Retailer Sustainability Vendor
Requirements & Benefits to Green
Marketing for Guatemalan Textile
and Apparel Association
September 25, 2014 Guatemala
Agenda
1. Overview
2. Recognizing Risks within the Supply Chain
3. Retailer and Brand Sustainability Initiatives
A. Abercrombie & Fitch
B. Gap Inc.
C. Ralph Lauren
D. Adidas
E. Nike
F. Target
G. Walmart
4. Industry Consortia
5. Labels & Examples in Green Marketing
6. How Can You Prepare
6. Questions & Wrap up
Gretchen Dudon
Gretchen Dudon
Overview
1. Basic Concepts
2. Key Drivers
3. Develop an Approach & Communicate Results
Basic Concepts
• Term “sustainability”
• Impetus behind sustainability movement
- limitation of natural resources
- global climate change
- consumer demand
- managing risks
Key Drivers
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Consumer value
Compliance
Retailers
GHG emissions
Develop an Approach &
Communicate Results
• Understand the impacts of your business
• Track facility information (energy, water, waste)
• Set target reduction goals & identify initiatives to meet
those goals
• Initiate projects & track progress
• Report to your customers, make information available
Recognzing Risks within the
Supply Chain
Gretchen Dudon
Supply Chain Risk Examples
“increasingly companies are focusing on sustainability in their
supply chains to manage risk”
1. Tsunamis in Japan & Thailand shut down factories & hurt profits in
automotive and electronic companies half way around the world
2. Protesters dressed as Ken & Barbie stalked Mattel’s HQ, saying the
company’s toy packaging was promoting the destruction of the
rainforests
3. Apple was accused of funding rape in Eastern Congo by sourcing
components containing minerals controlled by warlords
4. Fires and the collapse of Rana Plaza in Bangladesh killed more than
1,000, injured more than 2,500 people & exposed several apparel brands’
social compliance transparency risks
Gretchen Dudon
A recent survey of supply chain experts from PwC,
found 4 mains reasons for investing in sustainable
supply chain management
1. To manage the risk of unintended environmental or social damage
2. To manage a company’s reputation & the expectations of its
shareholders
3. To reduce costs & realize productivity improvements
4. To create sustainable products, thereby increasing revenues &
enhancing the corporate brand
Gretchen Dudon
The Obstacles
1. supply chains can be complex
2. supplier engagement is more art than science
3. data challenges
Follow the Golden Rule – A company cannot hold
its suppliers to standards it does not itself uphold
Gretchen Dudon
Clients Need to Have Good Data
How Suppliers Provide Sustainability Information
Gretchen Dudon
Standards are Emerging
Gretchen Dudon
Start by Setting Goals
To get results companies are setting goals
to improve sustainability within their supply chains
1. Nike has set supply chain goals for reduction of GHG, H2O use,
waste & discharge of hazardous chemicals
2. Puma has a goal to reduce CO2 emissions in the factories that
supply it directly
3. Walmart has set category goals & developed buyer incentives to
reward employees in merchandizing who deliver improved
environmental perfomance within their category
4. Gap Inc. has established a Preferred Mill Program which requires
implementation of measurement technologies at key mills & will
monitor investments in cleaner production technologies
5. Target is using HIGG Index scores as part of vendor annual scorecards
6. A&F asked key suppliers to complete HIGG self-assessment
Gretchen Dudon
Educate Suppliers
sharing knowledge about sustainability best practices with
suppliers is becoming more important
1. Kohl’s conducts webinars for its suppliers to teach tactics
around improving energy efficiency
2. Walmart has provided energy efficiency training to factory
managers
3. Walmart has hosted roundtables for factory and supplier
representatives to share best practices & discuss how to
execute an energy efficiency program
4. Gap Inc. has provided information to their suppliers on how
to report on sustainability, where to find additional resources,
and whom to contact at Gap should a supplier want to learn
more about the reporting process.
