The sustainability strategy

EXECUTIVE SUMMARY

With globalization, technological changes, economic drivers, and social and environmental mandates, the global business environment is less predictable and more challenging than it was even a decade ago. Customers, stakeholders, and society expect and demand superior products, services, and operations with less waste, reduced impacts on health, safety, and the environment, and enhanced corporate responsibilities for the decisions, technologies, products, processes, and activities of every facet of the business enterprise.

In the words of Rainey (2006) ‘Today, businesses must thoroughly analyze the global business environment to gain a firm understanding of the opportunities and challenges it presents, and develop aggressive strategies for improving every aspect of their enterprises. To do this, corporations must have in place a comprehensive and integrated strategic management framework for formulating and implementing business strategies, programs, and actions based on considerations that include the entire business environment.’

Such a framework requires the capability to integrate both internal systems and processes and those of external business entities, including customers, stakeholders, and supply networks.

According to Siemens Corporate Social Responsibility Report 2002, Berlin and Munich: “Siemens AG, 2002 Sustainable success is our number one priority. Our activities focus on meeting the needs of customers and creating value for our shareholders and employees. Our innovations – generated through our own laboratories and in cooperation with customers, business partners and universities – are our greatest strengths.”

Woolworths Limited is an Australian public corporation with annual sales of over 38 billion. The company is recognized as one of the top five retail companies in the world. The company is committed to wards improvement of its environment footprint through a proper sustainability strategy. The sustainability strategy of the company addresses many of the significant issues related with environment, public, staff, and economic responsibilities of business. This sustainability strategy of Woolworths has been discussed in detail along with its benefits and limitations in the report.

INTRODUCTION

The retail industry connects with every person in some way. To remain competitive and profitable the industry is constantly required to adapt to changing nature of local as well as that of global marketplace. Sustainability is not an easy task as it involves a great deal of complexity related with the issues involved. It is important to have an effective management system for managing environmental, social and economic performance as it is fundamental for a sustainable development of any company or industry as a whole.

Further, identifying, measuring, and reporting social and environmental impacts cannot begin until the board of directors and CEO are committed to improved sustainability management. Often it is through a mission statement or the development and articulation of a corporate sustainability strategy that the board and CEO set the tone at the top. It is then necessary to drive this commitment through the organization by implementing the various systems for identifying and measuring impacts, stakeholder engagement, product design, product costing, capital budgeting, information management, and performance evaluation.

Epstein, Mark J. (2008) argued that effective and consistent leadership provides an alignment between environmentally and socially responsive activities and corporate goals and provides internal credibility to promote progress toward improved social and environmental management within business units and organizational functions.

Woolworths CEO Simon Susman says, “We know that sustainable growth can only be achieved through paying greater attention to the world around us than has been the case in the past. The links between economic growth, transformation, social development, the environment and climate change must create a better world for everyone.”

Purpose and Scope

The report aims at making a critical analysis of Woolworths Sustainability Strategy. The strategy is analyzed on the basis of business responsibility towards social, economic and environmental issues. The report will present a view of Woolworth’s sustainability along with the key introductions in company’s new plan of sustainability which was released recently. Woolworth was praised for its sustainability strategy but recently it has also been criticized of working against its own strategy. This aspect is also discussed in the report.

Methodology

The case study analysis is undertaken to form an opinion about the issue. Secondary source of information is mainly used to analyze the sustainability strategy of Woolworths’ and its effect of society, environment and economic areas. The data has been collected from various journals, newspapers and website of Woolworths’. Various concepts and theories will be applied to the available data in order to present a clear picture of the company’s strategy.

BACKGROUND

Woolworths Limited stretches across food and grocery, liquor, petrol, general merchandise and consumer electronics. The company is a major investor in Australia and New Zealand communities. Woolsworth is listed on the Australian Stock Exchange and employ more than 191,000 people with approximately 380,000 shareholders. The company claims of being conscious of its responsibilities towards it stakeholders as its operations impact its own people, customers, communities, shareholders, supply chain and the environment.

Woolworths is well known as the ‘fresh food people’ in Australia and was established in 1924. It was the second largest employer in Australia and Corporate Social Responsibility (CSR) was an integral part of its corporate agenda. Recently Woolworths’ announced its new sustainability strategy. Under such strategy Woolsworth also opened its first Green Store in 2007 in Sydney. In this store innovative technologies are used to minimize the use of energy and water, and reduce waste generation. Through these stores Woolsworth aims at reducing the environmental impact caused by the company’s retail operations.

