Sustainable Development: Monitoring Systems and the Development of Indicators

Sustainable is a frequently used word applied in numerous combinations such as sustainable growth, sustainable development, sustainable economy, and in many others. Sustainable Development (SD) is a concept adopted by the World Commission on Environment and Development in 1980 (Karakosta & Askounis, 2010). SD is a ‘special’ form of development that meets the current needs of the generations (now) without compromising the future generations’ (then) ability to meet their desired needs. Many have agreed that SD integrates a comprehensive approach to social, economic, and environmental approaches (Karakosta & Askounis, 2010). The roots of SD are traceable to the 1960s environmental consciousness and the establishment of the link between environmental degradation and economic development (Karakosta & Askounis, 2010). Just like any other approach for development, sustainable development is set to improve human conditions (Davidson, 2005). There are two dimensions to understanding sustainable development: maintenance and notion of development. The purpose of this report is to develop a sustainability indicators monitoring system for an enterprise. This report will focus on Woolworths’ Limited sustainability monitoring system, discussing how the system has been encouraged, and how it contributed to the growth of indicator framework.

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Monitoring Systems and the Development of Indicators

Sustainability reporting and monitoring are new phenomena that have proliferated in enterprises, organizations, corporations, and the government embarking on the efforts for developing systems that monitor their activities and how they impact the society, environment, and the economy. Nowadays organizations are adopting these monitoring systems on different scales and levels (Davidson, 2004). This begins from the community and the corporate levels, then progressing to macro levels such as national and international organizations. In the last 50 years, tremendous growth has been recorded on the expansion of both financial and economic reporting that deals with broader range economic, social, and environmental issues (Macintoch & Wilkinson, 2006). Milne and Gray (2007) indicate that the existing link between financial, social, and environmental issues is being accepted widely with the field inextricably (p.199). The ‘old’ decision making framework that addressed economic growth incorporating environmental remediation is now seen as inadequate when fulfilling the needs of decision-making. Not only do these monitoring systems facilitate decision-making pertaining to the economy but also the environmental and societal impacts.

Features That Contribute To Effective Indicators

Sustainability development indicators (SDI) differ from the traditional social, economic, and ecological indicators. SDIs are quantitative tools that measure and evaluate both positive and negative development towards sustainable development (Pannell, 2003). These tools also provide means of communicating this information while managing social, economic, and ecological resources. Indicators point out issues, showing how well a system is working to achieve a desired goal. These indicators are also used as evaluation and assessment tools for development projects (Briassoulis, 2001). Nonetheless, SD measuring and monitoring have become crucial. Sustainability indicators are used at a global scale verifiable by a number of case studies and application of different approaches. When the environment, the society, and the economy are viewed as unrelated parts, risks may arise and each problem is viewed within individual sphere in a manner that is isolated. Moreover, instead of applying a ‘one-problem’ ‘one-indicator’ approach, SDI develop a framework that joins the two together emphasizing their linkage (McCool & Stankey, 2004). There are two approaches to indicators measures: the proximity to the target goals and the status that is normally presented in relative terms.

Characteristics of good monitoring systems

Characteristic Characteristics
Specific A good monitoring system must fit the purpose of measurement, that is, the relation to the desired outcome.
Pedagogical Good monitoring systems are bound to be practical and are preferred by the parties that are using them.
Reliable The information provided by the system must be reliable using the data source of a systematic model.
Sensitive The change under the circumstances should be reflected in the system.
Cost effective The cost of accumulating the necessary data should not exceed the benefits of the chosen indicators.
Relevance and usability A good monitoring system should only give what is needed, starting with the clear definition of objectives and focusing on what it was meant to achieve.

The Enterprise

Who is Woolworths Limited?

Woolworths is an Australian retail company that is built up by a number of businesses providing customers with a wide range of quality and low priced products. Woolworths’ business is built on retail passion, hard work, attention to detail, and ensuring customer and people’s safety while having fun. The company’s mission is to deliver the right shopping experience to customers each and every time (Woolworths limited, 2007).

