Office Depot’s Green Rx
For Office Depot, environmental stewardship is a multifaceted commitment encompassing all parts of the company, from the supply chain and internal operations to business and consumer markets.
“Our environmental vision involves a holistic strategy to increasingly buy green, be green and sell green,” said Yalmaz Siddiqui, environmental strategy advisor, Office Depot, Delray Beach, Fla., which operates 1,186 stores in North America and another 369 units around the globe, and had sales of $15 billion in 2006.
Siddiqui, who joined Office Depot in 2006, is responsible for further developing the company’s environ-mental strategy and integrating its various programs into the company.
“My role is to guide the company globally on the three different aspects of our strategy,” he explained. “I really see myself as an initiator, facilitator and communicator of green programs for Office Depot.”
The chain has an array of ambitious programs in place related to its green buying and selling objectives, from buying papers from certified well-managed forests and buying greener office products for internal use to selling green products to contract and retail customers and delivering innovative green solutions to online shoppers. Its Green Book catalog, launched in six countries in five languages in 2006, included 6,000 environmentally preferable products.
“The catalog is designed as a communications vehicle and purchasing vehicle for our business or customers,” Siddiqui said. “It has lots of pages dedicated to tips on going green,”
Energy reduction: Office Depot has made impressive strides in the third leg of its environment strategy: being green. Its most recent announcement: a 10.1% absolute reduction in carbon-dioxide emissions from electricity and natural gas consumed in its North American stores, warehouses and offices (all the more impressive in light of a 4.5% increase in total square footage). The chain reduced electricity consumption by approximately 66 million kilowatt-hours in 2006 as a result of energy-efficiency and conservation efforts in its stores and warehouses. The reduction translated into an avoidance of more than $6.2 million in utility costs in the one year alone.
“The results cemented our belief that being green also means saving green, in terms of dollars,” Siddiqui said. “Many companies deny investment in environmental activities because they look at it only as an expense. But that’s not the case. We have shown that there are investments in green technologies that deliver a strong ROI.”
A number of initiatives contributed to the chain’s energy reduction, including the installation of sensors to automatically turn off lighting when restrooms and break rooms are unoccupied, and high-efficiency HVAC systems.
Additionally, the chain completed an energy-management system upgrade that allows for tracking of energy usage and trends from a central location, setting of temperatures for all locations, identification of energy-related anomalies, and control notification by alarm when anomalies (for example, lights left on overnight) occur. The system allows corporate to get real-time data on store energy use across the nation in order to optimize energy use.
“It gives us better scheduling and monitoring ability,” said Ed Costa, VP construction, Office Depot. “It also gives us a lot more flexibility so that we can be more proactive with regard to energy use.”
But perhaps most significant was the completion of a T5 high-output fluorescent lighting retrofit across all its stores.
“While it was the combination of investments we made in lighting, HVAC and the like that provided us with the energy cost savings and greenhouse-gas reduction, the T5 retrofit was the single most dramatic investment we made to deliver the environmental benefits,” Siddiqui said.
On the transportation side, Office Depot has made significant improvements. The chain has been replacing its oversized diesel-powered delivery trucks with fuel-efficient, ultra-low-emission Sprinter cargo vans for the past several years. It has realized additional cost and fuel-consumption savings by using a sophisticated software program for custom deliveries (it arranges routes to maximize deliveries while minimizing distance traveled and time). The same software is being used to plan the delivery of products from distribution centers.
Office Depot By the Numbers
Absolute reduction in greenhouse-gas emissions from facilities (based on 2006 electricity and natural gas use in the United States and Canada): 30%;
Amount of electricity purchased from renewable-energy credits: 71,800,000 kilowatt-hours (kwh);
Estimated kwh of electricity saved due to energy efficiency and conservation efforts in North American (NA) facilities: 66 million;
lEstimated electricity costs avoided due to energy efficiency and conservation efforts in NA facilities: $6.2 million;
Estimated reduction in greenhouse-gas emissions related to Office Depot transport: 9.4%;
Estimated number of green office products sourced by Office Depot for resale in the United States: 4,000; and
Average post-consumer recycled content of cut-sheet plastic paper used in U.S. design, print and ship center: 30%;
(Source: 2007 Office Depot Corporate Citizenship Report, which looks at 2006 calendar year)
Office Depot’s efforts to green its transport fleet and distribution operations have aided its greenhouse-gas reduction strategy. So has its recent membership in the Carbon Disclosure Project. It also participates in the Business Roundtable’s Climate Resolve program and Environmental Protection Agency’s (EPA) Green Power partnership, purchasing renewable-energy credits (RECs) equal to 12% of its total electricity consumption.