Gretchen Dudon
Leverage Industry Standards
to combat supplier survey fatigue & to help raise the
quality of sustainability data collected
1. CDP Supply Chain process to obtain GHG emissions
2. EICC questionnaires to gather info on conflict minerals
3. SAC – HIGG Index
4. In-house company developed questionnaires (Walmart/
Target/ P&G)
5. The Sustainability Consortium (TSC)
Gretchen Dudon
Using Scorecards
for years corporate buyers have used vendor scorecards to rate
& rank suppliers based on price, quality, performance, delivery
time AND now are integrating sustainability into purchasing
decisions as well
1. Nike Materials Sustainability Index - helps designers choose
materials w/ appropriate environmental performance
2. Nike Manufacturing Index - to help assess manufacturers
3. Target Sustainability Scorecard – to rank suppliers
4. Walmart Sustainability Scorecard – to rank products
Walmart recenly pledged that it will buy 70% of the goods it sells
in US stores only from suppliers that use it’s Sustainability Index
to evaluate & share the sustainability of their products
Gretchen Dudon
Build Industry Knowledge &
Capacity
improving sustainability in the supply chain requires a
collaborative approach
1. Nike developed a H2O management tool called H2O Insight to
support its own water program & then worked with a 3rd
party to make it available to other companies
2. Many SAC Founding Members to help share industry
knowledge of it’s factories – GAP Inc, Target, Nike
3. Roadmap to Zero – a zero discharge program of hazardous
chemicals from supply chain by 2020 – H&M, Puma, Adidas,
GAP Inc., Marks & Spencer, PVH, Benetton, Inditex and Nike
4. NRDC’s Clean by Design Program helps to improve efficiencies
in the textile supply chain – Walmart, Nike and Target
Retailer and Brand
Sustainability Initiatives
Gretchen Dudon
Abercrombie & Fitch
 Kim Harr, Director of Sustainability
 Published Corporate Sustainability Report
 Published Sustainability Goals
 CSR Hub Ranking 52/100
 Focused on eliminating logo attire from its US stores
by 2015
Gretchen Dudon
Commitments
 Reducing GHG emissions for US operations by 8%
from 2008-2018
 Advocate for greater attention to environmental
stewardship with all companies they work with
 Intend to implement practices which reduce their
environmental footprint
 Want to promote long-term
sustainable
partnerships throughout the world
Gretchen Dudon
Strategy
 Reduce waste through conservation, collaboration,
industry partners, and carbon emissions programs
 Three R’s as a company policy – Reduce, Reuse, Recycle
 Focusing on reducing energy use, internally and externally
within supply chain
 Tracking GHG emissions through the Carbon Disclosure
Project
Gretchen Dudon
Initiatives
 H2O Management: Complete water footprint of supply chain
 Zero Discharge of hazardous chemicals from supply chain
 2011 Implemented A&F’s Master Vendor Agreement (MVA)
which includes language specific to RSL
 2011 Published a new RSL online and sent a copy to all A&F
suppliers
 2012 Suppliers to provide a Letter of Guarantee stating their
chemicals suppliers’ products will comply with RSL
 2012 Verify ISO 14001 certification status for key suppliers
 2013 Require key suppliers to complete Higg Index
environmental self assessment
 Reduce energy use at HQ, offices, retail stores and DC’s
Supply Chain
Gretchen Dudon
 Vendor Code of Conduct
 Environmental Code of Conduct focuses on compliance with all
relevant local laws & regulations
 CA Transparency in Supply Chain Act
 No Uzbek cotton
 Conflict Minerals Policy
 No Sandblasting
 All Bangladesh factories required to go through an electrical audit w/
3rd party monitoring firm
 Audit Lifecycle
 Factory Approval
 Monitoring
 Rating
 Correction Action
 Follow up
Gretchen Dudon
How Engage Suppliers
 3rd party monitoring firms audit factory
 2 week audit notification and performed 1x per year
 A&F’s sustainability team monitors each audit report & assigns the
factory a rating. Tracks factory progress to help support those in
greater need than others
 VIP (Vendor Infrastructure Program) in place to work directly with
factories to ensure compliance with Code of Conduct and local laws
 Brand Collaboration Working Group implemented to decrease
survey & audit fatigue
 Conflict Mineral due diligence process 1x per year to ensure supply
chain is reporting data pertaining to the source of its conflict
minerals
Gretchen Dudon
Gap Inc.
 Melissa Fifield, Director of Sustainable Innovation
 Published Corporate Social Responsibility Report
 Published Sustainability Goals
 CSR Hub Ranking 63/100
 Focused on “Do More” Than Sell Clothes campaign
 Founding member of the SAC
Gretchen Dudon
Commitments
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Do More Than Sell Clothes campaign
Reduce GHG emissions
PACE program
Volunteerism
Human Rights
Environment
Reporting via Carbon Disclosure Project, Clinton Global Initiative,
Ethical Trading Initiative, UN Global Compact, Social Accountability
International, and GAP’s public report
Gretchen Dudon
Strategy
 Energy efficiency in US Stores & DC’s – lighting retrofits & solar
energy
 Waste reduction – paperless paystub program saved 400 miles of
paper in 2012
 Field Teams Grants - $817K in 2012 for various community
organizations
 Camp Old Navy
 Partnership with International Labor Organization which led to
development of the global Better Work Program
 Completed supply chain footprint assessment – what gets
measured gets managed
 SAC Founding members
Gretchen Dudon
Strategy (cont.)
 Created Sustainable Fiber Toolkit for designers & merchants
 Advance H2O quality & conservation initiatives within supply
chain
 GAP’s internal Environmental Council meets quarterly to
assess GAP’s impact on the environment
 Utilize Higg Index in Brand, Product and Facility
 Wise Wash Denim - jeans use 25% less H2O, electricity, and
chemicals
 Wish Wash program came out of findings from Higg
 Refers to a manufacturing process that uses low impact
manufacturing techniques
Gretchen Dudon
Initiatives
 Align with UN’s Guiding Principals on Business & Human Rights
 2011 created Brand Integration & Vendor Performance project
