sustainability – Page 7 – The OM Blog by Heizer, Render, & Munson

OM in the News: Blue Jeans and Sustainability

“The four-year drought in California is hurting more than just farmers,” reports The Wall Street Journal (April 10, 2015). It is also having a significant impact on the fashion industry and spurring changes in how jeans are made and how they should be laundered. Southern California is estimated to be the world’s largest supplier of so-called premium denim, the $100 to $200-plus-a-pair of designer jeans. Water is a key component in the various steps of the processing and repeated washing with stones, or bleaching and dyeing that create that “distressed” vintage look. Southern California produces 75% of the high-end denim in the U.S. that is sold world-wide. The area employs about 200,000 people, making it the largest U.S. fashion manufacturing hub.

Now that water conservation is a global priority, major denim brands are working to cut water use. Levi, with sales of $5 billion, is using ozone machines to replace the bleach traditionally used to lighten denim. It is also reducing the number of times it washes jeans. The company has saved more than a billion liters of water since 2011 with its Levi’s Water Less campaign. By 2020, the company plans to have 80% of Levi’s brand products made using the Water Less process, up from about 25% currently.

Traditionally, about 34 liters of water are used in the cutting, sewing and finishing process to make a pair of Levi’s signature 501 jeans. Nearly 3,800 liters of water are used throughout the lifetime of a pair of Levi’s 501. A study found cotton cultivation represents 68% of that and consumer washing another 23%. So Levi is promoting the idea that jeans only need washing after 10 wears. (The average American consumer washes after 2 wears.) Levi’s CEO recently urged people to stop washing their jeans, saying he hadn’t washed his one-year-old jeans at the time. “You can air dry and spot clean instead,” he said.

Classroom discussion questions:

1. Why is sustainability a major issue in the fashion industry?
2. What else can manufacturers do to cut water usage and waste?

Good OM Reading: Sustaining Sustainability

Steve Zaffron, CEO of the Vanto Group and co-author of the best-selling business book, The Three Laws of Performance, believes that sustainability nirvana occurs when social responsibility moves from being expressed in one-off initiatives, siloed in the corporate CSR office, to a way of being and acting that is embedded in the company culture and work habits of employees. Achieving this kind of breakthrough in an established company, with its legacy systems and time-honored practices, is proving to be a tough nut to crack for many sustainability executives, according to a new MIT Sloan Management Review (Feb. 2015) article.

Zaffron, interviewed for the article, has worked with a diverse group of organizations — from rocket-scientist NASA to labor-intensive mining — to achieve this kind of deep organizational renovation. His experience shows that leaps in human performance come less from tangible investments in things like automation, equipment or compensation schemes, and more through intangible transformations in the way people in organizations see themselves and others.

“It’s not an easy thing to change the way in which people see the world and themselves. It takes time to develop,”says Zaffron. And time is an underappreciated variable in sustainability. “It’s obvious when you say it, that sustainability means through time,” states Zaffron, but while perhaps obvious, managing time is a recurring sustainability challenge. If it interjects itself in business sustainability, time usually appears as a constraint imposed by market short-termism. “We’re talking about long-term engagements that are substantial investments,” says Zaffron. “Managers have to know they’re in for the long haul.” Unfortunately, today’s sustainability management is dominated by the search for “quick wins,” which account for over two-thirds of corporate sustainability initiatives.

As opposed to the tangible “quick wins” mindset, the intangible benefits arising from embedded sustainability behaviors take sustained effort to produce. But over time, they create differentiated capabilities that can set an organization apart in the marketplace.

OM in the News: Recycling Tech Waste

Responsible recyclers try to dispose of as little material as possible and reuse anything that still works

Maybe you replaced old electronics over the holidays or you’re just sweeping out the old and ushering in the New Year. Trying to recycle your old technology the right way is becoming easier by the day, writes The New York Times (Jan. 1, 2015). Stores like Best Buy and Staples now offer programs to take back old gadgets and recycle them. Still, most old devices end up in the trash. Americans alone throw away 2-3 million tons of electronics yearly according to the EPA. With the life span of devices shrinking (the average phone is replaced every 18 months) the problem is growing worse.

