Logistics: a Decentralized Approach

Manufacturing our products, shipping them to our distribution centers, and getting them to our customers on time and with the lowest possible miles traveled and least cost is a logistical challenge. Doing that while growing 51% is a logistical nightmare. Or an opportunity. We chose to look at it as a powerful opportunity to pursue a decentralized approach as the best way to reduce our environmental footprint.

Our first phase of changes will cut our delivery miles to retailers by 48% in 2009.

By the spring of 2008, we had gone about as far as we could to reduce our delivery-related greenhouse gas emissions. To make the much deeper cuts our company has committed to, we needed a paradigm shift. We also needed more manufacturing capability to accommodate our company’s growth.

To address these needs, we started by studying where our retailers are located and how they’re changing. As we become more active in the Food, Drug and Mass Merchandising channel, we must adapt to that sector’s different customer service requirements including shorter lead times and more frequent and smaller orders. Starting with our retailers, we looked back through the many layers of our logistical network that must serve them. We needed an appropriately located network of distribution centers, manufacturing facilities, raw material suppliers, bottle makers and box manufacturers. Geographic considerations feature prominently in our decision matrix every time we initiate a relationship with a new partner. This allows us to expand our decentralized approach and keep our miles travelled (and thus our emissions and our costs) down. Here’s where we stand:

• 2008: opened three new manufacturing facilities in Mississippi, Toronto and Washington; optimized use of the distribution center opened in Atlanta late in 2007.
• 2009: Will increase to five regionally based Distribution Centers close to our retailers. These new centers will be using more EPA certified Smartway carriers, further reducing emissions.
• 2009: Will have reduced the carbon footprint of shipments to our retail partners by 48% (normalized to growth). That equals an anticipated reduction to 283 average weighted miles traveled per order from 586 miles — an expected 30% savings in freight costs for the year. We focused particularly on reducing our outbound miles (distance from distribution center to retailer) because we have more than twice as many outbound miles as inbound miles (miles from manufacturer to distribution center). This means that in 2009 we will be able to deliver our product for the exact same carbon footprint (or less) as in 2008, even with continued growth.

Our numbers for 2008 show a different story. Our transport-related GHG emissions increased 27%, due to our growth. However, our emissions per ton of product shipped, the real measure of our emissions reduction strategy, remained essentially unchanged. Our switch to 2X concentrate laundry detergent (go/detergent) allowed us to deliver more of this product per truckload, helping cut our emissions. However, to invest in our longer-term move towards decentralization, we had to change the mix of transport modes delivering our product, resulting in some emission increases. Some of our new manufacturing facilities do not have viable rail options forcing us to increase our truck miles 44% and reduce our rail miles 53% in 2008. Truck travel has far higher greenhouse gas emissions per mile than rail travel. We are investigating short-haul rail options to try to increase our rail usage again. We will continue to solidify our commitment to decentralization and to lower costs and emissions by exploring pooling, multi-stop deliveries, and freight optimization, in addition to rail.

As the blue bars indicate, we increased our total greenhouse gas emissions in 2008 (expressed in metric tons). The orange line show that our greenhouse gas emissions per metric ton of product produced have remained roughly the same for the past three years.

The dramatic rise in fuel prices in the summer of 2008 hit many of our competitors with centralized manufacturing facilities hard while our decentralized approach insulated us somewhat from that pain. Despite the tremendous savings in both fuel and emissions that we will be achieving over the next few years, this change in approach is costly to us in other ways — requiring significant time, money and experience to manage.

Our Materials

We care about the full life cycle of our products. To ensure that we continue to improve the sustainability of our materials, we track selected performance measures relating to our total materials use and our recycled and renewable content. Our total materials use (excluding water) grew 28%. Our water use (which represents roughly 62% of our total materials by weight) stayed the same as in 2007, a tribute to our sales of 2X concentrate laundry detergent. Our use of recycled materials grew 34% while our renewable materials use (excluding water) increased by 40%.

Packaging

Our interest in sustainability doesn’t end once we’ve designed great products. We seek to wrap our products in packaging that is: durable; efficient; recyclable; made from the highest recycled content possible; innovative; and that uses minimal amounts of material. In 2008, we made improvements to our boxes, bottles, and LDPE wrap far in excess of the industry standards and are on track to make further improvements in 2009 in these areas and in replacing the poly-coating on our dish and laundry powder boxes as well as the boxes containing our fabric softener sheets. Over the longer term, we will be exploring dramatically different approaches to packaging our products to push the envelope on sustainability as far as we can.

Boxes: We found two major suppliers of corrugated cardboard boxes that are capable of providing us with 100% post-consumer recycled (PCR) content boxes at the same or lower cost as our previous boxes. We will be converting all of our boxes to this standard in 2009. These two companies have multiple locations near our manufacturing partners allowing us to reduce transportation-related costs and emissions as well.

• 2008 30% are 100% PCR content; rest are 30–40% PCR
• 2009 all will be 100% PCR content
• Industry Standard US: 30–40% PCR; Canada: 61% PCR

Bottles: We have developed a new supplier relationship with an innovative company that will allow us to develop higher post-consumer resin (PCR) content bottles. Of our 11 bottles, here’s where we stand on our path from the current industry standard of 25% PCR to our near-term goal of 75% PCR.

• 2008 switched two bottles to 75% PCR successfully: The color is not as pure a white as our old bottles but here at Seventh Generation, we consider that a badge of honor. Compared to the old bottles, these new bottles used almost 75 tons less virgin plastic and saved 179 tons of green house gasses in 2008.
• 2009 seven more 75% PCR bottles will hit the shelves
• 2010 last two bottles will be switched to 75% PCR content. We are working hard to increase the PCR content to 90% for our simpler bottles and to achieve 85% PCR for our heavier bottles as longer-term goals.

LDPE Bags: These low-density polyethylene bags are the wrapping around our paper towels and bath tissue. A slightly heavier version of LDPE wraps our diaper packs.

• 2008 switched to 50% pre- consumer recycled content (from 0%) for lighter towel and tissue bag LDPE
• 2009 switching to 25% pre-consumer recycled content (from 0%) for heavier diaper bag LDPE

Polyethylene Coating: The boxes containing our fabric softener sheets and our dish and laundry powders all contain a poly-coating that acts as a moisture barrier. While technically recyclable, these boxes are outside the scope of most municipal recycling programs and we have been exploring substitutes that are more easily recyclable.

• 2009 Will replace poly-coating on boxes to improve recyclability

Label Laminate: We replaced the plastic laminate on our pressure sensitive labels with a gloss varnish, eliminating 35,000 lbs of plastic waste and saving $175,000 annually.

Package Downsizing: Jeffrey Hollender, our President, addressed the complicated issue of package downsizing (reducing product count or volume) in his blog — twice, in fact, acknowledging in the second post that “people who live in glass houses shouldn’t throw stones.” Read both discussions and an explanation of our decision to reduce the number of diapers in our packages here: go/productdownsizing.

Why don’t we have a goal of 100% PCR content bottles?

The post consumer resin (PCR) content of bottles refers to the plastic content of the bottles. In addition to plastic, there are usually colorants and filler materials added to give the bottles strength. The highest plastic (and thus highest PCR) content possible in a standard bottle is around 94%. Our goal is to get as close to this as possible to provide a market and a use for recycled plastic and to avoid producing new plastic.