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Walmart wants to be environmentally friendly — and discovers just how difficult ‘sustainability’ is PDF Print E-mail

Walmart has switched its environmental focus to its suppliers, rather than appealing to customerBy

ANDREWSPICEDAVIDGRAHAM HYATT

What a difference the birth of a granddaughter can make.

For Lee Scott, who ran Walmart WMT, +1.47% from 2000 to 2009, the arrival of his granddaughter not only convinced him the threat of global warming was realbut set him on a course that altered the very DNA of the world’s largest retailer. He decided he wanted to use its size and resources to make the world an “even better place for all of us,” changing the way millions shop in the process.

In 2005, midway through his tenure, he challenged his employees: “What would it take for Walmart to be that company, at our best, all the time?”

The answer became Walmart’s sustainability program, an ambitious effort to figure out how to get its budget-conscious customers to buy more sustainable products. Of course, it was more than Scott’s granddaughter that pushed the retailer in this direction. A dismal perception among the public as well as a stagnant stock price also played roles in prodding Scott and other Walmart officials to take the company in a more environmentally aware direction.

We spent five years studying the program — speaking with Walmart’s sustainability leaders, its suppliers and others who have a stake in the company’s activities such as environmental groups and farmers. Our findings highlight both the promises and perils of what one Walmart executive optimistically termed the “democratization of sustainability.”

 

Glaciers, landfills and shopping bags

During our extensive research into the implementation of Walmart’s sustainability program, we found many executives from the CEO on down who were passionate about making the company more environmentally friendly. Before the retailer even began its program, corporate executives traversed the globe to better understand what was at stake.

We were told stories of Scott’s summer 2005 trip to the top of Mount Washington in New Hampshire, where scientists take measurements of the ice and the wind to measure the effects of climate change and air pollution. There he met with Environmental Defense Fund President Fred Krupp and some of the scientists to discuss the company’s environmental impact and what it could be doing differently. On that same trip, he also met with maple syrup farmers who explained how climate change was affecting their harvests.

Other company leaders made trips to parched cotton fields, landfills covered with Walmart shopping bags and melting Arctic glaciers, all with the aim of gaining a deeper understanding of sustainability and engaging with environmental groups, journalists and critics.

But it still wasn’t clear where all this was going until August of that year, when Hurricane Katrina hit New Orleans, causing extensive human suffering and property damage along the coast.

Walmart, in an unusual move, gave local managers wide discretion in helping communities respond and, along with a few other large retailers, worked hard to get needed supplies to the area. In the context of widely reported government failures during the crisisWalmart received praise for its actions — a far cry from the usual criticism Scott received from social and political activists.

After Katrina, Scott had an epiphany, which culminated in that speech he made in October 2005 near Walmart’s headquarters in Bentonville, Ark., during which he announced the project:

“What if we used our size and resources to make this country and this earth an even better place for all of us: customers, associates, our children and generations unborn?”

Seeking sustainability

In the speech, Scott laid out Walmart’s sustainability vision to Walmart employees and suppliers. He called for reducing waste, using more renewable energy and selling products that “sustained people and the environment.”

In a way, these goals sounded easy. Simply cut down on waste, become more efficient, convince its legions of suppliers to make more sustainable products and sell them at its “low, low prices.” Sustainability goes up, costs go down, everybody wins. But as Scott and his successors learned, this was easier said than done.

 

Some aspects were relatively straightforward. The company’s efforts to operate more efficiently produced significant environmental value — and helped its bottom line. The efficiency of its fleet of trucks doubled within a decade. Walmart has now converted 28% of the energy sources powering its stores and operations globally to renewables.

And last year, the company diverted 78% of its global waste from landfills, instead finding ways to recycle, reuse or even sell the garbage. Its goal is to eventually get to 50% renewables and zero waste in Canada, Japan, the U.K. and U.S. by 2025.

Selling products that “sustained people and the environment” was harder. By 2008, its was clear that progress was not being made as fast as the company had expected.

Walmart had a challenging job. While the market for sustainable products is large and growing, it has primarily catered to people with a lot of disposable income who can afford to pay the “goodness” premium for things like ToyotaPriuses and organic foods.

What about the majority of consumers who usually see the high price of sustainability as a barrier? Are sustainable products a luxury good only attainable by the well off?

Read: Walmart earnings: E-commerce investments could offset earnings growth

The questions and challenges of selling sustainable products escalated over time. What is a sustainable product? How could it be measured effectively and efficiently? And how could this information create value for the company and customers? Would people be willing to pay for it if it was impossible to keep the costs down?

