Invest for Good: Why sustainability matters to Woolworths

By Nedgroup Investments

Roy Bagattini, the newly appointed CEO of Woolworths Holdings Limited, talks about why sustainability matters to Woolworths.  

To listen to this conversation, go to Nedgroup Investments Insights on Apple Podcast, Google Podcast and Spotify. Click here to watch the recording of the conversation.

Sustainability has become a hot topic and features quite prominently across business strategy today. At Woolies, we are passionate about sustainability. It is a critical component of how we operate, how we run the business and what we do to secure our future. 

The Good Business Journey
Woolworths is a strongly values driven company and our commitment to sustainability has in part been born out of those values. Companies should not have to choose between business performance and responsible social conduct. The most successful companies do both and is how they drive growth, strengthen their brands and keep their customers and staff inspired and engaged. Woolies has been on this journey for some time and aspects of sustainability have been on our agenda for many decades. We only really got behind sustainability in a concerted way in 2007 when we launched our Good Business Journey (GBJ), our holistic, end-to-end sustainability strategy. The initial focus was on our foods business, but we later expanded it to include all other businesses across the group. This journey is never ending and is something we work on every day to continuously improve our efforts in making an enduring and positive impact on the world around us.

The GBJ was the first of its kind in South African retail. We committed ourselves to deliver on some fairly ambitious goals in several important areas, such as environmental impact, supply chain, our people and our communities. Setting stretch goals helped to galvanise efforts across the company in pursuit of achieving them. Over time, we affirmed our vision to be one of the most responsible retailers in the world.

Sustainability imperatives
There are several reasons why sustainability and responsible retailing is important to us. Climate change is real and is a threat to all life on this planet if we don’t take action. Sustainability is a business critical issue for any company with a supply chain that uses natural resources. We need to take responsibility for the human and environmental footprint of our products and operations. Business continuity risks that arise from the impacts of climate change require active and urgent work to mitigate those risks across our supply chain. Sustainability also just makes good business sense. Since starting the GBJ, we’ve seen significant savings across all of our businesses of more than R1.2 billion in the last five years alone, primarily in the areas of energy productivity and water efficiencies. Very importantly, we believe we have an ethical obligation towards the people in our supply chains, not just those we employ, but also those involved in the production and manufacturing of the products we sell. We need to ensure safe and fair working conditions and overall wellbeing. A company’s commitment to sustainability features very highly among millennials and Gen Z when considering which brands and products they buy, where they choose to shop and which companies they choose to work for.

Focus areas of the GBJ
The GBJ consists of eight focus areas, which were identified through a robust materiality assessment and stakeholder engagement process. They cover the issues that we deem most material to the group as a premium food and fashion retailer. Ethical sourcing: We have very high expectations and standards when it comes to supplier ethics and conduct. Our ethical sourcing programmes are targeted, amongst other things, at improving the lives of workers in our supply chain and having a positive impact on the communities from which we source our product. We audit all our suppliers to ensure they comply with our code of business principles. Water:  A constant supply of clean water is essential to our value chain, from the growing of commodities to the manufacturing and sale of our products. We operate in one of the most water stressed regions and efficient water management is a pivotal factor for us to ensure the continuity of our business.

We have several partnerships with government, NGOs and the private sector to advance sustainable water policies across the industry. We also drive various water usage and efficiency initiatives with our farmers through our Farming for the Future Programme. Sustainable farming: Through our programmes and in conjunction with our farmers and suppliers, we continue to work on ways to improve farming and animal welfare practices to ensure a more sustainable, resilient and inclusive food system for our people, communities and planet. People & transformation: Our Group People Strategy is focused on creating a culture where everyone is developed with diversity and inclusivity key components of this. Our supplier and enterprise development programme aims to remove barriers for emerging black and black woman owned businesses to become suppliers. We assist in unlocking market opportunities, provide capital and support in building the relevant capabilities for them to run their businesses. Social development: We strive to make a meaningful difference in education, food security and community resilience in the countries where we operate. Health & wellness: This is about creating a safe and healthy working environment for our people. As a food retailer, we aim to inspire our customers to make healthier choices by providing them with a wide range of healthy food options, removing excess salt and sugar from products and expanding the range of plant-based foods. Energy & climate change: We have several initiatives to significantly reduce energy consumption and carbon emissions across our value chain. As a result of the improvements we have made in energy productivity, we are now servicing almost three times the square metreage for every megawatt hour used than we were when we started the GBJ.

Waste: Waste and packaging is a big focus area for us. In 2018, we embarked on an ambitious journey by committing to a target of zero packaging waste to landfill and since then we’ve already eradicated more than 350 tons of packaging. We’re committed to having only reusable and recyclable packaging by 2022. We committed to eradicating single use plastic shopping bags from our stores and have 148 plastic bag free stores across our fleet. In our food stores, we are rolling out low cost, reusable bags with recyclable paper bags for our home, beauty and fashion stores. We are also working to remove any unnecessary single use plastic products. We continue to make packaging improvements by removing unsustainable packaging substrates and incorporating more reusable, recyclable and sustainable packaging. The challenge is to balance the functional role of packaging, which is to maintain the quality, freshness, safety, transportability, etc. of the product with the need to avoid unnecessary and over packaging. Packaging also plays a significant role in preventing food loss and waste. In a country like ours where up to 30% of all food that is produced is lost, we take our obligation towards avoiding food waste very seriously. It is as important to us as reducing the amount of packaging we use. If you add to that our focus on quality, the challenge becomes quite clear, so it’s important to find the correct balance in this process.

Driving ownership and accountability
The GBJ is a core business strategy and informs and shapes many of the other strategies and is fully incorporated into our overall business strategy and growth blueprint. We set targets for a 5-year period with intermediate 1-year milestones, so we can track each business unit and hold them accountable to execute on their initiatives. Progress is measured on a bi-annual basis through a robust score carding process with results reported to the WHL Board Sustainability Committee. The GBJ facilitates a consistent, organisation-wide approach to managing sustainability issues across the business. It has been a key enabler in our efforts to become one of the world’s most responsible and sustainable retailers.

Sustainability highlights
Woolworths was one of the first major retailers to sign up to the EP100 initiative in 2017, committing to doubling energy productivity and the first South African company to sign up to the Ellen MacArthur Foundation’s New Plastics Economy Global Commitment in 2018. They have contributed R3.97 billion to local communities across the group against their 2020 target of R3.5 billion. Despite many accolades, we know there is always much still to do. In 2015, we set ourselves a range of sustainability targets for the 5-year period. In many cases, we not only achieved, but exceeded these and perhaps we were not thinking big enough. We are now in the process of finalising new group-wide GBJ goals and commitments based on the issues that we’ve identified as most important for our organisation, namely climate change, water, biodiversity loss, packaging, waste, responsible sourcing, transformation & diversity and wellbeing. Where possible, our targets will be set on a science or context-based approach and aligned with various global collective initiatives.

Moving from plans to impact
Many companies recognise how important this work is, but corporate sustainability as a whole is at a critical juncture. It’s not enough for companies to talk about it and set targets and think that targets alone will get us to where we need to be. We have to move to executing on the actions to achieve those targets and we have to hold ourselves more accountable. It has to be about impact and not just about plans. This is urgent. Our planet, communities, consumers and investors are calling for it. The business imperative is overwhelming and I believe it is the only way to ensure long-term business continuity and success. While Woolworths can make an important difference in all of these areas, profound, sustainable, real impact and progress will require significantly elevated levels of collaboration amongst stakeholders at large. All of us working together, but the business community in particular, can and must play a leading role in driving many of these initiatives.