Historically, FMCG companies’ green initiatives focused mostly on public relations.  Few companies were involved in actually promoting and implementing programs.  Green initiatives were presented most often as part of a strategic vision, with clear tactical goals taking a back seat.

To save the planet, companies have been told to reduce energy consumption and waste and to reevaluate product design.  The market is saying, what is good for the environment is also good for the brand.  Companies are employing a number of conventional and unconventional strategies to minimize the bad (e.g. energy consumption) and to maximize the good (e.g. ingredients).  FMCG companies are also spending more time researching their options and identifying appropriate green solutions.

The big chill

In the beverage industry, vending machines are an integrated part of the supply chain strategy, especially in more developed markets such as the U.S., Japan and the European Union.  Vending machines and corporate coolers provide “within arms reach” availability and merchandised products.  Manufacturers’ cooling strategies have always been focused on keeping the lights on and the compressor running around the clock in order to increase sales potential.

Unfortunately, conventional coolers and vending machines consume significant amounts of energy as they rely on inefficient compressors and light bulbs.  With increased pressure on companies to act, companies such as Coca-Cola, Pepsi and McDonalds are taking action.

Coca-Cola is currently spending $40 million USD to research next generation refrigeration technologies.  Current research is focusing on reducing the energy consumption of compressors and light bulbs as well as developing greener vending technology.  The company unveiled a hydrofluorocarbon-free (HFC) vending machine used at the 2008 Summer Olympics in Beijing.  Coca-Cola plans by 2010 to have 100,000 HFC-free refrigerators and vending machines operating around the world.

Consolidation

Transportation systems are another area that is currently undergoing changes.  Fierce competition and a traditional go-it-alone mentality have kept FMCG companies from collaborating.  However, higher oil prices and the “green wave” are breaking down these barriers.

One example is in load consolidation.  Load consolidation aims to maximize the space used for shipments and transport of goods.  This system consolidates loads of manufacturers’ products that would have otherwise been shipped at less than truck load (LTL).

Solution providers, such as CaseStack, ship the products of manufacturers by combining many separate deliveries heading to the same distribution center.  When the distribution center receives the order, they calculate the capacity, weight and stackability of products. The loads are then consolidated and transported to the distribution center.  Some carrier initiatives use advanced algorithmic technology to do this.  This allows FMCG companies to significantly reduce transport cost, especially for companies where seasonality is a major factor.

By eliminating LTL, companies also reduce “shipping air”. Shipping air is a concept referring to wasted space during transportation.  This could significantly contribute to limiting carbon emissions by reducing the number of ships and trucks needed for transporting goods.

Working with partners and critics

For FMCG companies it is increasing important to manage the flow of materials from the supplier all the way to the end consumer.  Companies are starting to take a more holistic approach through implementing green sourcing, procurement and certification programs.  By following an end-to-end approach, companies are getting more involved in the life cycle of the product.

For example, multinational SC Johnson created Greenlist, a raw material classification system.  Greenlist classifies raw materials according to their environmental and health impacts and characteristics.  The system also creates a comparison table with other similar raw materials.  The system gives each ingredient a Greenlist score and is then made available to SC Johnson laboratories around the world.  The company shares the system with suppliers, who are encouraged to use the ingredients that score high on the list.  Suppliers are currently using the tool to develop and market new products.  In the process, they are greening the supply chain.

In addition to encouraging partners to adopt green initiatives, some companies are implementing a rigorous certification process for their products.  Historically, self certification was common.  However, this received criticism from activist groups about a lack of transparency.  Now, companies such as Starbucks, are employing external auditors to track and monitor compliance and ensure improved performance against environmental standards.  Certification focuses on the environmental life stages of the product including energy and water consumption.  It furthermore tracks each stage of the product life cycle, including design, transport, manufacturing and disposal.  Suppliers are advised how to adopt green practices and are scored according to the certification system.

Increasingly, FMCG companies are working with some of their biggest critics, including non-governmental organizations (NGOs) and international conservation groups in identifying green solutions.  For example, Starbucks formed a long-tem partnership with Conservation International to promote methods of coffee production that help conserve global biodiversity.  The criteria for the sourcing guidelines are based on the Conservation Principles for Coffee Production.  The guidelines were developed jointly by the Consumers Choice Council, Conservation International and a number of other key stakeholders with inputs from Starbucks.  Such initiatives have the added benefit of satisfying a growing consumer client base that values greener products and companies.

Making it work

Any successful green initiative requires leadership from the top.  In addition to leadership, such initiatives require substantial resources and funding.  The linkage between green initiatives and a company’s vision and goals must be communicated to all managers and employees.  The mutual benefits to the company and the environment should be clear.  In addition, technology is playing an important role, such as in reducing energy consumption and allowing companies to consolidate loads.  Successful companies have shown a willingness to collaborate with all stakeholders, including critics.   A transparent collaborative process in the end will benefit the environment and also the bottom-line.

Communicate the message – It all starts at the top. Communicate the green vision and actions plans to all in the organization.  Have a clear public relations agenda and don’t shy away from your critics. Work with all stakeholders.

Look at the whole supply chain – talk to your partners and suppliers and get an understanding of their processes and systems. What are they doing better or worse than you?  What can you learn from them and how can you help?

Understand the returns – have a look at packaging, equipment, waste, and product returns. What happens to all of this?  What can your organization do to make the reverse logistics greener?

Reward ideas - focus on employees, suppliers and other partners. Develop clear plans to implement and reward new initiatives.

Take action – when things go wrong take action. Remember it is a process and don’t expect immediate results. Don’t focus too much on short term gain and keep the bigger picture in mind.

Unfortunately, conventional coolers and vending machines consume significant amounts of energy as they rely on inefficient compressors and light bulbs. With increased pressure on companies to act, companies such as Coca-Cola, Pepsi and McDonalds are taking action.

Coca-Cola is currently spending $40 million USD to research next generation refrigeration technologies. Current research is focusing on reducing the energy consumption of compressors and light bulbs as well as developing greener vending technology. The company unveiled a hydrofluorocarbon-free (HFC) vending machine used at the 2008 Summer Olympics in Beijing. Coca-Cola plans by 2010 to have 100,000 HFC-free refrigerators and vending machines operating around the world.

Reverse logistics is increasingly becoming a factor for manufacturers and customers. Reverse logistics can be defined as the flow of purchased products back to the supply chain for recycling, replacement or disposal. Some of the benefits of a well planned reverse logistical process are:

Reducing energy or fuel cost. A better network distribution design will reduce energy cost, and provide savings to all on the supply chain network. Furthermore, energy efficient assets (e.g. new environmentally friendly bottle coolers) will not only save costs for customers, but will also have a positive impact on the environment.

Improved packaging design. Improved packaging and design can reduce transportation cost and reduce waste. Improved packaging and an effective reverse logistics design will increase recycling and reduce the need for landfills. It can furthermore provide opportunities for the reuse of products and packaging (e.g. returnable bottles).

Less expired products. An improved system will furthermore reduce expired products and save money for both manufacturer and customer.

Competitive edge. A more effective and greener reverse logistics process can provide the organization with a competitive edge in the market, and lead to improved brand loyalty and brand recognition.

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