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Sustainability for the Long Haul
It's good for the environment and your bottom line
by Lori Valigra
Sustainable manufacturing and processing, which reduces raw materials waste and minimizes refuse, is more than a passing trend for companies both large and small during this economic recession. As companies using such practices see it, sustainability attracts consumers. But more fundamentally, it is good for a business’s bottom line.
Large conglomerates like Kraft Foods Inc., Hormel Foods Corp., and Unilever Corp., as well as smaller companies like Sierra Nevada Brewing Company and Kettle Foods Inc., are adopting sustainable practices that range from basic recycling of cardboard and plastic wrap to running their own water treatment facilities or in-house digestion operations that generate electricity. State and federal governments and local utilities are even giving incentives to companies that adopt green practices.
Other drivers of sustainability are competition, consumers, food security, and potentially more stringent reporting practices and laws on energy use. Several food companies also cited Wal-Mart’s requirements for suppliers as playing a big role in sustainability practices; while currently focused on electronics, these requirements are expected to filter down to food businesses.
“Consumers play an important role as a driver of this, but in talking with other food and beverage manufacturers, they see it as a good business model that can turn in better numbers for their shareholders,” said Cheri Chastain, sustainability coordinator at Sierra Nevada Brewing. “Money is the biggest driver.”
Every part of a practice is trying to get to carbon neutral, said Cheryl Baldwin, PhD, vice president of science and standards at Green Seal, a nonprofit organization that provides environmental certification standards to manufacturers. “They are looking at energy-efficient lighting, solar panels, energy conservation, production downtime, renewable energy, and producing energy with waste products … by in-house digestion,” Dr. Baldwin said. “If a company is serious, it can see benefits. And there are better payoffs during an economic recovery.” She pointed to an A.T. Kearny study from May through November 2008 that found that companies committed to sustainability financially outperformed industry averages by 15%.
An April 2009 study by the Grocery Manufacturers Association (GMA) and Deloitte found that some 54% of shoppers actively consider environmental sustainability issues in their buying decisions. “Understanding consumer expectations and shopping behavior are critical to the development of the industry’s overall strategy on environmental sustainability,” said Elliott Penner, GMA Sustainability Task Force leader, when the study was released. Added Scott Bearse, director and retail leader of Deloitte LLP’s Enterprise Sustainability group, “Sustainable product characteristics are emerging as an important brand differentiator, but to capture the potential market value of green shoppers, retailers and manufacturers must do a better job of communicating the sustainable attributes behind the products to show the value of buying green to the shopper.”
Manufacturing Goes Green
Even before the latest recession took hold, environmental sustainability was becoming a mandatory component of the business model followed by consumer businesses of all types, another 2007 report by the GMA and Deloitte found. “While the issues associated with sustainability—such as waste management, commodity shortages, and energy usage—are nothing new, the expectations of shareholders, consumers, regulators, and other constituencies have changed, pushing sustainability to the top of the agenda for many consumer products companies,” said Peter Capozucca, a principal with Deloitte, when the study was released. “It is unlike any business issue consumer businesses have encountered in the past. The industry’s large environmental footprint and unique dependencies on agricultural inputs, water, and packaging make sustainability a critical strategic issue that consumer packaged goods companies must address proactively.”
And, according to Dr. Baldwin, food manufacturers can achieve zero waste by examining all areas of operations. “Look at what is going to a landfill, and look at composting and recycling,” she advised. “Kraft recently announced it has a couple facilities that have reached zero waste. That’s not unique.”
Kraft recycles nearly 90% of its global manufacturing waste by turning it into energy and finding other companies that can use the waste. In the United States, Kraft has been partnering with Sonoco for several years on plant-waste reduction and now has a number of plants that are “zero waste to landfill,” said Steve Yucknut, MBA, vice president for sustainability at Kraft, in an e-mail to Food Quality.
“We’ve shown steady progress against our 2011 goals,” Yucknut said. From 2005 through 2009, he said Kraft had achieved the following:
- eliminated 174 million pounds of packaging materials, exceeding its 150 million-pound goal two years early;
- reduced plant energy use by 15% (toward a goal of 25%);
- cut plant energy-related carbon dioxide emissions by 17% (toward a goal of 25%);
- reduced plant water consumption by 32% (far exceeding the goal of 15%); and,
- reduced plant waste by 30 % (double the goal of 15%).
