Staples CFO: Going Green Means Saving Green

Switching from using three-amp to two-amp lightbulbs, for instance, adds $4.2 million to the company's bottom line.

Interestingly, that program originated in an initiative by a store manager in Oklahoma, who was looking to make some money to donate to local schools systems with budget shortfalls, and not specifically to help the environment. The energy-reduction program also began, Mahoney said, as a cost-cutting initiative rather than a green one. “One by one people started to see that the two could go hand in hand,” he said.

A cornerstone of Staples’s environmental program is selling paper products containing a high amount of recycled material, which also are used in the company’s 1,400 copy and print centers. This began with an intense lobbying effort by a group of non-governmental organizations back in 2000. In fact, they did more than lobby; for two years, while the company took its time figuring out how to respond, activists chained themselves to racks in Staples stores and the NGOs did things like issue baseball cards showing the company’s CEO with the moniker “MVP of Forest Destruction.”

Today Staples sells more than 2,200 paper products with recycled content, and the effort does not end with paper. For example, Staples-branded office furniture includes recycled steel, and binders and organizers use recycled plastic.

These products not only are cost-efficient and green, they also stimulate customer loyalty, Mahoney claimed. “We find that when these products are made with high quality and priced right, [their environmental friendliness] becomes the tipping point for customers in deciding what they’re going to buy,” he said.

Few customers, though, will buy products solely for their green impact. When Staples first opened stores in Seattle, it figured that the city’s youngish, famously hip population would “go for green products like crazy,” Mahoney said. “But we found that they didn’t buy them more than anybody else in the country. The market for people who either are willing to pay more for or absolutely demand green products, just because of the sustainability issue, is very small.”

Green Partnerships

Ruta, meanwhile, gave a rundown of cost-saving measures by some of the companies that the Environmental Defense Fund has worked with on green initiatives.

One of the organization’s newest partnerships is with Kohlberg Kravis Roberts & Co., the big private equity firm. “Nobody is as focused on cost savings as KKR, and yet without hard looking we were able to find some savings, and they’re excited and in search of others,” Ruta said.

The pilot phase of the partnership, results of which were announced in Februrary, involved making just a few changes at a few of KKR’s portfolio companies. These produced savings of 25,000 metric tons of greenhouse gas emission reductions and 650 tons of solid waste, which generated a $16 million reduction in operating costs. “It was enough to get the attention of portfolio managers at KKR, and now we have a schedule of bringing three or four companies into the program each quarter,” Ruta said.

One of the fund’s most successful partnerships has been with Wal-Mart. One recently completed initiative involved switching from diluted laundry detergent — a little soap and a lot of water in a big jug — to a more concentrated product in a much smaller container. This single change, according to Ruta, produced savings of $30 million in labor costs, 150 million gallons of water, 7 million gallons of fuel, and 30 million pounds of plastic resin, as well as a 50% out-of-stock reduction.

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