As supply chain decision-makers urgently turn their focus toward sustainability, they are looking at opportunities to reduce CO2 emissions through initiatives such as renewable energy, transportation optimization, IoT (internet of Things), and more. But have you considered how wood pallet and packaging recycling can make a difference for your sustainability aspirations?
The funny thing about pallets, like other things in life, is that if you aren’t aware of them, they are easy to overlook. In the United States, there are 2 billion of them hiding in plain sight. If we assume 50 lbs of wood per pallet, that amount translates into 100 billion pounds of wood, which sequesters roughly 45 to 50 billion pounds of carbon. We will return to the CO2 reduction benefits of wood pallet and container reuse and recycling in the next post.
Once people become aware of pallets, however, some folks are surprised to realize that pallets are on the job almost everywhere in supply chains from inbound material at the production plant to supporting unit loads arriving at the retail outlet.
As the National Wood Pallet & Container Association states, “Pallets Move the World®”. According to one report, around 94% of industrial and consumer goods in the United States travel on a pallet at some point in their supply chain journey from producer to distribution location to end customer.
The MH1-2016 standard defines the pallet as a “portable, horizontal, rigid, composite platform used as (a) base for assembling, storing, stacking, handling and transporting goods as a unit load; often equipped with (a) superstructure.” When products are stacked on top of a pallet, the combination of goods and a pallet is known as a unit load.
The mechanized handling of materials in unit loads offers many benefits versus the manual handling of goods. This practice helps protect sensitive products from damage associated with “touch labor” or manually repositioning each box, for example. The pallet also protects products during interaction with material handling equipment such as forklifts, conveyors, pallet storage racks and automated storage and retrieval systems. Palletized unit loads can be stored more efficiently than unpalletized goods in most storage systems or through the stacking of unit loads. Palletization also dramatically increases the speed of loading and unloading versus floor loaded or unpalletized goods, and through the avoidance of manual handling, improves workplace safety.
Pallets or wood packaging may be used for a single supply chain link or to move goods through multiple links. For example, plywood orchard bins move fresh tree fruit to the packing shed where it is packed and palletized onto a wood pallet. The bin is reused in the orchard, while the pallet is employed for delivery of packaged fruit to a grocery distribution center, and then perhaps as the base for a full unit load or a mixed pallet load assembled for delivery to the retail outlet. In a mainframe computer supply chain, on the other hand, components may arrive palletized, with the sensitive finished product then shipped in a custom wood container to the customer location.
In part 2, we will take a look at the life cycle and recycling of wood packaging and the positive impact that recycling has on carbon emissions.
The buck stops at the top when it comes to corporate leadership and environmental responsibility. Sustainability has become a core element of corporate strategy, and the creation of effective policies and programs plays a crucial role in supporting it. From the time the term was coined over 25 years ago, the Triple Bottom Line of Planet (environmental performance), People (social performance) and Profit (economic performance) has increasingly found its way into the lexicon of leadership.
Not that many years ago, recycling and zero waste initiatives were viewed by executives as convenient proxies for sustainability. Having an active recycling program was offered as proof of a company’s commitment to the environment. Now, however, companies are grappling with a broader view of sustainability that also focuses on carbon footprint, water conservation, plastic pollution, and other environmental priorities.
Business leaders must also be mindful of greenwashing claims and the reputational damage it can cause, as well as address the challenges of achieving high recycling rates in increasingly complex supply chains. It is well worth the effort, however. An emphasis on zero waste and sustainability can help deliver positive economic outcomes.
Recycling policy, like other corporate policies, provides guidance, consistency, accountability, and clarity on how an organization operates. While policy speaks to guiding principles, programs are interventions designed to help achieve policy goals. For instance, a company may have a zero-waste policy and institute programs to support it such as facility recycling or composting initiatives.
In Sony’s recycling policy, for example, the company states that it “subscribes to the principle of individual producer responsibility (IPR), that is, the idea that a producer bears responsibility for its products over their entire life cycle.” In order to meet this commitment, the company is “focused on recycling-oriented product design, collection and recycling used products, and building global recycling systems that suit the needs of individual countries and regions.”