 team to help GAP better leverage vendor data to drive
business decisions, including order placement
 Mill Engagement Program – social & environmental practices in
fabric mills
 Train all new GAP sourcing employees on the importance of
responsible purchasing practices
 Highlight case studies
 Ensure factory orders are made w/ full understanding of
impact on workers
 Reduce absolute GHG emissions 20% by 2015
Gretchen Dudon
Supply Chain
 Work with smaller, consolidated vendor base to facilitate deeper
relationships
 Complete supply chain H2O mapping and create a supply chain
H2O strategy
 Zero Discharge of hazardous chemicals by 2020
 Preferred Mill Program
 currently partnered with 3 key mills
 extending to 15 more mills over the next 3 yrs
 Rate factories performance against Code of Vendor Conduct to
maximize understanding & improve factory performance
 234 factories in 21 countries participated in environmental
footprint assessment through partnership w/ NRDC
GAP Factory Approval 2012 by
Geography
GAP Factory Ratings 2011
GAP Factory Ratings 2012
Gretchen Dudon
How Engage Suppliers
 Supplier Reporting has been encouraged to all suppliers
 GAP sent a letter to all suppliers encouraging them to issue
public sustainability reports
 GAP provides info on how to report, where to find additional
resources, & whom to contact at GAP if you want to learn
more about reporting processes
 Public sustainability reporting earns best practice credit on
GAP’s Code of Conduct ratings
 GAP “provides our own Social and Environmental
Responsibility Report and so should our suppliers”
Gretchen Dudon
Ralph Lauren
 Caren Mintz, Director of Environmental Sustainability
 Published 1st Citizenship Report in 2014 due to pressure from
a major investor
 No Published Sustainability Goals
 CSR Hub Ranking 43/100
 Focused on integrating sustainability into all business
decisions
Gretchen Dudon
Commitments
 Environment
 Energy & Climate
 Materials & Recycling
 Engagement Practices
 Responsible Sourcing
 Manufacturing of products
 Vendor selection
 Product safety & social compliance practices
 Employees
 Community
Gretchen Dudon
Strategy
 Carbon Footprint – measured & tracking scope 1 & 2
emissions
 Materials and Recycling
 Selecting different ways to transport products
 Shipping more ocean and rail vs. air to reduce emissions
 Shipment consolidation
 98% of company controlled ground shipment moving via
EPA’s SmartWay carrier
 Utilizing efficient routing via end-end visibility &
forecasting tools
 100% of ocean carries are Clean Cargo Working Group
Gretchen Dudon
Initiatives
 Recyclable packaging and packing materials that incorporate
recycled content
 Environmental preferred purchasing guideline
 Recycling programs in all corporate offices
 Monitoring progress
 Advertising using FSC certified mailers and increased soy & veggie
based inks
 CA Transparency Supply Chain Act
 Sourcing working closely with Global Human Rights Compliance
(GHRC) department for selection of new business partners
 Collaboration with other like-minded companies working within
same factories to reduce audit fatigue
Gretchen Dudon
Supply Chain
 Over 700 manufacturers worldwide with no one manufacturer
providing more than approx 4% of RL’s total production
 Regional sourcing breakdown: 9% Americas, 10% EMEA, 81% Asia
 All vendors sigh RL’s Code of Ethical Conduct
 All vendors agree to comply with Vendor Compliance Packet
 local law adherence
 Restricted Substance adherence with full transparency of
records (Supplier Transparency Initiative)
 Testing and production protocols of Global Testing & Quality
Assurance Program
Gretchen Dudon
Supply Chain (cont.)
 Environmental Sustainability must be integrated into all partners’
business decisions
 Natural resources
 Pollution prevention
 Utilization of green technologies
 Promote factory efficiency trainings to create greater ownership
within production process
Gretchen Dudon
How Engage Suppliers
 Vendor Scorecard – rates vendors via on-site evaluations
before becoming a vendor
 Factories undergo scheduled audits via 3rd party social audits
 Key vendors undergo audits annually
 Engage suppliers in Continuous Improvement Programs with
3rd party consultants
Gretchen Dudon
Nike
 Hannah Jones, Corporate Sustainability Officer and VP of
Innovation Accelerator
 Publish Nike Responsibility Report Yearly
 Publish Sustainability Goals
 CSR Hub Ranking 63/100
 Founding member of SAC
 Reducing environmental impact while continuing to grow in
revenue each year
 Introduced 1st product with ColorDry technology in June 2014
Gretchen Dudon
Targets &
Commitments
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Cut Energy
Empower Workers
Reject Toxics – Zero Discharge by 2020
Slash Water Use
Reduce Waste
Support Communities
Gretchen Dudon
Strategy
 Nike Materials Sustainability Index – helps Nike choose
materials with appropriate environmental performance
 Nike Sourcing and Manufacturing Sustainability Index – used
to assess manufacturers
 Zero Discharge of Hazardous Chemicals
 Energy and Carbon Program
 Factory Code of Conduct includes environmental impacts
minimized
 Nike Colordry
 Bluesign Bluefinder
 The Making App
 FlyKnit
Gretchen Dudon
Materials - Largest Impact
 1,500 different material vendors
 57% of apparel material vendors
have signed commitments to green
Used throughout value chain relates to
materials – agriculture, processing &
finishing; 21% from growing, raising,
extraction or harvesting, 33% in
processing and finishing
Of value chain water consumption
relates to materials
Gretchen Dudon
Nike Materials Sustainability Index
Sourcing & Manufacturing Sustainability
Index
 Single evaluation system for manufacturing across all products and
all brands
 The MI integrates scores from key performance areas – quality,
cost, delivery and sustainability – into a single dashboard rating
 Groups factories as gold, silver, bronze, yellow or red
 The MI creates 1 overall score for each contract factory
Measuring Sustainability In Sourcing
& Manufacturing
• Sustainability is incorporated into the MI as 1 component