Two interconnected challenges it faced are particularly illuminating: the lack of a sustainability standard and how to convince suppliers and customers to go along.

What’s ‘sustainable’ anyway?

Walmart leaders quickly learned that the absence of a credible sustainability standard hampered their ability to market new products.

Back then, marketing products as “sustainable” was anything goes. While a few marketing attributes, like “organic,” are verified by the U.S. Department of Agriculture, for the most part companies were free to call their products “sustainable,” “natural” or “good for you,” regardless of whether it was true or not.

The need for a standard crystallized when Walmart asked suppliers for proposals for a 2008 Earth Day promotion. It wanted to specifically promote products that were sustainable. Suppliers responded with such a vast range of claims that Walmart managers could not figure out which products to include. Examples of traits that made a product “sustainable” ranged from having “reduced” packaging material — though there was no gauge as to what it was reduced from — to the use of non-toxic ingredients or the product’s overall recyclability.

A subsequent promotion of Campbell’s soup with a green “Earth Day” label (instead of its customary red one) generated external criticism and accusations of “greenwashing.” That is, some bloggers claimed sustainability at Walmart simply meant taking existing products and putting green labels on them.

Lessons like these led Walmart to seek a way of defining what sustainable means for all its products — a mammoth scale given that the company had over 60,000 direct suppliers and a single store could sell about 142,000 products. So, in 2009, the company helped establish the Sustainability Consortium, a collaboration of retailers, suppliers, universities, environmental groups and others to create a data-driven index of sustainability.

The consortium would eventually produce a sustainability “toolkit” with key performance indicators and guidance for achieving sustainability at the product category level whether these be laundry care products, computers or beer.

Read: BlackRock is stripping Walmart, Dick’s from some of its funds over guns

Such indicators could then be used by consortium members in communications with their suppliers, typically in a sustainability scorecard that the supplier would complete. For instance, a manufacturer might be asked if it had plans for reducing harmful emissions — and if it didn’t, the thinking initially went, this type of information could eventually be passed on to consumers who could then make their own judgments.

The problem was, relying on customers didn’t work.

Focusing on suppliers, not consumers

 
Toyota plans to expand production, shrink cost of hydrogen fuel cell vehicles PDF Print E-mail

TOYOTA CITY (Reuters) - Toyota Motor Corp (7203.T) is doubling down on its investment in hydrogen fuel cell vehicles, designing lower-cost, mass-market passenger cars and SUVs and pushing the technology into buses and trucks to build economies of scale.

As Toyota cranks up improvements for the next generation of its Mirai hydrogen fuel cell vehicle (FCV), expected in the early 2020s, it is hoping it can prove wrong rival automakers and industry experts who have mostly dismissed such plans as commercially unviable.

The maker of the Prius, the world’s first mass-produced “eco-friendly” gasoline-hybrid car in the 1990s, says it can popularize FCVs in part by making them cheaper.

“We’re going to shift from limited production to mass production, reduce the amount of expensive materials like platinum used in FCV components, and make the system more compact and powerful,” Yoshikazu Tanaka, chief engineer of the Mirai, said in an interview with Reuters.

It is planning a phased introduction of other FCV models, including a range of SUVs, pick-up trucks, and commercial trucks beginning around 2025, a source with knowledge of the automaker’s plans said.

The automaker declined to comment on specific future product plans. But it has developed FCV prototypes of small delivery vehicles and large transport trucks based on models already on the road, as Tesla Inc (TSLA.O) develops a battery-operated commercial semi-truck from the ground up.

“We’re going to use as many parts from existing passenger cars and other models as possible in fuel cell trucks,” said Ikuo Ota, manager of new business planning for fuel cell projects at Toyota. “Otherwise, we won’t see the benefits of mass production.”

The company is also betting on improved performance. Toyota wants to push the driving range of the next Mirai to 700-750 kilometers from around 500 kilometers, and to hit 1,000 kilometers by 2025, a separate source said.

Driven by the belief that hydrogen will become a key source of clean energy in the next 100 years, Toyota has been developing FCVs since the early 1990s.

Hydrogen is the most abundant element in the universe and stores more energy than a battery of equivalent weight.

The Mirai was the world’s first production FCV when it was launched in 2014. But its high cost, around $60,000 before government incentives, and lack of refueling infrastructure have limited its appeal. Fewer than 6,000 have been sold globally.

LMC Automotive forecasts FCVs to make up only 0.2 percent of global passenger car sales in 2027, compared with 11.7 percent for battery EVs. The International Energy Agency predicts fewer FCVs than battery-powered and plug-in hybrid electric vehicles through 2040.