According to Simon Susman (Chief Executive, Woolworths) “We have used the phrase the ‘Good business journey’ because this truly is a journey and there are no easy solutions. We are committed to meeting the 5 year targets we have set and to do this, we will be exploring new ways of doing things in many areas. Reaching these destinations will require significant behavioural and cultural change. If we can take our customers and suppliers along with us, this journey will have an even more meaningful impact on the wide range of transformational, social and environmental challenges that face South Africa,”

Models and Frameworks

The objective of ‘sustainability’ is the maintenance or restoration of a desired state that has already existed. The promotion of sustainability is an active process of engaging society. Firms need to become involved in this process because, collectively, they are now so powerful that communities and governments often do not act sufficiently strongly to achieve sustainability if there is active or perceived opposition from the private sector. So sustainability-promoting firms need to go beyond simply reducing their own negative environmental, social or economic impacts. They need to produce products that help society to become sustainable and they also need to use their influence to encourage society-wide action to achieve sustainability. This approach will be taken as the basis of our analysis of Woolworths’ sustainability strategy.

Capabilities Framework

According to Turner and Crawford (1998) ‘To maximize organizational success, in both the short and the long term, firms need the capabilities to deliver results effectively. They also need to be able to identify viable and desirable future directions. And in the face of the enthusiasm for the new, they still need to retain valuable attributes and resources (within the firm and in society/ the environment). To achieve these three goals firms need special capabilities.

Turner and Crawford gave a framework of such capabilities which is depicted in Figure 1 and will be considered while discussing the strategy of Woolswoths.

Sustainability Implementation Framework

Another framework to be used in the study is the Sustainability Implementation Framework suggested by Diesendorf (1998) that comprises of following three levels:

• Level 0, comprising the broad ethical principles
• Level 1, comprising broad goals arising from these principles
• Level 2, comprising measurable objectives or indicators

The above two models will be used to analyze the sustainability strategy of Woolworths.

ANALYSIS OF SUSTANABILITY STRATEGY OF WOOLSWORTHS

Woolworths is aware of its responsibility towards stakeholders and thus employed corporate social responsibility at the core of its business strategy. Business of the company has social, economic and environmental impacts and thus Woolworths decided to take a range of initiatives to provide a quality of life to its customers, the workforce and the society at large. Along with such social initiatives Woolworths took up several initiatives to be a responsible retailer as well. Woolworths made sure that its initiative related with Corporate Social Responsibility (CSR) must comprise of initiates towards the betterment of environment, employees, shareholders, supply networks and customers. Some important components in relation to sustainability strategy of Woolworths are discussed as follows:

• Accelerating Transformation
• Driving Social Development
• Enhancing the Environmental focus
• Addressing Climate Change
• Providing Quality and Innovation in products and Services

Accelerating Transformation

Woolworths aims at accelerating transformation of its products, stores and processes. The company is committed to transformation across the business and has embarked upon a company-wide program so as to make sure that transformation becomes an entrenched way of doing business all over the company. Under this approach company will transform the way of doing business across all aspects and also will work in partnership with its suppliers, public sector, and franchise partners. Woolworths will accelerate its retail skills and for achieving this target various straining initiatives have been undertaken by the company. These initiatives include accreditation of Woolworths courses and the establishment of provincial Woolworths learning centers. Such training initiatives will prepare a pipeline of skilled employees which can be harnesses in case of any shortage at senior leadership levels in the organization. Under the sustainability strategy Woolworths is also aimed at meeting employment equity targets. Also Woolworths aim at focusing at groups such as madumbi farmers of KwaZulu-Natal and the Beaufort West Hydroponics Project to increase the number of core products sourced from BEE supplier partners.

According to the website of company “In addition to our own broad BEE Employee Share Ownership Scheme, we will focus on advancing skills development and pushing our ‘South Africa first’ approach even harder.”

Woolworths also recognized its economic responsibility and have taken initiatives to refine its brand position with significant investment in price, merchandise range, and quality. This investment will continue to deliver gains to shareholders of the company.

Driving Social Development

Under its sustainable strategy Woolworths is committed towards social development and its first focus is on South Africa in this context.

As stated on company’s website-“We’ll work harder to drive social development by expanding the existing initiatives of the Woolworths Trust such as EduPlant and MySchool, and by introducing a programme through our stores to improve the plight of orphans and other vulnerable children.”