• Nike assesses sustainability through the Sourcing &
Manufacturing Sustainability Index (SMSI)
• Target is to source all products from factories reaching a
minimum BRONZE standard
• In FY13, 309 apparel factories met bronze or higher out of 452 =
68% of factories
• The SMSI also gives a platform to incentivize performance
improvements
• Factories that rate below bronze are required to pay for 3rd
party audits until their performance improves
Zero Discharge of Hazardous
Chemicals (ZDHC)
 2012 launched
 Zero discharge goal by 2020
 Working with other brands to create a roadmap to
achieve goal
 Raodmaptozero.com
 Continue to maintain RSL
 2013 Nike formed a strategic relationship with
bluesign to provide Nike suppliers access to extensive
information about more sustainable materials &
chemistries
 4,300 pre-screened blusign-certified textile chemical
formulations (dye systems, detergents & other
chemicals used in manufacturing)
 69% of apparel material vendors have signed the
commitment to writing green chemistry practices
Energy and Carbon Program
ColorDry
 A resourceful invention to reduce H2O use
 Investment with Dutch DyeCoo Textile Systems
 High-tech equipment that eliminates use of H2O &
process chemicals from fabric dyeing with
replaceable CO2
 Traditional dyeing process uses an est. 100-150 liters of
H2O to process 1 kg of textiles – or about 30 liters of
water to dye a single t-shirt
 industry analysts estimate that more than 39M tons of
polyester will be dyed annually by 2015
The MAKING App
Informed decisions lead to more
sustainable design
 Powered by Nike MSI
(Material Sustainability Index)
 4 key impact areas: chemistry,
energy/GHG, water/land, &
physical waste
 Discovery tool for designers &
creators to make informed
decisions in the materials they
use
Gretchen Dudon
Make with Less
Used per unit of footwear made
over 5 yrs ending FY13
Used per pair in footwear
manufacturing from FY11
– FY13
* 57% of apparel materials vendors have signed commitments to green
Gretchen Dudon
Reuse
28 Million
Pairs of shoes processed through
Reuse-A-Shoe and turned into
Nike Grind since 1990
Of cardboard used in
Nike shoebox is recycled
content
Gretchen Dudon
Adidas Group
 Frank Henke, Global Director of Social and Environmental
Affairs
 Publish Sustainability Report
 Publish Sustainability Goals
 CSR Hub Ranking 62/100
 Member of the SAC
 Social and Environmental Affairs (SEA) Team solely focused on
ensuring environmental compliance & implementation of
environmental initiatives within supply chain
 Implemented a SMS texting program for factory workers
Gretchen Dudon
Targets &
Commitments
 People: 60% of all direct suppliers to meet 3C (good) or better
and 80% of strategic suppliers to meet 3C or better
 Product: DryDye technology uses zero H2O, 50% fewer
chemicals & 50% less energy compared to conventional fabric
dyeing, using virtual images in place of physical samples
helps reduce natural resource use in sample production.
 1.5M fewer physical samples were made using virtual
imagery
 Planet: increase ISO certifications within supply chain and
focus on more rigorous audits to help suppliers address most
significant environmental impacts
 Partnership: creating an industry wide audit tool
Supply Chain
Not only do we try to reduce the environmental footprint from our own
sites, we encourage our suppliers to do the same. We want them to
tackle the environmental impacts from the manufacturing process and
be smart in their use
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31% of supplier training sessions focused on sustainability in 2013
Sustainability training based on needs assessments
2013 Guatemala - 4 Adidas supplier factories out of 1,214
2013, Adidas performed 1,489 factory audits, visits & training
sessions
 2013 Guatemala had 2 initial assessments
Gretchen Dudon
Supply Chain
Environmental Guidelines
 Measure and assess the environmental performance & risks at
factories
 Follow Legal Requirements & Environmental Permits for
Guatemala
 Adopt Environmental Management System
 Sustainable Resource Use
 water conservation, energy efficiency, material efficiency, waste
management
 Reduce emissions
 Monitor
 Manage
 Calculate a carbon footprint
 Measure and Report
 http://www.adidasgroup.com/media/filer_public/2013/07/31/environmental_guideline
Gretchen Dudon
Product Sustainability
 40% Better Cotton use by 2015 and 100% Better Cotton use by
2018
 50% reduction in colors used within the Sports Performance
division
 Virtualization project to drive reduction in samples in design
process
 Optimize packaging solutions
 Establish full transparency of more sustainable materials – continue
to monitor process of suppliers’ compliance and set clear strategy
to implement Adidas’ Sustainable Material Tracking Tool to
suppliers
 Support SAC and integration of Higg Index into Adidas Better Place
tools
Gretchen Dudon
How Engage Suppliers
 Multi-level monitoring & enforcement process
 Rating system for assessment of suppliers
 Rating results shared with Sourcing to decide how many future
orders to give factory
 SMS texting program to provide open communication for factory
workers and Adidas Group
 Supplier Training Programs for sustainability
 Use of letters to take action over poor factory performance
 1st letter warning – fix problems
 2nd letter if problems aren’t fixed – stop orders
 3rd letter – Sourcing Team stops working with factory and a
letter goes out to the local government
Gretchen Dudon
Target
 Kate Heiny, Corporate Social Responsibility Executive
 Publish Corporate Social Responsibility Report
 Publish Sustainability Goals
 CSR Hub Ranking 55/100
 Founding member of the SAC
 Recent news Target and Walmart join forces on supply chain
sustainability to drive innovation & remove harsh chemicals
from household cleaners, personal care & beauty, and baby
care products
 Developing a Sustainable Product Standard
Gretchen Dudon
Commitments
 Education
 Sustainability – goals mainly focused on efficient operations,
transportation, packaging, sustainable living, organic food,
sustainable seafood, and sustainable products
 Health and Well-Being
