May, 2012

Fruits of Thought

Kroger Sustains Strong Perishable Donation Program

Comparing the commitment to sustainability across different retailers is a difficult task, yet one Produce Business takes on each year in awarding the Produce Business Retail Sustainability Award. What makes it so tough? Well, geography distorts comparisons, for one thing. A particular retailer may have lots of stores utilizing expensive solar energy and wind energy, and thus, win plaudits from environmentalists, while another retailer shies away from the same investments.

More often than not, careful examination reveals that two retailers are in dissimilar situations. Sometimes it is a matter of energy efficiency with one retailer in an area with lots of sun and steady winds but even more often, the key variable is the cost of electricity and the availability of local subsidies. California, for example, has pricey electricity and generous state tax credits and grants — so, not surprisingly, California retailers are often able to trumpet their sustainability with showcase projects.

Yet sustainability includes not wasting money. So — and this is the thing many have trouble with in evaluating sustainability efforts of various retailers — the exact same projects taken by, say, a Texas retailer — where electricity is comparatively inexpensive and state subsidies few — would not be an example of sustainability at all. It would just be wasting money.

In deciding to commit to the path of sustainable development, most companies cherry-pick a bit and focus on sustainability efforts that already meet their business model. Many retailers, for example, look to drive costs out of the system and focus on sustainability in a way that emphasizes the cost-saving components that result from saving energy, reducing carbon emissions, etc. Yet many don’t really respond to the traditional tripartite division of sustainability into environmental, social and economic silos. In other words, many retailers are anxious to emphasize the kind of sustainability that can save them money — say developing ways of filling up trucks — but have not really had a response to sustainability in terms of its social aspects, such as the pay and treatment of labor. 

Of course, most retailers emphasize what makes them look good, and so other retailers, say those obligated to expensive union contracts, are likely to emphasize their high wages as a sign of social sustainability.

If you investigate as much as we do, it can get rather tiresome as margins at retail are thin, and it is actually hard to identify many things that retailers do to promote sustainability — that they don’t either have to do — say honor union contracts — or that would be wise to do whether they believed in sustainability or not — say use more efficient truck routes, packaging, etc.

Businesses have a particular role to play in our system, and if they are not merely profitable but, indeed, sufficiently profitable to attract capital and to grow, the businesses will not serve their purpose. They will not be sustainable. Yet for sustainability to mean anything, it has to go beyond simply doing what one would do on an economic basis alone.

The recipient of this year’s Produce Business Retail Sustainability Award is The Kroger Company, and, of course, in such a large and varied entity, there are many things it does that fall under the rubric of sustainability.

Yet the selection was made, above all else, for Kroger’s Perishable Donation Partnership (PDP) program. This program is really a response to a chronic need. Food banks and similar programs have long relied on donations of non-perishable foods that were excess inventory. Lean manufacturing and just-in-time ordering systems have combined to make the food chain quite efficient, and that surplus product of yore just doesn’t exist much anymore. So there is a real and important need to find new sources of food that can be donated. Perishables, with short shelf-life and high quality standards, are the logical place to look.

It is not without risk, though, and Kroger has shown a rare kind of courage in emphasizing this program. There are reputational risks... What if Kroger donates food and someone gets sick? It is the Kroger name that could get muddied, and that is not a small thing to a corporation such as The Kroger Company. There are also business risks. The line between product unfit to sell, but good enough to donate, is a fuzzy one. It is possible, even likely, that some associates will be sufficiently enthused about the donation program that they will donate some product that could have been sold. This is money that disappears from the bottom line.

These are risks Kroger didn’t have to take. That it elected to do so is the kind of thought process that distinguishes true sustainability efforts from simply using sustainability jargon to save money. Of course, one could say that taking these risks is also profit-maximizing, as Kroger can earn goodwill from the publicity given its efforts. We here at Produce Business certainly hope so, and hope that this award contributes to such a profit — as it is when the zeitgeist rewards good works that people and companies focus on doing good things.                 pb