The development of a recycling program typically stems from the creation of a policy, followed by nominating a project manager and assembling a team. One of the early steps in the process is to conduct a detailed waste audit to clarify the types and volumes of materials involved. From there, a recycling plan can be created. After launching the program, it should be monitored to measure its success in diverting materials from the trash. And by celebrating the program’s accomplishments, the company can help build employee engagement and reinforce behaviors that support the recycling effort. Recycling@Work offers a 10-step action plan for implementing a workplace recycling program.
The term “greenwashing” refers to the practice of making unsubstantiated or misleading environmental claims by a company about its products, services, or operations. Another definition refers to it as a situation when a company invests more in marketing itself as environmentally friendly than on minimizing its environmental impact. Customers and employees alike are becoming increasingly sensitive to greenwashing. It can damage brands and employee engagement. It is also against the law.
In 2019, for instance, Miami Beach-based retailer Truly Organic Inc. (Truly Organic) and its founder and CEO were ordered to pay $1.76 million to settle a Federal Trade Commission complaint alleging that their nationally marketed bath and beauty products are neither “100% organic” nor “certified organic” by the U.S. Department of Agriculture (USDA). The company advertised its products as vegan, even though certain products contain non-vegan ingredients like honey and lactose, according to the complaint.
Organizations can guard against greenwashing claims by taking safeguards such as the following:
Corporate recycling programs that concentrate on a facility approach can successfully divert recyclable materials but find themselves hard-pressed to address the challenges of nonrecyclable or difficult-to-recycle materials. Companies are coming to recognize that in order to achieve zero waste, a supply chain approach to recycling may be required. Through aligning procurement with the recycling initiative, companies can make more powerful change. They can leverage their buying power to request packaging that is easily recyclable, for example, as well as packaging that is made from recycled material. Having a corporate pallet policy and working with suppliers, for instance, can help companies avoid accumulating and dealing with broken or odd-sized pallets.
Recycling is also an important consideration from the customer perspective. As in the case of Sony, mentioned above, companies are increasingly mindful of the recycling implications of their packaging and products for customers. Ease of recycling is part of overall customer engagement with a product and can no longer be ignored. According to the 2019 EcoFocus Trend Survey, 71% of consumers overall, and 76% of Millennials, said they feel positive towards companies that use recyclable packaging.
A Triple Bottom Line approach is the right thing to do, and it is also good business. Attention to recycling and sustainability resonates with many customers and helps improve brand image. It also strikes a positive chord with employees. According to the Deloitte Millennial Survey 2019, younger workers “show deeper loyalty to employers who boldly tackle the issues that resonate with them most, such as protecting the environment.”
As for the relationship between sustainability and profitability, Bank of America Merrill Lynch found in 2018 that companies with a better ESG (Environmental, Social and Governance) record than their peers delivered higher three-year returns, had a greater likelihood of becoming high-quality stocks and were less likely to experience large price declines or bankruptcy.
As the Triple Bottom Line approach becomes more pervasive, sustainability concerns are becoming integral to corporate strategy. Corporate leaders are embracing the importance of recycling and zero waste initiatives within the broader context of their corporate sustainability aspirations.
Corporations are under more significant pressure than ever before as we collectively strive for a more sustainable future. They increasingly recognize that much of the work to be done extends far beyond the four walls of factories and retail locations. We have learned that procurement decisions made locally can have far-reaching sustainability impacts involving distant suppliers or downstream, directly contributing to product end of life waste streams. According to CDP’s Global Supply Chain Report 2019, companies generate 5.5 times more emissions throughout their supply chain than they make from internal operations.
We now know that the best way to ensure sustainability is to take a supply chain approach. Our perspective must consider the sustainability impacts for input suppliers as well as for customers and society.
Supply chain sustainability has been described as “a holistic view of supply chain processes, logistics, and technologies that address the environmental, social, economic, and legal aspects of a supply chain’s components.” SCS is mindful of variables such as solid waste generation, carbon footprint, pollution, deforestation, and the welfare of workers. Companies now recognize that an SCS emphasis is not only good for the planet but also essential for building positive brand awareness and improving longterm profitability.
Corporate sustainability efforts generally predated supply chain initiatives. The latter approach has become more important in recent decades. Company-specific sustainability practices date back to the 18th and 19th Centuries. In 1853, Sir Titus Salt, a U.K. industrialist, created a model village for his mill workers called Saltaire. Likewise, the Cadbury and Rowntree dynasties of that time were involved in similar schemes, providing parks, hospitals, museums for their factory employees.