Many automakers, including Nissan Motor Co (7201.T) and Tesla, see battery-powered cars as a better, zero-emission solution to gasoline engines. Only a handful, including Honda Motor Co (7267.T) and Hyundai Motor Co (005380.KS), produce FCVs.

But people familiar with Toyota’s plans said the automaker thinks demand will perk up as more countries, including China, warm to fuel cell technology. The company also sees FCVs as a hedge against a scarcity of key EV battery materials such as cobalt.

7203.TTokyo Stock Exchange
7203.T

HAND BUILT

For now, Mirais are assembled by hand at a plant in Toyota City, where 13 technicians push partially constructed units into assembly bays for detailed inspections. This process yields just 6.5 cars a day, a sliver of Toyota’s average domestic daily production of about 13,400 vehicles.

Strategic Analysis Inc, which has analyzed costs of FCVs including the Mirai, estimates that it costs Toyota about $11,000 to produce each of its fuel cell stacks, by far the vehicles’ most expensive part.

Toyota has been building up production capacity to change that, as it expects global FCV sales climb to 30,000 units annually after 2020 from about 3,000. Strategic Analysis estimates that would allow Toyota to reduce costs to about $8,000 per stack.

It has already begun to use parts developed for the Mirai in other models, such as the fuel cell stack, which is used in Kenworth freight trucks being tested in California, the Sora FC bus it released in Japan in March and the delivery trucks it will test with Seven-Eleven stores in Japan next year.

“It will be difficult for Toyota to lower FCV production costs if it only produces the Mirai,” the first source told Reuters on condition of anonymity as he was not authorized to speak publicly about the issue.

“By using the FCV system in larger models, it is looking to lower costs by mass-producing and using common parts across vehicle classes,” he added.

The Mirai’s high production costs are largely due to expensive materials including platinum, titanium and carbon fiber used in the fuel cell and hydrogen storage systems.

Engineers have been reducing that by improving the platinum catalyst, a key component in the 370 layered cells in the fuel cell stack, which facilitates the reaction between hydrogen and oxygen that produces electricity.

“We’ve been able to decrease the platinum loading by 10 percent to 20 percent and deliver the same performance,” said Eri Ichikawa, a fuel cell engineer at Cataler Corp, a Toyota subsidiary that specializes in catalytic converters.

Strategic Analysis says using that much less of the precious metal would save up to $300 per fuel cell stack, based on an estimate that Toyota now uses about 30 grams of platinum per unit.

“By consistently focusing on these issues, we will be able to progressively lower the cost of FCVs in the future,” Tanaka said.

Reporting by Naomi Tajitsu and Maki Shiraki; Editing by Joe White, Ritsuko Ando and Gerry Doyle


 
Caerphilly council calls for exploration of hydrogen power's potential PDF Print E-mail

A CAERPHILLY councillor has called on the Welsh Government to explore the possibility of utilising hydrogen as a renewable energy source.

Plaid Cymru councillor Phillip Bevan tabled a motion at full council on Tuesday asking colleagues to consider the research of Mid and West AM Simon Thomas.

The Plaid politician had published a paper exploring the economic potential of hydrogen in the decarbonisation of transport in Wales.

Mr Thomas has suggested that Wales could follow the likes of Germany, Austria, China and Canada and develop hydrogen-powered trains and buses.

According to Mr Thomas, the recently-awarded Wales & Borders rail franchise and proposed South Wales Metro present “timely opportunities” to make the case for hydrogen-powered buses.

But Mr Thomas says that one of the barriers to creating a ‘hydrogen economy in Wales’ is its significant cost, adding that the existing hydrogen sector in Wales is “in its infancy”.

Despite this, Cllr Bevan asked fellow elected members to consider the findings of the report in a motion supported by Councillor Colin Mann, leader of the council’s Plaid Cymru group.

The motion also called upon the Welsh Government to talk to local authorities, businesses and researchers about holding a ‘key event’ to show Wales’ ambitions to a global audience and develop a comprehensive hydrogen economy strategy.

Cllr Bevan said: “The potential of hydrogen to help solve some of the biggest problems facing Wales now and in the future in terms of air pollution, climate change and the need for clean, renewable energy as well as great economic potential needs to be fully explored.

“Due to its versatility, abundance and practical benefits, hydrogen offers one of the main pathways to decarbonisation.

“There has been very little research conducted on the use of hydrogen for these purposes in Wales to date and there needs to discussion on how to develop a hydrogen strategy and drive forward expertise and interest in the technology.”

Cllr Mann agreed that hydrogen power could have “huge potential” if implemented in Wales.