Woolworths Today

Since its opening in 1924, Woolworths has changed the face of retailing in Australia. The company operates more than 2750 stores, distribution centres, petro sites, and support offices in Australia and New Zealand (Woolworths Limited, 2007). The company also engages in joint consumer electronic retail ventures with the Indian company Tata Group. Woolworths major brands are Woolworths, Safeway, Dan Murphy’s, BIG W., Foodtown, Dick Smith Electronic, Tady, BWS, and PowerHouse (Woolworths Limited, 2007). Woolworths is one of the largest public owned companies with approximately 320,000 shareholders and 40,000 employee shareholders. This makes Woolworths the largest employee owner business in Australia with over 80% ‘mums and dads’ shareholders (Woolworths Limited, 2007).

Woolworths In Future

Woolworths recorded sales of $52,477 million in the FY2010-2011 serving more than 21 million customers every week across its retail businesses (Woolworths Limited, 2007). In December 2010, the company had more than 2,700 operating stores, and by the end of 2015, Woolworths will have estimated a projected growth of 600 new stores with exclusions of acquisitions.

How to Move From Today to Future

To achieve the projected growth, Woolworths can use the following framework of a plan

  1. i) Establish 30-45 new stores each year and expand the existing supermarkets.
  2. ii) Establish 12-24 BIG W stores every year.
  • iii) Establish up to 25 new Dan Murphy’s annually.
  1. iv) In the next four years, Woolworths can increase the number of consumer electronic stores by 25 stores per year.

Sustainability Dimensions

The monitoring systems encapsulate and elaborate on the principle of sustainability. Woolworths reports its performance in much larger context of social, ecological, and economical constraints that adds meaning to the information (Milne & Gray, 2007).

Sustainability and What It Means To Woolworths

In this aspect, sustainability is what the company does and how it does it. To be sustainable in the longest time ever, Woolworth’s success comes without the expense of the economies, societies, and the environment that constitutes the company (Keeble, Topiol & Berkeley, 2003). The company knows well that in order to progress, it must take important steps toward the sustainability journey (Woolworths Limited, 2007). The company sustainability means abiding to the right thing by the customers, shareholders, the employees, the environment, and the community at large. It is about listening and capturing the company’s knowledge on the human societies, the influence on societal expectations, and the way the natural world grows. The retail industry is evolving, and the concept of sustainability becomes consistent with the core principles that underpinned the company since it opened doors 88 years ago (Woolworths Limited, 2007). The sustainability indicators are classified into social, economic, and environmental performance. In Woolworths monitoring and reporting framework, indicators are subdivided into two: core indicators and additional indicators. The core indicators are more relevant when reporting what matters to Woolworths and the interest of stakeholders most of all (Jacobs, 1991). Some of these indicators are net sales, water usage, establishment of new stores, expansion of existing stores, and the effective monitoring systems. Additional indicators present a leading practice in social, environmental, and economic measurements while providing possible measures that might be worth consideration in future as core indicators (Karakosta & Askounis, 2010).

Sustainability Dimensions As They Apply To Woolworths

Economic Dimensions. This dimension conveys how Woolworths affects its stakeholders directly or indirectly through an economic interaction. Woolworths forwards two types of economic indicators: direct and indirect indicators (Davison & Wilson, 2006). The direct indictors monitor the flow of funds between Woolworths and the key stakeholders. They also measure how the organization affects stakeholders’ economic circumstances. While the indirect indicators measure the externalities that Woolworths will commit to the community, economic dimension emphasizes on the direct indicator with the three key indicators which are the integration and expansion of the energy business model, refocusing the process of internal supply change management, and securing the growth strategies focus (Davison & Wilson, 2006). Other economic indicators pertain to issues of employee relations in the training process and remuneration. Finally, there is Woolworths’ community financial contribution, an investment seen as positive.

Environmental Dimension. In this dimension, the impact of Woolworths to the environment is considered. Woolworths greatest concern is the carbon emissions and energy saving. Using the monitoring system, Woolworths should provide both normalized and absolute measures that would foster the understanding of what to be developed and at what scale. Generally, Woolworths reports only in absolute figures. Though not included in other industrial benchmark, environmental footprint is included in this dimension (Davison & Wilson, 2006). As a result, this makes the process of understanding the magnitude and the scale of environmental impact difficult to monitor. The carbon emission is measured against the average stated by the government. However, this is just one of the few indicators that provide a clear comparison. This differs with the components of the other two dimensions.