 Responsible Sourcing – supply chain goals are focused around
increasing Higg participation from suppliers
 Safety and Preparedness
 Team Members
 Volunteerism
Gretchen Dudon
Strategy
 2013 Global Reporting Initiative (GRI) reporting
 Materiality – formalized their assessment to prioritize top
corporate sustainability issues for Target and stakeholders
 Performed LCA on Target brand made garments
 Founding member of the SAC and played a key role in
developing the Higg Index
 Clean by Design – NRDC’s best practices for dyeing
Gretchen Dudon
Initiatives
 Big campaign around washing in cold H2O – Target found growing,
harvesting, spinning raw materials and consumer laundering have the
greatest impact on H2O and Energy
 2013 added a reminder to labels of Target brand apparel “consider coldwater wash” to save energy and $
 Switched Target labels to polyester made from recycled H2O bottles
 Reducing carbon footprint within supply chain via product development,
packaging and transportation
 2012 Target began asking vendors & Target brand factories to use the
Higg Index
 2013 a second round of Higg surveys were completed with 97% response
rate
Gretchen Dudon
Supply Chain
 Using Higg Index scores as part of vendor annual scorecards
 2012 Clean by Design piloted in 3 high volume textile mills in China
for 1 year – savings found in water, energy & materials
 Expanding Clean by Design best practices to 2 more cities in China in
2013
 Conflict mineral transparency policy
 Standards of Vendor Engagement in which all vendors, subcontractors, and suppliers are required to uphold
 Vendor Performance Overviews (VPO) as a tool to make educated
sourcing decisions
 Adopted a “coaching stance” with suppliers to recognize progress,
inquire about obstacles, & encourage improvement
Gretchen Dudon
How Engage Suppliers
 Offers web-based training programs on topics like preventing
underage labor, working hours, & health and safety management
 Provide self audit forms to help vendors improve their performance
 Intensive compliance, education, evaluation, and execution program
for a limited number of vendors to improve their audit results
 Target scorecard is in a spreadsheet format – when answers are
updated your score changes immediately
Gretchen Dudon
Walmart
 Jeff Rice, Senior Director of Sustainability
 Launched the Sustainability Index in 2009 in collaboration with
The Sustainability Consortium (TSC)
 Publish Supplier Sustainability Goals
 CSR Hub Ranking 50/100
 Recent news Target and Walmart join forces on supply chain
sustainability to drive innovation & remove harsh chemicals
from household cleaners, personal care & beauty, and baby
care products
 Developing a Sustainable Product Standard
Gretchen Dudon
Commitments
 Energy
 Targeting Zero Waste
 Sustainability Index
 Water
 Truck Fleet
 Sustainable Food
 Greenhouse Gas Emissions (GHG)
 Acres for America
 US Manufacturing
Gretchen Dudon
Strategy
 By Dec. 31, 2020 procure 7 billion kWh of renewable energy
 Reduce use of plastic shopping bags
 By end of 2013 reduced plastic bag waste by 38%
 = 10 billion bags annually
 Responsible packaging – Reduce, Reuse, Recycle AND
Rethink to develop product packaging solutions that cut
unnecessary waste and save $
 Launches The Sustainability Consortium in China to set
supplier targets
 2013 Walmart requires buyers to set specific sustainability
objectives that will be tied to their annual reviews
Gretchen Dudon
Initiatives
 More than 500 suppliers to participate in the Sustainability
Index
 NRDC Clean by Design “best practice” mill implementations
 Track scope 1, 2 and 3 emissions
 GHG emissions (scope 3) from supply chain are > than
corporate emissions (scope 1 & 2)
 Committed to eliminate 20 million MTCO2e rom global
supply chain by the end of 2015
 Use the Sustainability Index to spur innovation, track &
measure GHG emissions, and create accountability
 Target zero waste
Gretchen Dudon
Initiatives (cont.)
 Improve water efficiency through better facility design and
operational improvements
 Jan 2013, Walmart pledged over the next 10 yrs to invest
$250B in products that support American jobs
 Effort to grow US manufacturing
 Encourage the creation of US jobs
 Acres for America in partnership with the National Fish and
Wildlife Foundation 10 yr commitment
 Invest $35M to purchase and preserve 1 acre of wildlife
habitat in US for every 1 acre of land developed
Gretchen Dudon
Supply Chain
 Recently pledge that Walmart and Sam’s Club will buy 70% of
the goods it sells in US stores only from suppliers that use the
Sustainability Index
 More than 700 categories covered by the Index
 Index score improvements year over year in all major business
units
 Responsible Sourcing Program to include transparent supply
chain
 Buyers are now incentivized in their annual reviews (5% of
a buyer’s bonus) to source more sustainable products and
set specific category sustainability objectives
Gretchen Dudon
Supply Chain (cont.)
 Increase the use of recyclable plastics
 Remove harsh chemicals from health & beauty, household
cleaners and baby products
 Reduce fertilizer use in agriculture
 Expand Sustainability Index to international markets
 Improve energy efficiency of supply chain partners with
shared projects
Gretchen Dudon
How Engage Suppliers
 Sustainability Index initiative in collaboration with The
Sustainability Consortium
 Sustainability HUB
 Resources & tools
 Learn how to get started with the Sustainability Index
 Ask questions
 Share success stories
 Developing buyer incentives around improving environmental
performance in their category
 Adding specific sustainability objectives to its global sourcing
merchants’ annual evaluations
The Sustainability Index
 Based on KPIs developed by the TSC
dependent on product category
 Implemented by buyers within their product
category
 KPI’s address issues up and down the supply
chain
 Index constantly evolving
 Index launched 1x per year – Feb. 2015 next
launch
 intent is to see incremental progress
from suppliers over time
 70% of all categories covered except apparel
“If we work together, we
can create a new retail
standard for the 21st
century."
