Woolworths Holdings Limited is a retail group that operates two subsidiaries: Woolworths in South Africa, which accounts for the majority of the Group’s revenues, and Country Road in Australia.
Impacts and Opportunities for Retail Companies
According to a 2009 Deloitte Green Shopper study, sustainability considerations either drive or influence the buying decisions of more than half the shoppers interviewed ((Grocery Manufacturers Association/Deloitte. “Finding the green in today’s shoppers: Sustainability trends and new shopper insights.” 2009. Accessed April 2, 2014. https://www.deloitte.com/assets/Dcom-Lebanon/Local%20Assets/Documents/Consumer%20Business/DeloitteGreenShopperStudy_2009.pdf)). Consumers are increasingly considering factors such as the use of sustainable raw materials or the carbon footprint of a product in their purchasing decisions. Additionally, there are a growing number of regional initiatives aimed at calculating and labelling the environmental footprint of products.
Woolworths offers a variety of free range, fair trade and organic products at its stores. The company utilizes World Wide Fund for Nature’s (WWF) South African Sustainable Seafood Initiative and sells only free-range lamb and free-range eggs. The company’s yogurts are made from rBST hormone free milk and ingredients sourced for its private label products do not contain genetically modified organisms. Free-range and organic products accounted for 23% of the company’s food sales in 2013.
Supply Chain Management
The environmental impacts of agricultural production include habitat loss, soil erosion, and increased water consumption, as well as water pollution from the use of pesticides, herbicides, and fertilizers.
Woolworths has a Farming for the Future (FFF) program aimed at encouraging conventional farmers to adopt more environmentally sensitive practices. Nearly all of the company’s produce suppliers qualify for this program and Woolworths is currently expanding the program to include dairy and beef suppliers. Recognizing South Africa’s water scarcity issues, Woolworths has joined WWF’s Water Balance Program and the company is targeting a 30% reduction in water usage by all FFF suppliers by 2015.
Direct Environmental Impacts
In the retail sector, most companies’ largest direct environmental impact is likely to be the energy purchased, as electricity, gas, or oil, to operate storefronts. To minimize a company’s direct environmental impact, common initiatives include energy efficiency upgrades for lighting and heating/cooling, as well as initiatives to reduce water consumption and paper use.
Woolworths is committed to mitigating the direct impacts of its stores and office buildings through numerous energy efficiency initiatives and operational upgrades. The company reports that it tracks and monitors over 200 targets.
Areas for Improvement
Enhanced Environmental Reporting
While Woolworths tracks and monitors over 200 indicators, the company only reports on a fraction of these targets. Portfolio 21 has asked the company to expand its public disclosure.
Clarification on the Environmental Code of Practice
Within this Code, Woolworths states that, “No materials, dyes, or chemicals used in the production of Woolworths clothing or textiles pose what we believe to be an unacceptable risk to health or to the environment – during their manufacture or disposal.” Unfortunately, Woolworths does not define what it believes to an unacceptable risk. Portfolio 21 has asked the company to provide more clarity around the chemicals and dyes that it prohibits from its clothing and textile products.
Industry: Consumer Discretionary
Country: South Africa
To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 3/31/14 and may not reflect current opinions or subsequent events.