Social Dimension. This dimension focuses on the impact of the organization on the sphere within which it operates. The monitoring system does not capture all the social aspects, and their measure merely meets the level of consensus of environmental dimension (Davison & Wilson, 2006). The key themes in Woolworths’ social dimensions are human rights, aspects affecting customers, labour practices, and community. The focal to this dimension is safety in the work place, customer service, community contribution, and employees’ development.

Specific Sustainability Area

Environmental Dimension: The Priority Issues

Some of the primary indicators for Woolworths environmental sustainability improvements are water, sourcing, climate change, sourcing, packaging, Green store, and waste. This dimension provides an overview on how the environmental issue influences Woolworths, their performance baseline, current situation, presented opportunities, and challenges. The process of measuring the environmental impact is quite complex with the scope definition being the major consideration (Pannell, 2003). Some of these are carbon emission assertion concerning transport. In the scope determination, there is a moment to focus on areas that have the greatest direct impact within which data limits the potential influence of the company. There are factors that are outside the scope such as purchasing behaviour and preference of customers. Some of the fundamental indicators that relate to Woolworths business operations in relations to environmental dimension are climate change due to houses using energy, emission of gases, use of fuel in transport, use of water, sourcing, and packaging.

Climate change

Climate change impacts the production of fresh food, a critical issue currently facing Woolworths’ operations and its sustainability program. Prolonged drought, several weather events, and their effects are some of the things that Australians have become wary about in the recent years (Woolworths Limited, 2007). This has greatly influenced pricing and availability of fresh products; thus the business has to reduce carbon footprint with the hope that it will reduce the company’s contribution to global warming. Retailing sector is energy-intensive that involves a lot of electricity for lighting, refrigeration, temperature control, and transport for distribution purposes. The climatic change landscape is shaped by a number of political and regulatory factors that includes the requirements to disclose emission, Australian Emissions Scheme implementation, and the increased awareness that followed the Stern report. Woolworths has more than 900 supermarket stores across Australia and New Zealand with the delivery vehicle travelling millions of kilometres each year (Woolworths Limited, 2007). In addition, Woolworths is one of Australia’s best known non-manufacturers of energy, therefore, accounting for 0.66% of the country’s total green house emission (Woolworths Limited, 2007). The 75 percent of Woolworths’ carbon emission is from its supermarkets and the rest from the other stores.

 

Today’s Knowable. In the calendar year of 2006, Woolworth’s greenhouse emissions were approximately 3.7 million tonnes of carbon dioxide equivalent. This is an approximate data due to the fact that the company cannot obtain the accurate data which is breakable to;

  1. i) 6 million tonnes of carbon dioxide in emitted from electricity use in the stores, distribution and the office.
  2. ii) Approximately 610kt Carbon dioxide is from the refrigerant gas leakage from the supermarket systems.
  • iii) Approximately 410 kt Carbon dioxide is used for transport, distribution for both the company’s fleet and employees travel
  1. iv) The waste to landfill that approximate to 160 kt of Carbon dioxide

Clearly the areas where improvements can make big differences are refrigeration, lighting, and air conditioning.

Carbon Dioxide Emissions by the Use

Presented Challenges and Opportunities

The greatest challenge is that costs of fuel and electricity are steadily rising. Besides, the advent of carbon pricing will add to these costs significantly (Woolworths Limited, 2007). Woolworths is taking steps to find ways to reduce fuel and electricity use by adapting and supporting other alternative fuels and renewable energy. This is integral to the business growth, and this will support the supply of fresh products to the customers (Woolworths Limited, 2007). Integrating alternative fuels and going green can reduce environmental impact while delivering healthier supplies at a reduced price.

Sustainable designs for the new stores. The new stores are the largest users of energy than the already existing one due to their larger size and increased use of refrigeration. There is a growing demand for a semi- and pre-prepared food items such as frozen meals and salads. The current decisions that Woolworths in relation to the new store designs that concern lighting, refrigeration, and air conditioning that will serve for the next seven to ten years as sustainable choices.