Sustainability Industry
Consortia
Industry Groups & Consortia
Sustainable Apparel Coalition
 Multi-Stakeholder group
 Evaluates factory facilities, products & brands in different modules

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Members:
Adidas
Group Hanes
Focus is on the Higg Index – a suite of assessment tools that
Levi’s
standardizes measurement of environmental and social impacts in
Columbia
value chain
Nike
Adidas
GAP Inc.
Registration is Free, easy to set up an account
A&F
PPR
Self-assessment tool (scoring based out of 100 total points and
VF Corp
each module is scored independently) to help guide & improve
H&M
Inditex
Attempts to be a single industry standard
Khol’s
Nordstrom
Data is not shared – you own your Higg Index data
Target
Walmart
Sustainable Apparel Coalition
Members:
Adidas
Group Hanes
Levi’s
Columbia
Nike
Adidas
GAP Inc.
A&F
PPR
VF Corp
H&M
Inditex
Khol’s
Nordstrom
Target
Walmart
Sustainable Apparel Coalition
Supplier Facility Module Questionnaire
Operational Focus Area
Weighted Scoring
Environmental Management System
14.3%
Energy Use & (GHG) Emissions
14.3%
Water Use
14.3%
Wastewater/Effluent
14.3%
Emissions to air
14.3%
Waste Management
14.3%
Pollution Prevention/Potentially
Hazardous Substances
14.3%
Members:
Adidas
Group Hanes
Levi’s
Columbia
Nike
Adidas
GAP Inc.
A&F
PPR
VF Corp
H&M
Inditex
Khol’s
Nordstrom
Target
Walmart
Gretchen Dudon
Sustainable Apparel Coalition (SAC)
New and Current Changes
 Rapid Design Module – beta was released in 2013
 Streamlined version of the Product Module from
Higg Index 1.0
 Used to help designers during product creation
make more informed decisions about the
potential environmental impacts of their designs
 Assesses materials through the MSI (Material
Sustainability Index – based on Nike’s original
tool creation)
SAC’s RDM
The Sustainability Consortium
 Multi-Stakeholder Membership – 80 members
 Addressing sustainability on all product categories
 Focused on building a scientific foundation to drive
innovation & improve consumer product sustainability
 2 Tools
 Category Sustainability Profile (CSP): summary of
the best available, scientific info on a product over
its entire lifecycle
 Key Performance Indicator (KPI): questions
retailers can use to assess & tack the performance
of brand manufacturers on critical sustainability
issues
 Clothing, Footwear & Textiles working group – Feb 2013
Members:
Clothing, Footwear and Textiles Working Group (CFT)
 Focused categories
 Nylon, polyester, rayon, & cotton clothing
 1st working group having research conducted in
China
 2 Product Sustainability Toolkit
 Cotton – CSP & KPI’s
 Cotton textiles – CSP & KPI’s
 Examples of other product categories include
 Air freshener, apples, butter, bread, cheese, CD’s &
DVD’s, board games, beef, bananas,
beans/lentils/peas, baby wipes, baby diapers,
eggs, dairy, display monitors, hand tools, plastic
toys
Members:
Carbon Disclosure Project (CDP)
 International non-profit organization
 Provides a global platform to measure, disclose, manage &
disclose environmental information
 A tool to quantify & compare companies’ carbon
emissions management & strategies
 Works with investors, companies, cities, & governments
 Climate Change program
 Supply Chain program
 Water program
 Forests program
Supply Chain Statistics
Carbon Disclosure Project (CDP)
Supply Chain Program
“CDP offers our suppliers an industry standard global platform
for reporting their climate strategies, and data, improve
supplier scores on the sustainability index and empowers
Walmart to efficiently capture the positive impact that the
company and our suppliers’ efforts are having in our supply
chain”. Jeff Rice, Senior Director, Sustainability, Walmart
Carbon Disclosure Project Signatories
Climate change program engages 767 signatories with assets of US $92 Trillion
Water program engages 573 signatories with assets of US $60 Trillion
 Current Apparel Companies utilizing CDP for tracking &
reporting on climate change (carbon emissions), water, & or
forests
 Nike
 Adidas
 Target
 Wal-Mart (AND Supply Chain Member)
 Abercrombie & Fitch
 Gap Inc.
Clean by
Design
Mill Engagement
Program
Gretchen Dudon
California Transparency in Supply
Chains Act (SB 657)
 Effective: Jan. 1, 2012 (signed into law by Governor
Schwarzenegger in Sept. 2010)
 Purpose: Law requires large retail sellers & manufacturers
doing business in California (global sales > $100M) to
disclose their efforts to eradicate slavery and human
trafficking from their direct supply chains for tangible
goods offered for sale
 Disclosure must be placed on website for public to see
Gretchen Dudon
California Transparency in Supply
Chains Act (SB 657)
Vendor Requirements:
 Be prepared for announced & unannounced audits to
evaluate & address risks of human trafficking & slavery.
 Obtain certification from suppliers that materials used to
manufacture products are not produced with slave labor, are
not connected with human trafficking, and comply with laws
of the country in which you are doing business.
 Provide certification that your products sold are not
produced with slave labor, are not connected with human
trafficking, and comply with the country laws in which you
are doing business.