Woolworths also plans an effective role in providing employment and giving the community opportunities to expand and grow. The company employs nearly 191,000 people in its retail business. The company claims of employing people based upon their skills, qualifications and aptitude with irrespective of gender, race, religion, marital status or ethnic origin. Also, it employs women in business and provides them flexible working patterns and training opportunities. Health and Safety policy is also undertaken and is well communicated to managers in the organization along with an efficient system of managing and reporting of such a health and safety culture.

Woolworths is continuously making a difference in South African Schools. According to the financial results of the company for a period of July 2007 to June 2008, Woolworths has announced a R18 million contribution to MySchool, including MyPlanet and MyVillage in South Africa. The company aims at increasing it social contributions to more than R300m per year.

Woolworths also entered into partnerships with charity groups and undertook franchising programs. It supported charities like Foodbank, Salvation Army, Canteen, Beyond Blue, Juvenile Diabetes Research Foundation, etc. Woolworths also started many initiatives to raise awareness about the plight of farming families hit by drought of Australia.

The introduction of reusable bags by the company supported new enterprises that were required to produce fabric bags for the company.

Enhancing Environmental Focus

Another key component of Woolworths’ Sustainability Strategy is giving full importance to environmental issues. Environmental sustainability was a key aspect of Woolworths’ CSR approach. Woolworths’ is in retail business and its operations affect the environment in many ways such as waste production, high energy and fuel consumption and greenhouse gas emissions. Woolworths implemented a long term strategy to combat issues concerning the impact of the company’s operations on the environment.

Woolworths concentrated on refrigeration, lighting and temperature control to reduce the amount of energy consumption in its operations. Installation of automated after-hours blinds on open refrigeration cabinets, lighting and air conditioning made operations more energy efficient. Woolworths have decided to make all of its new stores Green Stores and adopt energy efficient guidelines in all such stores. Through these initiatives company will be able to reduce the emission of Carbon-di-oxide.

In the strategy company aims at reducing the use of harmful pesticides and chemicals and increasing organic food and cloth offering. Also, company introduced a new packaging scheme to develop reusable bags which an effort towards saving scarce natural resources. The company targets at reducing the amount of plastic and cardboard in the general waste to less than 1 percent by weight by year 2010.

Susman said “Water is one of South Africa’s scarcest natural resources and Woolworths is targeting a 30% reduction in water consumption and will develop a programme to encourage our suppliers to do the same.”

Woolworths also took several initiatives to save water in it stores. It plans to save at least 200 million liters of water by year 2010. Also, as a fuel saving initiative, Woolworths discarded vehicles that consumed more fuel. It outsourced the disposal of worn-out tires and batteries to third party experts and used grease traps at its truck cleaning centers to prevent oil and fuel waste from entering waste water system.

Addressing Climate Change

Woolworths planned to use B20 (20 percent bio fuel mix) bio-diesel for its entire fleet of trucks. This move was expected to reduce carbon emission by 11,500 tones per year. Also, company decided to use large number of small cars with LPG fuel across its car fleet. The carbon emission from the company’s fleet of 3100 cars is to be reduced by 30 percent by 2010 and that of trucks by 25 percent by the end of 2012 as compared to 2006. In addition to this initiative the company aims at cutting its electricity usage by 30% and removing conventional light bulbs from its shelves.

Chief Executive, Woolworths, Simon Susman stated “Woolworths will support carbon offsetting in as much as greening reduces carbon excess. We’ll do this by planting more trees at our MySchool schools, our Eduplant schools and our extensive Midrand campus grounds.

Providing Quality and Innovation

The very first component which formed the base of sustainability strategy was ‘innovation’. Woolworths aims at providing innovation in products, services and facilities provided by the company. The company views innovation as the base to introduce any product or service in market, finding more efficient and cheaper sources of supply, new store formats and process improvement to gain a reduction in cost. In this context while considering environment responsibility Woolworths concentrated on adopting a ‘Green Stores’ strategy where all the new stores of company’s would adopt energy efficient guidelines. At the same time Woolworths implemented several water saving initiatives at its stores. While choosing new sites for stores the company special consideration have been given to investigate how a store will fit in the state and local government area. Sufficient market research is being done before opening up any store. An example of innovative practice is a number of modifications being made in store design to address the community interest in Mullumbimby in New South Wales. Company has moved the loading dock away from the car parking area to improve safety for shoppers and making changes to the façade so that the store will fit in better with the streetscape.