Fuel substitution and renewable energy Woolworths is investigating on options to switch from electricity to natural gas in possible areas. In many cases, gas operate air conditioning heat pumps, gas fired ovens, hot water systems, and even on-site generators. The company is also investigating on renewable energy generation using wind and solar power at the appropriate sites while investing in the technology that recycles energy.

Both gas and renewable energy options present limitations such as availability of technology, cost and site restrictions that require further investigation.

 

Water

It is common knowledge that water is the most important of all the natural resources. Compared to other industries, retailing sector is not a large user of water. However, the suppliers of fresh products heavily rely on availability of water (Woolworths Limited, 2007). Woolworths’s fresh fruit and vegetables are sourced directly from the local growers and farmers with the obligation not to wastewater.

 

Today’s Knowable. Woolworths’ supermarkets in Australia estimated water usage is approximately 2.2GL. This is not the actual metered usage volume that is not inclusive of the stand-alone stores that are metered. Some stores located in the shopping centres are not metered directly as the water rates are part of the lease rates.

 

Presented Challenges And Opportunities

Drought and bad weather events have caused the prices of dairy, grain, fresh fruit, and vegetable to rise, and they will continue to rise in future. The water crisis has no single solution, and the government has implemented polices on water usage and supplement through recycling and other measures at all levels (Woolworths Limited, 2007).

The National Drought Action Day was first held in January 2007 with the aim of raising money to assist the farming families affected by the drought. $4.7 million was raised and two thirds of this amount was distributed among the affected families and the remaining was used for Landcare, a program that funds sustainable expenses (Woolworths Limited, 2007). Some of these projects are South East Queensland Water Wise Project and Every Drop Count Program.

Water saving initiatives – Woolworths have implemented water saving initiatives at the water sites. The company has installed a one million litre capacity rainwater tank at the main support in Norwest Business Park and Sydney that houses more than 3,500 staff (Woolworths Limited, 2007). The tank collects stormwater that is used for toilet flushing, landscaping irrigation, cleaning, and car wash.

Sourcing

As retailer, Woolworths must develop and maintain a sustainable means of sourcing for products to meet the customers’ dynamic needs, a key issue for both international and domestic levels. The relationship with the suppliers is one of the key issues to retailer success that strives for growth (Woolworths Limited, 2007). A mutual relationship is therefore important for mutual benefits.

Today’s Knowable. Woolworths aggressively supports Australian farmers and growers who supply 97% of the company’s vegetable and fresh fruits (Woolworths Limited, 2007). The company continually work with the local growers in the development of new crops, product innovations, and farming technique. The company will remain committed to their long-standing commitment of prioritizing the vendors who meet the mandate of the supply (Woolworths Limited, 2007). The company’s global buying office is located in Hong Kong that has well-established practices and policies on how sourcing is conducted.

Global sourcing – There many issues that the Hong Kong office considers in the process of sourcing products international. Though the labour practices and environmental standards differ with other countries, Woolworths only accepts products from suppliers who meet Australian standards (Woolworths Limited, 2007). Some of issues accountable when making the purchasing decisions are safety, child labour, health, environmental impacts, and wages.

Presented Challenges and opportunities

Both technological and globalization advances have contributed to raising levels of choice and levels of availability. Therefore, it is important for Woolworths to understand that choices are made in supply of products and manufacture, and environmental factors have a great impact on this (Woolworths Limited, 2007). Woolworths must take the responsibility for the way the products are presented on the shelves to abide to the human rights of the workers and environmental impact. Many issues must be considered before sourcing from a supplier. Some of these are environmental standards and labour practices that vary when purchasing products from international markets. In some countries, issues such as working hours, safety, health, child labour, and wages are not taken into account as local suppliers should do.

 

Packaging

In the packaging supply chain, the retailers play an important role and have the capability to drive measurable positive change. Woolworths have dual role: brand owner and a retailer. The company has a committed for improvement by establishing cost-effective ways that reduces packaging while minimizing waste (Woolworths Limited, 2007). With all this in mind, Woolworths continues to deliver high quality products at lower prices. The company has several thousand private label products under their name including home brand, baker, fresh deli, dairy, and liquor.