Gretchen Dudon
California Transparency in Supply Chains
Act (SB 657)
“Verification of Product Supply Chains and Certification of Compliance with Laws (SB
657). At Target, we hold ourselves and our vendors accountable to high ethical standards
wherever we do business. Target works diligently to ensure Target ’ s products are
produced ethically by our suppliers and in accordance with Target ’ s Standards of
Vendor Engagement(“Target’s Standards”) and Target’s Vendor Conduct Guide, which
Target suppliers are subject to as a condition of doing business with Target. Target’s
Standards expressly prohibit our suppliers from utilizing any forced or compulsory
labor. They also mandate that workers receive fair wages and benefits in compliance with
all applicable local laws. Target suppliers also warrant that all the products they supply to
Target are manufactured in accordance with all applicable laws, regulations and standards
– both of the United States as well as their country of origin”.
http://m.target.com/HelpContent?help=/sites/html/TargetOnline/help/orders_and_shipping/more_help_with
_orders/CA_SupplyChain_Act.html
Gretchen Dudon
California Transparency in Supply Chains
Act (SB 657)
Corporate Disclosure in Compliance with SB 657
California Transparency in Supply Chains Act
(Human Trafficking and Anti-Slavery)
“…. As part of our commitment to be a responsible company, the Ethical Sourcing
program was established in 1992. A key part of that program is our Standards
for Suppliers, which are Walmart’s fundamental expectations of its suppliers on
social and environmental practices. The Standards cover topics including:
compliance with laws, voluntary labor, labor hours, hiring and employment
practices, compensation, freedom of association and collective bargaining,
dormitories and canteens, and the environment. Walmart requires every supplier
to sign an agreement that they, their contractors and subcontractors will abide
by these Standards. Factory audits are used to verify suppliers’ compliance with
the Standards in those facilities producing merchandise for Walmart…. ”
http://corporate.walmart.com/global-responsibility/ethical-sourcing/californiatransparency-in-supply-chains-act
Summary of Programs
The
Sustainability
Consortium
Energy
GHGs
Water
Waste
Chemicals
Social
Natural
Resources
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

SB 657 – CA
Transparency
in Supply Chain
Sustainable
Apparel
Coalition


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NRDC
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
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

Nike (SMSI)

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
CDP

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

Labels & Marketing
Labels & Marketing
 Product sustainability as a point of differentiation
 Green Labels
 Eco Criteria
 GoodGuide
 Green Marketing Guidelines (FTC)
 Examples of Green Marketing
Product sustainability - Consumer
Perspective
Q. How do you know a product is green?
Q. Are you searching for greener products?
Q. Are you seriously searching for more sustainable apparel?
Q. Where are you searching for more sustainable product?
Product Sustainability Consumer Perspective
 How do you know a product is green?
 49% read product ingredients & statements about energy
reduction on the packaging
 31% it’s made by a company with a strong environmental
reputation
 25% it’s been certified by an independent 3rd party
Product Sustainability Consumer Perspective
 Are you searching for greener products? Greener defined as
more energy efficient, natural or sustainable?
 70% responded yes in 2012
 This is flat from 2011 where 70% of consumers also said yes
but trending upwards from 2009 where only 60%
responded yes
Product Sustainability Consumer Perspective
 Are you seriously searching for more sustainable
apparel?
 20% said yes – seriously to indicate a strong
commitment and intent in 2012
 This number is down from 3 yrs ago, however
consumer behavior is generally trending
downwards attributed to the economic recession
Product Sustainability Consumer Perspective
 Where are you searching for more sustainable product?
 38% Big box retailers (Target or Walmart)
 22% Online
 5% Specialty boutique (Patagonia or Aveda)
Product sustainability – B2B Communications
• Brands, Retailers, Investors and Shareholders are
increasingly concerned about the effects of climate change
and water scarcity to doing business.
• What was the most costly natural disaster in the past 100
years?
• With the reality of rising global population and resource
constraints we must manufacture differently. Companies
fear consumers perception if their success has
consequential impacts.
Green Labels
 Vary by country you are selling into
 Common List
Energy Star
55%
Green Good Housekeeping
29%
USDA Certified Organic
27%
Consumer Reports Greener Choices 23%
UL Environment
6%
MBDC Cradle to Cradle
<1%
Eco Criteria
 Eco Fashion is a holistic concept that refers to all fashion
products that have been created in such a way to contribute to
a healthier and more equal world
Vegan: products that have been made without the
use of leather or animal tissue products
Ethically produced: ethical fashion that has been
produced with respect for people & environment. This is
an option for smaller companies who are taking
significant action but don’t qualify for existing Organic and
Fair Trade
Eco Criteria
Fair Trade Certified: Organized movement that
promotes standards for international labor,
environmentalism, and social policy. Focuses on
exports from developing countries to developed
countries.
Organic: Natural fibers that have been grown without any
pesticides and other toxic materials. The process of
organic grown can be certified by various organizations.
USDA Organic is common one in USA
Recycled: Anything made from already existing
materials, fabrics, fibers or metals; often reclaimed
from previously made clothing and reworked into new
ones. Re-spun, re-purposed.
GoodGuide
 Provides information on health, environment, and social
impacts of consumer products
 Search and browse over 200,000 products
 Use scientific expertise and rating system based on 0-10
 iPhone app available
 Reviews products and categories – apparel category available
GoodGuide
GoodGuide
Federal Trade Commission
Environmental Claims: DO’s
DO specify environmental benefits when using seals or
certifications
DO use environmental certifications or seals that convey the
basis for the certification
DO have reliable scientific evidence to support carbon offset
claims
Federal Trade Commission
Environmental Claims: DO’s
DO be clear about your compostable claims and where your
product can be composted
DO ensure if you make degradable claims that your product will
completely break down and return to nature within 1 year
DO provide competent and reliable scientific evidence that your
non-toxic claim is safe for both people and the environment
Federal Trade Commission
Environmental Claims: DO’s
DO qualify recyclable claims when consumers have limited
access to recycling facilities.