“The key event should really be the start of a concerted programme to really get to grips and use this technology for the benefit of Wales,” he said.

“Maybe we can actually get to the forefront of some technology, we’ve just been scuppered on the [Swansea Bay] tidal lagoon by the UK Government and there’s an opportunity to get in front of the game.”

Labour councillor David Poole, leader of the council, offered his support but urged caution about the high costs of using hydrogen for energy.

Cllr Poole added: “It’s going to be an expensive fix. We need to push the Welsh Government to come out with a national strategy for Wales on decarbonisation.”

The motion was carried.

 
Enerkem to Make Methanol Through Gasification in Netherlands PDF Print E-mail

The company will divert what would have headed elsewhere for incineration, while creating an alternative to fossil fuel, mainly for manufacturing and transportation fuel blends.

Enerkem

Now that Enerkem’s Edmonton, Alberta, waste-to-cellulosic ethanol plant is running at full scale, the company has turned to the Netherlands for a larger conversion project. It plans to tap into some of the 2 million tons of municipal solid waste (MSW) shipped to Port Rotterdam yearly to produce methanol through gasification—diverting what would have headed elsewhere for incineration, while creating an alternative to fossil fuel, mainly for manufacturing and transportation fuel blends.

Two companies join the Enerkem-Port Rotterdam partnership: Amsterdam-based chemical company AkzoNobel, which wants to shift from fossil fuel to other raw materials to make its products, and Air Liquide, an industrial gas company headquartered in Paris that will supply gases to the plant for its waste-to-methanol production process.

“All four partners have complementary strategies, with the main one being to work on shifting from fossil fuels to alternative fuels,” says Anton de Vries, an Enerkem director who leads the project.

The port not only is rich in feedstock and potential end users but is uniquely positioned to support infrastructure. It has existing resources to ship methanol via truck or boat as well as to move trash from the U.K. and Northern Europe, which de Vries says has made it fairly easy to capture materials through agreements with waste management suppliers.

Air Liquide’s interest and involvement will likely eventually expand beyond Rotterdam, de Vries projects. “We plan to one day sell our plants all over the world so they could follow us to other locations,” he explains.

AkzoNobel has its own vision. 

“The production and use of methanol fits into the sustainability strategy of AkzoNobel Specialty Chemicals. It will enable us to provide products to our customers with the best environmental profile in the market,” says Marco Waas, director of research, development and innovation and technology with AkzoNobel Specialty Chemicals.

“We expect that the Enerkem technology can in the future be used to produce other key chemical building blocks like acetic acid and various components that can be used as fuel and resins,” adds Waas.

Waas says he sees the project as an important step toward increasing the sustainability of its industry cluster in Rotterdam. But the company’s aim beyond, he points out, “Would be to ensure further implementation of the Enerkem technology in our other industry clusters in Europe as a key element of our sustainability strategy.”

The Rotterdam plant, costing nearly $232,235,000, will gasify 300,000 tons of waste a year, producing more than 200,000 tons of methanol. The gasification process will avoid about 300,000 tons of CO2 emissions that would have been generated through incineration, according to de Vries.

The patented technology can break down chemically and structurally dissimilar waste, including plastic materials, into a pure syngas. The syngas can then be converted into commercial-grade methanol.

This project helps the Port of Rotterdam support the government in working toward greenhouse gas reduction targets for 2030 and 2050: 49 percent and 95 percent, respectively (from 1990 emissions).

“There is a large industry sector (electricity production, chemicals, refineries) in the port area in Rotterdam that is dependent on fossil fuel,” says Bert Regeer, spokesperson of the Port of Rotterdam Authority. “There is a huge challenge to be successful in the energy transition and at the same time maintain a vital port of world class in the future.”

“Against this background, the Port of Rotterdam Authority installed a dedicated team that is building coalitions for energy transition projects that help the port to become carbon neutral on the road toward 2050,” he adds. “This is an important project to make tangible progress on the short term with the energy transition.”

The Rotterdam plant is in the design phase, with construction slated to begin sometime in 2019 and launch planned for 2020.

Construction is expected to create about 600 to 700 direct and indirect jobs. Once in operation, the plant will create about 150 to 200 direct and indirect jobs, says de Vries, who reports Enerkem is now contracting with waste suppliers and negotiating contracts with methanol buyers. 

The company’s eventual plans are to build out, having modules constructed in different parts of the world to be assembled in Rotterdam and shipped out. The demand is there, de Vries notes.