The knowable – Woolworths is a signatory of National Packaging Covenant and the company has committed in the achievement of covenant objectives (Woolworths Limited, 2007). Woolworths has carried actions to minimize packaging and already has set goals for the next two years. Currently the company has taken initiatives that include:

  1. i) Minimized use of high-density polyethylene plastic bags implemented 30% and 15% use of recycled contents in the supermarkets and BIG W stores to close the loop for recycling (Woolworths Limited, 2007).
  2. ii) Plastic checkout bag recycling facilities in all supermarkets
  • iii) Introduction of reusable bags such as the blue chiller bags, enviro bags, and wine bags.
  1. iv) Using roll cages thus reducing the need for pallets and plastic shrink-wrap.
  2. v) Using plastic crates to transport produce from the supplier to the stores and supermarket eliminating the use of string nets, Styrofoam plastic bags, and waxed cardboards cartons.

Presented Challenges And Opportunities

           Plastic Bags usage. Woolworths has employed more than 30,000 service cashiers who work part-time or on casual basis. The company’s challenge is to ensure that these service cashiers understand and engage in the initiatives of minimizing plastic usage at the checkouts (Woolworths Limited, 2007). Woolworths has raised plastic bags awareness through training programs such as ‘Fill the bag, not the environment’ encouraging recycling and stock levels within the stores. Most of Woolworths’ customers are aware of the efforts of minimization of plastic bags seen in the strong initial reductions and the sale of the alternative reusable bags. 40% of all customers buy three items or less in the supermarket and for such transaction the company does not issue a bag unless requested to by the customer. 22% of the customers buy between four to eight items a possible indication of impulse buying and the customers have not brought reusable bags (Woolworths Limited, 2007). 37% of the customers buy more than eight items and most case they normally have a reusable bag.

Despite all efforts, spontaneous purchases will still happen and many people still use plastic bags for other purposes at home. This calls for more reinforcement on the importance of using the reusable bags.

Supply Chain. For the suppliers of private label goods, Woolworths can identify sustainable packaging guidelines. However, Woolworths has to consider cost of implications when making the decisions in the determination of a competitive price. Nonetheless, there are limits on how the company can influence packaging of other suppliers’ products.

References

Briassoulis, H. (2001). Sustainable development and its indicators: Through a (planner’s) glass darkly. Journal of Environmental Planning and Management 44(3), 409-427

Davidson, K. (2005). Towards an intergrated sustainability indicator framework. International Journal of Environment, Workplace and Employement 1 (3/4) 70-382

Davidson, K.(2004). Intergrating sustainability indicators. Newcastle: Prepared for the New Zealand and Australian Ecological economic conference, 148-157.

Davison, K. & Wilson, L. (2006). Measuring social, economic and environmental sustainability at the enterprise level: A case study of anAustralian Utility Corporation’sSustainability Report. Retrieved from http://eprints.qut.edu.au/6089/1/6089.pdf

Jacobs, M. (1991). The green economy: enviroment, sustainable development, and the politics of the future. London: Pluto Press

Karakosta, C & Askounis, D. (2010). Developing countries’ energy needs and priorities under a sustainable development perspective: A linguistic decision support approach. Energy for Sustainable Development 14 (2010), 330 –338

Keeble, J., Topiol, S. & Berkeley, S. (2003). Using indicators to measure sustainability performance at a corporate and project level. Journal of Business Ethics 44, 49-158.

Macintoch, A. & Wilkinson, D. (2006). Which Direction? A review of monitoing and reporting in Australia.

McCool, S., & Stankey, G. (2004). Indicators of Sustainability: Challenges and Opportunities at the Interface of Science and policy. Environmental management 33(3), 294-305.

Milne, M. & Gray, R. (2007). Future prospects for corporate sustainability reporting. Sustainability Accounting And Accountability. Retrieved from http://www.crcnetbase.com/doi/abs/10.4324/NOE0415384889.ch10

Pannell. D. (2003). What is the value of a sustainability indicator? Economic issues in monitoring and management for sustainability . Australian Journal Of Experimental Agriculture 43, 239-243

Woolworths Limited. (2007). Doing the right thing Sustainability Strategy 2007–2015. 2007. Retrieved form http://www.woolworthslimited.com.au/icms_docs/130514_Doing_the_Right_Thing.pdf

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