DO make recycled content claims only for materials that have
been recovered or diverted from the waste stream during the
manufacturing process or after consumer use.
DO qualify claims for products or packages made partly from
recycled material ~ “made from 30% recycled material”.
Federal Trade Commission
Environmental Claims: DON’Ts
DON’T make broad, unqualified environmental benefit claims,
like ‘green’ or ‘eco-friendly’ ~ too difficult to substantiate
DON’T claim “green, made with recycled content” unless you
analyze the trade-offs ~ do the environmental benefits outweigh
the risks and costs?
Federal Trade Commission
Environmental Claims: DON’Ts
DON’T make unqualified renewable energy claims “made with
renewable energy”, unless all, or virtually all, the significant
manufacturing processes involved in making the product or
package are powered with renewable energy or RECs
DON’T make product or package reduction claims without a
basis for comparison ~ “ 10% less waste than our previous
product”
Examples of Green Marketing
Directly from your Client’s Corporate
Sustainability Reports
“our paperless paystub program saved 400 miles of paper in
2012” GAP
“By recycling and composting at our San Francisco HQ, we
diverted 75% of our building waste from going to landfill” GAP
“Since fiscal year 2009, we reduced our global air mix by more
than 1/3, avoiding more than 20,000 metric tons of CO2 emissions
in the latest fiscal year alone” Ralph Lauren
Examples of Green Marketing
(cont.)
 “Reducing our global air mix AVOIDED 20,000 MTCO2e of
emissions from being released into the air, the equivalent of
emissions from 18,000 homes’ energy use for 1 year” Ralph
Lauren
 “Through the use of intermodel solutions, we avoided emissions
equal to to Co2 emissions from 390,000 gallons of gasoline”
Ralph Lauren
 “Making labels more sustainable by switching to a polyester
made from recycled water bottles, diverted around 9 million
water bottles from landfills each year” Target
Examples of Green Marketing
(cont.)
 “2 billion water bottles recycled in material used in Nike Brand
apparel product since FY10 … equivalent to covering over 2,000 soccer
fields” Nike
 “Adidas has used more than 2M yards of DryDye fabric, saving 50
million liters of H2O, or 20 Olympic-sized swimming pools” Adidas
 “A program evaluation from the International Center for Research on
Women found that GAP PACE is changing women’s lives, with 1.5 times
as many women saying they felt more confident in their ability to
accomplish tasks at work and at home and nearly 50% more women
reporting a higher level of self-esteem after they participated in the
program” GAP
How Can You Prepare
Can Suppliers Meet Retailers’ Rising
Sustainability Expectations
• Khol’s VP of Corporate Sustainability sees a clear segmentation
among suppliers & their approach to sustainability
– “our vendors fall into 3 buckets” – John Fojut
• They either consider (sustainability) part of their core
values
• They see it as something that gives them a competitive
advantage
• They see it as something they have to comply with
Can Suppliers Meet Retailers’ Rising
Sustainability Expectations
• A positive attitude – rooted in the realization that improved
environmental & social performance can help make any business
smarter, stronger, and more profitable
– Excellent foundation for future growth
– Long term viability depends on continuous improvement &
innovation which includes sustainability
– Shifting from a compliance perspective to this can actually add
value to my business
• Many of your client’s are adopting sustainability as a corporate
directive
– What category will you fall into? Wait-and-see or act now and
get ahead of the curve?
Act Now or Wait and See?
Which are You?
• Despite mounting evidence that commitment to sustainability is
deepening & accelerating in the retail world, many suppliers have
been slow to out of shift neutral gear
• Some adopted the “wait-and-see” holding pattern
• reasoning that “once our customers sort out these requests,
initiatives and standards, then we’ll start moving”
• Others made no secret of their plans to do as little as possible
• reasoning they assumed sustainability would fade in importance
• “we get a different buyer every few years; the next one
probably won’t care about this”
• This is just another fad; retailers won’t care about this next year
Act Now or Wait and See?
A simple test to reveal whether the wait-and-see approach is
right for you.
To assess the likelihood that retailers/brands will stop caring, lets
ask 3 simple questions:
1. Is the customer of tomorrow likely to care more or care less
about sustainability than the customer of today?
2. Are product contents and manufacturing locations likely to
be more visible or less visible to retailers and the public 10
years from now?
3. Are costs of essential inputs like energy, clean water, and raw
materials likely to increase or decrease for the foreseeable
future?
Act Now
1.Build a Team
2.Assess your top client’s and percentage of business coming from
each
3.Inquire about their supplier sustainability directives
1. How do you engage your suppliers?
2. Are you following a specific index?
3. How do you reward your compliant suppliers?
4. Do you have any educational / joint programs / resources for
your suppliers?
4.Start measuring and understanding your environmental impact
1. Energy
2. Water
3. Waste
4. Chemicals
5. Social
Act Now
5.Put procedures in place to manage data
6.Create goals once you have measured and began tracking
7.Ask your operational managers and directors what they have
already been doing (most likely your current operations are
already following sustainability index initiatives)
8.Create a Corporate Sustainability Report
9.Share with your clients
10.Start small and make progress over time – baby steps
11.Keep it simple
12.Engage a sustainability consulting firm – ask for help and
create the budget from operational savings
Wrap Up
Gracias, Buena suerte!!!
Gretchen Dudon, President Dudonova Group and Associate
Advisor with Walter Wilhelm and Advisors
gretchen@dudonova.com
+1 303.589.8760
Thanks…