmart
“Asda, for example, has a great programme around the promotion of sustainable local palm oil, which is found in many grocery products, and there's the potential to do something similar in SA.”
Walmart took over UK retail chain Asda in 1999, and it has set a goal to ensure all Asda brand products and Walmart own label products use only sustainable palm oil by 2015.
“No doubt, there are areas across all operations where they're far ahead of us, and in areas where it's applicable to the market we'll look at implementing them here too,” says Leroni.
He mentions Walmart's focus on sustainable farming. “It has developed local fruit and vegetable suppliers in places like India, China, El Salvador and Honduras, and we could absolutely implement these processes in SA. We hope to develop support for local agriculture supply chains and would like to invest part of the R100 million fund into that.”
Fuel for thought
While these steps provide benefits for companies with the reach and resources to make it viable, smaller players often balk when faced with the complexity of the ecosystem.
“So many companies are operating in a great number of supply chains,” says Kilbourn. “They have hundreds of accounts with hundreds of different supply chains so they have to separate the vital few from the trivial many, and identify their key suppliers.”
Cost-cutting strategies can also have a positive environmental side effect, notes Kilbourn. ”Any efficiency you bring into the supply chain has an impact on the environment. For example, while you may introduce better routing and scheduling for your fleet to reduce fuel costs, it also reduces emissions. You have to look at the big picture.”
Nevertheless, the shift will not come easily, notes Kilbourn. “There's a mindset change that needs to happen; there needs to be greater collaboration and sharing of information.
“That said, we've come a long way in SA in the past decade in terms of awareness of supply chain management. But many companies focus on the short-term gains and are missing the boat.”
According to Kilbourn, initiatives are increasingly being orchestrated by logistics suppliers, something he sees as a trend worldwide.
When it comes to Walmart's strategy in SA, Kilbourn believes the company has learnt from its mistakes in other countries; namely, if it wants to localise, it has to make sure it provides the local market with what it wants.
“Walmart has the economies of scale and finely tuned supply chain globally, but they'll have to make it work here. Local suppliers have very different economies of scale from international suppliers, and it will be interesting to see how this plays out.”
For now, however, Kilbourn foresees transport and fuel costs becoming the major challenge for local companies.
“It's a big issue for us in terms of supply chain management. The volatility of fuel prices means we need long-term strategies. We're a transport-intensive economy with a lot of tonnage being transported on roads, and fuel costs are going to become a huge consideration for companies.
“It's a killer, because with all that fluctuation, who are you going to pass the cost onto?”
This sentiment was echoed by Walmart's US president Mike Duke last year, in a warning that "we need to get ready for a world in which energy will only be more expensive”.
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