Woolworths introduced a health kids program named ‘Fresh Food Kids’. This program helps in increasing the consumption of fresh fruits and vegetables in kids. An interactive and educational website has also been launched under this step. There are many successful applicants to the program who have regarded it a success in developing and encouraging eating health and fresh food among kids.

Woolworths aims at undertaking innovation through efficiency and enhancing quality in its business processes. It has made a substantial commitment to its Project Refresh which refers to a framework in order to improve business performance and business restructuring programs through end-to end supply chain improvement.

APPLYING VARIOUS FRAMEWORKS TO SUSTAINABILITY STRATEGY OF WOOLWORTHS

Now we will apply the models discussed in section 2 to analyze the performance Woolworths sustainability strategy.

Capabilities Framework

Path-finding

Path-finding refers to developing, crystallizing and articulating new directions, strategies, purposes and values for the organization. Woolworths studied the environment in which the company is operating. It gave due importance to the areas and people affected by its operations and business. Through a continuous study the company realized that it is important to act responsibly towards the stakeholders of the company. So, it designed and developed a strategy committed towards benefit of customers, shareholders, environment, climate and communities. Then company placed the Corporate Social Responsibility at the base of the project so that there is no divergence from this basic objective through the implementation of the strategy of sustainable growth. The directions decided to achieve the objectives of this strategy was guided by the principles of innovation, quality, transformation, environment and climate focus and social improvement.

Engagement

Getting people throughout the organization informed, committed and motivated to act to achieve the organization’s purpose and future direction refers to engagement. Woolworths’ strategy involved people of the organization to achieve the desired target. The strategy at each step emphasizes on training of employees and workforce of the company so as to understand the need of new initiatives and learn to perform under new objectives. Woolworths has launched an Employee Matching Award (EMA) to support issues that are of particular, personal concern to its staff members and encourage the workforce of the company to help make a positive contribution to worthy causes.

However, there is no involvement of customers and other stakeholders in strategy making process. No feedback or suggestions are taken while designing a policy which can impact the lives of general public.

Development

Woolworths have been engaged in developing its resources whether physical, technological or personnel. Redesigning of stores has been initiated as a strategic move to reduce waste and make them energy efficient. Personnel at all levels are being provided training to perform well in changed environments and with new standards. Also, company has changed its fleet of trucks and cars to reduce emission and fuel consumption.

Performance Management

There is no set well established management system to assess the performance at each step of implementation of the strategy. In such a strategy where so many changes and new operations have been introduced there is a need of a detailed and efficient performance management system also.

Identification

Woolworths strategy does not give a clear view of which of the organization’s or society’s current attributes, strategies will be retained and which will be changed under the plan of sustainability.

Marketing and Selling

The sustainability strategy of Woolworths lacks a detailed marketing plan. Although, understanding the market and innovating products as per the needs and expectations of customers is surely present in the plan but the strategy to enter new markets and tap existing untapped markets does not find any place in the sustainability of the company.

Sustainability Implementation Strategy

Applying the Sustainability Implementation Frameworks as suggested by Diesendorf the strategy of Woolworths is now explained. There are three levels discussed in this framework of sustainability development. These levels along with their presence in the sustainability strategy of Woolworths are discussed as follows:

Level 0

In this level the broad principles considered are generally ethical requirements. By ethics, we mean pertaining to questions of right or wrong, or good or bad. In the past, consideration of values and ethics was not popular in the business world. The ethical principles described under this framework are respect nature, respect humans and be generous in our respect.

According to Diesendorf (2000) ‘Those who are uncomfortable with starting from an ethical position might consider that the above ethical principles are essential for the long term viability of the economy and society. Therefore, they could be seen as enlightened self-interest on the part of individuals and corporations planning for a long term future.’

In the strategy of Woolworths all the three principles are very well taken care off. There is perfect consideration for nature in the strategy and also humans whether employees, customers or shareholders all are respected and given due consideration while taking any step towards achievement of strategic goals.

Level 1

At Level 1, the broad goals to conserve or enhance inter- and intragenerational equity, human well-being, biodiversity and ecological integrity are widely supported.

Diesendorf added the ‘conservation of cultural diversity’ here as a social analogue to the ‘conservation of biodiversity’.

According to Diesendorf ‘The goal of inter-generational equity is the basic thrust of the Brundtland definition of sustainable development.’ If we accept this goal, then it can be argued that we must also accept the need for intra-generational (that is, social) equity. It should be recalled that, in this chapter, ‘equity’ does not mean ‘equality’, but rather ‘equal opportunity’. This goal is very well taken care of in Woolworths strategy. The company ensures of employing people in the organization irrespective of their cast, race, gender, cultural background and strictly on the basis of their educational qualification and experience.