“[Using methanol as a building block] becomes a marketing tool, and we see it having a lot of pull. Manufacturers are asking for products that will use a methanol biobase,” he says. “We anticipate this plant, which is the first of its kind in Europe, opening the door for similar future facilities in other parts of Europe.”

 
Microsoft and Toyota are revving up interest in hydrogen fuel-cell energy tech PDF Print E-mail
Toyota MiraiToyota’s Mirai fuel-cell sedan runs on hydrogen. (Toyota Photo)

Grid battery storage projects like Tesla’s 100-megawatt installation in Australia may be getting lots of press, but behind the scenes, hydrogen fuel-cell systems are carving out a niche in applications ranging from non-polluting motor vehicles to power-gobbling data centers.

“It’s not either-or,” said Sunita Satyapal, director of the U.S. Department of Energy’s Fuel Cell Technology Office. “We definitely need battery electric vehicles, we need advanced combustion, biofuels — really, all of the above. But what’s unique about hydrogen is its versatility.”

Satyapal and some prominent users of fuel-cell systems, including executives from Microsoft and Toyota, discussed the state of the art in Seattle today during the CleanTech Innovation Showcase, presented by CleanTech Alliance.

Fuel cells generate energy through a straightforward chemical reaction: Stored hydrogen is combined with oxygen from the air with the aid of a catalyst, producing electricity. The devices are about twice as efficient as internal combustion engines when it comes to converting chemical energy into power, and the only emissions they produce are air and water vapor.

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“For us, it’s all about the emissions,” said Ron Kent, advanced technologies manager for the Southern California Gas Company.

Today, most hydrogen fuel is produced from natural gas, but energy companies are also fine-tuning  techniques that use electricity from renewable sources such as solar and wind to split water into hydrogen and oxygen through electrolysis. The hydrogen provides a portable way to store the energy for later use.

Kent’s company is partnering with the University of California at Irvine and the Energy Department’s National Renewable Energy Laboratory on demonstration projects that combine hydrogen and carbon dioxide to produce methane fuel.

“It allows use to grab CO2 and do something with it,” Kent said. “We’re using microbes to do it.”

Microsoft aims to use fuel cells, as well as grid batteries, to make sure its data centers can cope with spikes in power usage when the internet glows hot.

“Our vision is that fuel cells are primary power, not backup,” Sean James, director of energy research at Microsoft, told GeekWire. Microsoft has been experimenting with fuel-cell-powered data centers that run on biogas or natural gas, with the eventual aim of using hydrogen made with solar or wind power.

One big drawback is the capital cost. “Fuel cells are already pretty efficient, but they’re also pretty expensive,” James said. He advised energy researchers to focus on making the devices cheaper rather than increasing their efficiency.

Sunita Satyapal, director of the U.S. Department of Energy’s Fuel Cell Technology Office, moderates a panel at the CleanTech Innovation Showcase in Seattle. To the left are Ron Kent of the Southern California Gas Company and Sean James of Microsoft. To the right are Total Transportation Services’ Victor La Rosa and Toyota’s Dave Bora. (GeekWire Photo / Alan Boyle)

Fuel cells are slowly gaining ground in the automotive sector as well. For several years, California-based Total Transportation Services has been running a fleet of freight trucks powered by hydrogen fuel cells, alongside trucks powered by batteries and natural gas.

Setting up mobile hydrogen fuelers is one of the keys to success, said Victor La Rosa, the company’s CEO.

“It gives us a lot of versatility, and the ability to open up using hydrogen anywhere,” he said. “But more than anything, it increases our range. That’s really the most significant thing, especially over the battery technology.”

Total Transportation’s hydrogen-powered trucks have a range of about 250 miles, compared with 100 miles on average for battery-driven trucks, La Rosa said. Moreover, hydrogen refueling goes much faster than battery recharging, he said.

The availability of hydrogen refueling stations, or lack thereof, is a limiting factor. Right now, California and Hawaii are the only states that have them. But Dave Bora, senior manager for advanced technologies research at Toyota Motors North America, is hoping that’ll change sooner rather than later.

Toyota already makes a hydrogen-powered passenger sedan known as the Mirai (which is the Japanese word for “the future”). Toyota says the car will become available this year in Canada, starting with Quebec.

Just this month, a hydrogen fueling station opened in Vancouver, B.C. — the first of what’s expected to be eight such stations to make their debut in British Columbia over the next two years. The stations are meant to service Hyundai’s hydrogen-powered Tucson model as well as the Mirai and the Honda Clarity.

“Now we have California and Canada, and we’re starting to look at Oregon and Washington, in between … to kinda get the West Coast going,” Bora said.

 
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