Cheryl Baldwin, PhD, Green Seal
They are looking at energy-efficient lighting, solar panels, energy conservation, production downtime, renewable energy, and producing energy with waste products … by in-house digestion. If a company is serious it can see benefits.
The successes come with a broad-based vision to make sustainability part of every business decision, Yucknut said. “It’s a priority across our organization, including general management, marketing, operations, and R&D. It’s a priority from the senior-most levels on down,” he said, adding that each business unit has goals, road maps, and projects to which it is held accountable. “This also applies to manufacturing. Now, each plant has water, waste, and energy-reduction goals and environmental improvement plans.”
One example he cites is Kraft’s Kenco Coffee Company in the United Kingdom, where 100% of the coffee beans come from Rainforest Alliance Certified farms and the manufacturing plant burns spent coffee grounds to supply 85% of its electricity needs.
Setting Sustainability Goals
Like Kraft and other food manufacturers, Hormel Foods Corporation has set its own environmental sustainability goals, and in April the company said it had made significant progress toward them. Like a growing number of companies, Hormel also issues an annual corporate responsibility report.
Thomas Raymond, Hormel’s director of environmental sustainability, noted that the company reduced water use by more than 447 million gallons in 2009 compared to 2008 at its U.S. manufacturing operations and reduced total water use by more than 590 million gallons, or 9%, over the past three years. Its U.S. operations also sent 7,275 fewer tons of solid waste to landfills in 2009 compared to 2008. The company has reduced the amount of solid waste sent to landfill by 16% over the past three years.
In April, the company said that for the first time it is reporting environmental information as normalized for production. “Accounting for production levels allows us to benchmark and track our improvements and efficiencies,” Raymond said at the time. “Last year, the two areas where we excelled were in reducing water use and the amount of solid waste sent to landfills. An area we are heavily focusing on this year is the amount of energy we use on an annual basis. By publicly showing year-over-year trending data, we closely monitor each area and work to ensure we are hitting our targets,” he told Food Quality magazine. The company also developed an internal data management system. Return on investment comes from increased measurement and communication at the plant operating level, he said.
Peter Capozucca, Deloitte
The industry’s large environmental footprint and unique dependencies on agricultural inputs, water, and packaging make sustainability a critical strategic issue that consumer packaged goods companies must address proactively.
For example, Raymond attributed the water reduction to employee education and capital improvement projects. With Burke Marketing Corporation, Hormel conducted a plant-wide study in 2009 to evaluate water reduction possibilities, which resulted in 12 million gallons of annual water savings. “We implemented a variety of projects, including adding new water meters to quantify department usage; level controls were added to ovens, nozzles were changed to sprays and sanitation hoses, and control valves were installed. In addition, educational programs were implemented for all employees to increase individual awareness levels.”
He added that energy reductions have come primarily from investment in infrastructure for lighting retrofits and heat recovery from boiler stacks and hot process exhaust streams. Solid-waste-to-landfill reductions were accomplished through both source reduction and improved recycling, which was applied to all materials, including paperboard, packaging, and processing byproducts, he said.
On the Small Side
Such savings are being enjoyed at smaller companies as well. For Sierra Nevada and Kettle, sustainability started with the companies’ foundings, and the benefits have continued rolling in.
“Our roots are in the natural food business, so we’re all about environmental concerns and good ingredients in food,” said Jim Green, spokesman for Kettle Foods. “So such things as saving energy and recycling waste were embedded into the DNA of the company.” Kettle, which makes potato chips, started more visible projects in 2003 by installing solar panels in its Salem, Ore., headquarters. Its more than 600 solar panels generate more than 120,000 kilowatt hours of electricity per year, enough to make 250,000 bags of chips and reduce annual CO2 emissions by 65 tons.
The company also began reusing cooking oil in biodiesel fuel instead of sending it to the candle and soap industries. It now sends out all of its waste oil—2,300 gallons—to be recycled into biodiesel. For every 7,600 bags of potato chips the company produces, it creates one gallon of waste vegetable oil. In 2006, Kettle also began purchasing renewable energy credits or “offsets” for 100% of its electricity use of 12 million kilowatt hours per year. Green said Kettle pays extra money for the electricity, money that is used by a third party to fund wind farms in the United States.