The ‘conservation of natural capital’, widely used in some models of sustainability, has been replaced here by the ‘conservation of critical capital’, because the former overlaps strongly with ‘conservation of biodiversity and ecological integrity’ and, even where it does not, there are vast quantities of some forms of natural capital (for example, sand) which are not in urgent need of conservation. ‘Critical’ capital facilitates a focus on those forms of natural and human-made capital which are threatened with damage, destruction or dispersion (for example, phosphorus, archaeological sites). This feature does lack in the strategy of Woolworths.

Conservation of atmosphere and climate is not normally included as a sustainability goal. However, in view of the seriousness of the present threat and the fact that the potential effects of climate change impact on biodiversity, ecological integrity and human health, it has been listed explicitly here alongside critical capital. This goal have been given an important place in sustainability strategy of Woolworths as the retail giant aims at reducing the emission of carbon from its fleet of trucks and cars. Also, introduction of reusable bags in place of plastic bags proves that the company is committed to environmental and climate safety.

Level 2

This stage defines the standard criteria for sustainability indicators. This stage explains that such criteria should be measurable, relevant, simple to use and understand, reliable, reproducible, and timely for decision making. Hart (1998) states ‘Several authors suggest that sustainability indicators should, in addition, reflect something fundamental to the environmental, economic and social/cultural health of a community over generations.’

The sustainability strategy of Woolworths does include set targets which are represents in figures but there is no set measurable standards to judge and measure the achievements of the strategy.

RECOMMENDATIONS

From the analysis of sustainability strategy of Woolworths it is evident that despite of being a successful strategy with corporate social responsibility as the basis of its operations there are certain key areas where the process is lacking.

For the improvement of the strategic program certain recommendations have been discussed as follows:

• There should be a performance measurement and control system embedded in the strategy of sustainable growth. A proper assessment of performance at various stages and the regular feedback on the performance will help in removing any gaps in the level and efficiency decided for meeting objectives and actual achievement of such objectives.
• A system of feedback and suggestions from stakeholders should be designed. Such a feedback will help in improving the strategy and making the required changes as per the perception of general public about the initiatives taken by the company. It will ensure a fast and proper acceptance of the strategy by the stakeholders which is an essential element for the success of any strategy.
• There should be a proper system of informing stakeholders about the strategy. In the present plan no emphasis is given to communication of plans within and outside the organization. If the plans of the management are properly and efficiently communicated they are easily grasped by the concerned parties and makes it easier for the workforce to contribute towards the achievement of desired organizational objectives.
• Woolworths is also expected to introduce innovation in its products. There have been several innovative steps taken by the company to improve its processes’ and service to public. The company operates in a highly competitive environment of retail industry where the needs, demands and preferences of consumer changes very fast. To sustain in such an environment it is necessary to introduce innovative products also.

Conclusion

In the words of Simon Susman “The ‘Good business journey’ is a business imperative for Woolworths. Many aspects of it are linked together to generate a multiplier effect: reducing product miles by encouraging greater local sourcing we will open up opportunities for enterprise development and preferential procurement; reducing packaging will result in energy and paper savings thereby reducing the Woolworths carbon footprint.”

‘Corporate responsibility’ or ‘Sustainability’ is fundamental to any company’s responsibilities. At the same time it is also an opportunity for the company to establish its good image in front of its customers and shareholders. Thus, an integrated sustainability program as that of Woolworths is an important and successful method of managing environmental, economic as well as social risks. Moreover, such a strategy helps in identification of new opportunities, services, new products and new markets for expansion of business.

Woolworths program of sustainability is strongly influenced by the strategies of international retailers such as Wal-Mart, and Marks & Spencer. However unique to this approach is the placement of South African perspective on the issues related with Social responsibility along with a strong focus on transformation initiatives and environmental safeguard.

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Internet Source

• http://www.woolworthslimited.com
• http://www.woolworthslimited.com.au
• http://crreport08.woolworthslimited.com.au/environment.php
• Woolworths Holdings Limited (2006), Our Good business Journey, Woolworths the difference, http://www.woolworths.co.za/Caissa.asp?Page=ITB4_RHConText&Post=CO-Environment_Planet_KeyAreas, Accessed 22 November 2009.