“Our greenhouse-gas reduction strategy is a three-phase program that will continue to unfold during the next several years,” Siddiqui said.
In Phase 1, the chain completed the implementation of the first round of its store efficiency and conservation efforts, finished a carbon footprint for North American operations and transportation, and purchased RECs, which it will continue to do.
In Phase 2, it will complete a carbon footprint for its European operations and look beyond the quick wins of the first round of efficiency upgrades for other opportunities.
“We will also explore investments in renewable energy infrastructure, which will likely include solar,” Siddiqui said.
As part of Phase 3, the chain will develop a strategy that looks more globally, setting global greenhouse-gas reduction goals.
As to future environmental goals, Office Depot does not have a quantitative target.
“Our goal is one of continuous improvement,” Siddiqui said.
Along those lines, the chain continues to refine its store prototype and is exploring LEED (Leadership in Energy and Environmental Design) certification for the same.
“We’re working quite closely with the United States Green Building Council to build a store that is more environmentally compliant,” said construction VP Costa. “We are trying a lot of new things. We do due diligence on every item as we go through it in our attempt to see what will work and what won’t.”
Many retailers are just starting out down the green path. Siddiqui said he would caution them not to lump all things green together.
“Some green actions are inexpensive from the start, such as reducing waste,” he explained. “Others require an investment that leads to a very quick payback; others will deliver a longer payback. And some will just cost you. You need to look at green as a continuum and disaggregate it, breaking up environmental issues into specific program areas. Ultimately, the most effective path to sustainability is to take small steps.”
For those chains that may be still on the fence about going green, construction VP Costa sounded a warning note.
“You should get onboard now, before it’s too late,” he said.
Winn-Dixie team honored for turnaround
JACKSONVILLE, Fla. The team that lead Winn-Dixie Stores’ successful turnaround initiative is being honored by the Turnaround Management Association for the best ‘Mega Company Turnaround’ for 2007. Comprised of financial experts from The Blackstone Group, Skadden, Arps, Slate, Meagher & Flom and Smith Hulsey & Busey, the team helped Winn-Dixie regain the market share and profits it started to lose in the mid 1990s and early 2000s to competitors Publix and Wal-Mart.
Winn-Dixie filed for Chapter 11 bankruptcy in early 2005 after reporting year-to-date losses of $552.8 million or $3.93 per share of common stock and a decline of 4.9% in identical-store sales in its second fiscal quarter over the same period in 2004.
Despite the difficulty of achieving a succesful turnaround, Winn-Dixie began its reorganization effort, while still continuing to operate its core business and preserving jobs. According to the Turnaround Management Association, it created new common stock for five classes of unsecured creditors, with recoveries ranging from about 96% to 53%. The company emerged from bankruptcy on Nov. 21, 2006.
For its fiscal year ended June 27, Winn-Dixie reported adjusted EBITDA of $85.9 million compared to a loss of $27.8 million last year and an identical-store sales increase of 1.6%
Sears ends deal with maternity retailer
PHILADELPHIA Sears and Mothers Work, the world’s leading maternity apparel retailer, will not be renewing their agreement, Mothers Work announced today. Under their current agreement, Mothers Works operates the maternity apparel department in 502 Sears stores through the sale of its Two Hearts Maternity branded merchandise.
Mothers Work said it expects its partnership with Sears to end on June 20, 2008, when it current deal with the company is expected to expire.
Rebecca Matthias, president and ceo of Mothers Work, noted, “While we are disappointed about the end of our relationship with Sears, we feel the decision not to proceed with a renewal is in the best interest of our stockholders since we were unable to reach terms on a renewal which would be favorable for Mothers Work and our stockholders. “