More recently, Kettle’s Beloit, Wis., site became the first LEED (Leadership in Energy and Environmental Design) Gold-certified food facility in the United States, because it doesn’t disturb wetlands or fish, Green said. That facility, which has 18 small wind turbines on the roof, generating more than 28,000 kilowatt hours of electricity per year, also sees a 20% annual energy savings (gas and electric), which translates into an estimated cost reduction of $110,000 on natural gas and $51,000 on electricity.
The power from the turbines can make 56,000 bags of potato chips per year. Additionally, the electrical power use at that factory is 100% offset with wind credits equivalent to 12.3 million kilowatt hours annually. Annual water savings of $34,000 are realized by reclamation systems capturing and reusing 3.4 million gallons of water from potato washing. Excess filtered process water is diverted to restrooms, saving an additional 120,000 gallons of water a year.
And with the new plant in Wisconsin, taking 420 trucks off the road between the two plants eliminated some three million pounds of CO2 emissions. The various sustainability efforts have improved sales by 26% compounded annually over 10 years.
As with many manufacturers, however, a big challenge for Kettle comes from dealing with huge amounts of raw waste. In both Salem and Beloit, the company has two sorts of wastes: raw and finished. Raw waste comprises potatoes that don’t make the grade or are inspected out; those go to commercial composting operations. Finished waste from chips that are inspected out of the process goes to an outfit that turns it into animal feed.
“Our raw waste is about zero,” said Green, who added that the investment the company made in recycling is insignificant compared to putting the waste into a dumpster and having it hauled away.
Another major improvement for sustainability is air compressors, which are used in most factories. “It’s a big use of electricity,” said Green. “A new generation of air compressors is variable speed, and they save us a tremendous amount of electricity.” An outside company approached Kettle to look at its electric bills, and the compressors stood out, so it went with the newer models. “The payback was so quick it was a no brainer.”
Helping Kettle and other companies are the incentives to encourage sustainable manufacturing that are offered by local and state governments. “Oregon has tremendous tax breaks to encourage people to convert to solar panels and other devices,” Green said. “The first thing any business should look at is energy demand.”
From Beer to Animal Feed
Sierra Nevada has benefited greatly from such incentives. Chastain said that when the company installed hydrogen fuel cells for energy five years ago, 70% of the installation cost was covered by rebates and incentives from the local utility and the federal government. The company also taps power from solar cells it installed. In 2009, Sierra self-generated 84% of its power. Sierra Nevada’s drive to sustainability, like Kettle’s, started with the company’s founding 30 years ago. “There hasn’t been an ‘aha’ moment over the past 10 years,” Chastain said.
But there has been some creative thinking and basic assessment of what comes into and goes out of the plant. “Barley and hops are a fixed input,” she said. “We work with farmers to have more sustainable farming practices. And energy and water can be reduced a lot. Heat can be recovered and water reused.” The company found that spent grain and yeast have value as additives in the cattle and dairy industries.
Sierra pulls out the sugars, but there’s a lot of protein left for the feed. Tanker trucks pick up the spent grain and yeast. Sierra gets paid for the grain. The liquid yeast, with the hauling, is a wash in terms of price. In 2009, the company had 32,000 tons of solid waste left, like spent grain and glass, but it recycled so much that only 160 tons went to a landfill. “So we had a 99.5% diversion rate in 2009,” she said, noting that this year the company is on track to hit 99.7%.
The company has identified key performance indicators that it tracks, such as energy and water per barrel of beer produced. It keeps a greenhouse gas inventory that is reported to the climate registry, an effort that started with the voluntary California Climate Action Registry that has now gone national.
“Over the last five years we have decreased energy consumption by 20% everywhere and generated about 75% of our electricity on site,” said Chastain. Part of the energy generation is from repurposed CO2, which brewers use a lot of, both to carbonate beer and to sanitize.
“We don’t bring in CO2,” Chastain said. “Our fermentation tanks generate CO2, and instead of venting it to the atmosphere, we recover it and recycle it. It saves millions of dollars a year by not having to buy CO2 and it decreases trucking emissions.” A pressurized system pulls CO2 off the top of the fermentation tanks. Then it is cleaned, compressed, and stored in liquid form until it is regassified for reuse.