By the 1980s, corporate social responsibility had gradually become part of mainstream corporate strategy, with the introduction of transparency and traceability considerations, especially regarding labor rights. In the 1990s, the importance of taking a broader perspective continued to grow. Several examples of international corporate exploitation surfaced, requiring businesses to address sustainability through a supply chain lens.
The 1990s and beyond also saw the introduction of third party certification and fair trade schemes to help companies make more informed sustainability decisions. The Forestry Stewardship Council was created in 1990, and the Marine Stewardship Council was launched in 1997. Such groups brought together non-governmental organizations and businesses alike to establish responsible resource management practices.
SCS management continues to evolve from the aspirational to the quantitative. Companies increasingly look to achieve sustainability metrics such as “Zero to Landfill” as well as “Net Zero” CO2 reductions. Ongoing advances in technology have made it easier for participants to achieve transparency in their supply chains as well as to track their progress toward meeting quantifiable targets.
Companies have developed several practices aimed at improving their SCS performance. Popular approaches, as outlined in Introduction of Green Supply Chain Management, include the following:
Green procurement – People call it “the power of the purse.” Companies can boost a supply chain’s overall sustainability by purchasing materials and components that have positive characteristics such as renewability, reusability, and recyclability, when purchased from vendors that meet required sustainability requirements.
Green manufacturing – The implementation of SCS accountability measures and practices help mitigate the harmful effects of manufacturing activity.
Product design improvements – Products can be designed to use less material, to use recycled content, or to last longer. According to the European Commission, nearly 80% of a product’s environmental impact can be improved through eco-design.
Green transportation and reverse logistics – According to the U.S. Energy Information Administration, transportation is the single largest source of Co2 emissions, generating 1.9 billion tons annually. As such, initiatives to reduce emissions through electric vehicles or renewable fuels, as well as improved freight optimization, can make a difference. Effective reverse logistics has also become increasingly important as we look to increase reuse and recovery of products and materials in support of a circular economy.
Renewable energy and biofuels – Supply chains rely heavily on fossil fuel, which is the leading cause of global warming and greenhouse gas emissions. A transition to renewable energy and biofuels can help propel companies toward their environmental targets.
Industries best suited to SCS practices are those that can most easily transition from the “take-make-waste” model so prevalent today. Every sector, however, can reduce its environmental impact through the implementation of sustainable practices, as outlined in the section above. Generally speaking, supply chains that utilize renewable resources are best suited, such as sustainable forestry and agricultural practices, for example. The exploitation of non-renewable resources poses a significant challenge to SCS and requires the implementation of mechanisms such as sharing, reuse, refurbishment, and ultimately material recovery to promote sustainability.
Top SCS performers are found in several different industries. For example, Supply Chain Digital’s Top 10 largest sustainable supply chains worldwide includes Accenture (professional services), Apple (technology), Coca Cola (food and beverage), Rolls-Royce (manufacturing), Tokyo Gas (energy), Sky (entertainment and communications), NRG Energy (energy), Microsoft (technology), Sodexo (food service), and Taiwan Semiconductor (technology). Approaches common to successful supply chains include transitioning to renewable energy, eco-friendly product design, and enlightened procurement practices that help improve overall SCS.
And speaking of enlightened procurement practices, solid wood packaging selection helps support sustainability in several ways. It is sourced from renewable forests and sequesters carbon, while pallets and packaging are in use. Additionally, it requires less energy to produce than most commonly-used building materials and possesses a negative carbon footprint. Another bonus is that wood packaging is typically made from less popular low-grade lumber, thus ensuring full utilization of harvested trees. Wood pallets are widely reused and refurbished, and recovered components are used to build new pallets. Meanwhile, damaged material is ground into wood fiber material to serve a variety of end-use markets. Overall, wood pallets enjoy an enviable recycling rate of 95%.
The SCS opportunity for wood packaging continues to improve as technology offers new opportunities. Technologies aimed at reducing empty freight miles are helping supply chains reduce the cost and greenhouse gas impacts of empty pallet re-positioning. Additionally, the increasing development of IoT technologies for tracking promises to unlock novel insights into supply chain processes and fresh opportunities to make further SCS gains.