The toxic waste from all those tossed gadgets causes terrible damage to soil, water and people. And the U.N. calls electronic waste the “fastest growing waste stream in the world.” The recycling industry first began moving toward more responsible practices about 10 years ago, but the mission had changed from purely recycling to a greater emphasis on intercepting usable tech. If you recycle for raw materials, you get a portion of that product. But if you can reuse a cellphone, that’s the most environmentally beneficial of all.

To be certified, recyclers that collect e-waste have to show that they’ve tried hard to reuse products that come in — not just stripping them down and selling off individual parts, but trying to resell an entire phone, computer, printer or game console. The second level in the recycling hierarchy is to find parts and components that can be reused in other products. Touch screens can be sold to toy makers, for example, or circuit boards can be used in other computerized devices. And if the entire item can’t be sold, recovering heavy metals like gold, palladium and other raw materials inside electronics is a form of “urban mining.”

Classroom discussion questions:

1. Relate this article to the Triple Bottom Line discussed in Supplement 5.

2. How can electronic companies design and produce for sustainability?

OM in the News: Recycling and the New Ford F-150 Truck

Scrap from the F-150 is shredded and shipped back to suppliers to be turned into new sheets

Ford’s decision to build a lighter-weight pickup truck using aluminum body-panels has been billed largely as a way to achieve better fuel economy, reports The Wall Street Journal (Dec.17, 2014). It is also a recycling play. The 2015 F-150, perhaps the most important vehicle to hit Ford dealerships in decades, goes on sale this month. By the time a new truck exits the factory and heads for the showroom, it will have left behind $300 worth of scrap aluminum on the plant floor.

That scrap is collected, cleaned, and sent back to the aluminum plant on the same trucks that delivered it fresh—creating what CEO Mark Fields calls a “closed loop” that helps offset the expense of building its best-selling vehicle with a material that is far pricier than steel. “Every single scrap of aluminum is reused,” says Fields.

Every day, 50 semi tractor-trailers drive out of Ford’s F-150 plant in Dearborn, Mich., with thousands of pounds of shredded aluminum, scrap that was stamped out of 6-foot-wide aluminum rolls used to make F-150 body panels. Only 60%-65% of a roll is actually used in the stamping process because many body panels have big holes, such as windows. Ford installed systems to separate the six different aluminum alloys it uses and return them to mills in Iowa or New York, to be turned back into aluminum sheet for delivery to its Dearborn stamping plant. Ford’s aluminum recycling system, installed as part of a $359 million overhaul of the Dearborn factory, allows the company to recoup up to $300 a truck, helping offset about 20% of its higher production costs.

Classroom discussion questions:

1. Why was an aluminum F-150 a big risk for Ford?

2. What is a “closed-loop” system?

OM in the News: Sustainability and the Ford F-150 Truck

“Bucolic upstate New York is an odd place to be building the future of the U.S. auto industry,” writes Forbes (Nov. 24, 2014). Yet here, in a factory that makes aluminum cans for the beverage industry, workers are gearing up for a crucial role in the launch of the next generation of America’s bestselling vehicle.The Novelis plant is the birthplace for Ford’s innovative new F-150 pickup, 700 pounds lighter–and thus more fuel-efficient to meet government requirements–because its steel body panels have been replaced by lightweight aluminum. The stakes could not be higher. The F-150 pickup is Ford’s crown jewel, generating $20 billion in revenue annually and 40% of its annual profits.

Novelis, the world’s largest aluminum recycler, showed Ford how it could afford the switch to higher-priced aluminum (adding about $750 per truck) by using recycled scrap instead of buying virgin aluminum mined from bauxite. Together they created an innovative supply chain that allows Ford to recover a big chunk of its aluminum costs by selling the scrap back to its suppliers and reusing it. The rest of the industry is watching closely. Tough new fuel-economy laws require automakers to double their fleetwide average to 54.5 mpg by 2025.

Here’s how it works: When a vehicle body panel is stamped, about 40% of the metal winds up as scrap. Instead of gathering up all the various metal scraps from its stamping plants, Ford installed pneumatic scrap-handling equipment that will separate the aluminum alloy on conveyors and deposit the scraps in dedicated containers. Novelis contracted a fleet of 150 trailers to ship the scrap back to its plant for reprocessing. The scrap is then melted in a 2,000-degree furnace. Once the molten metal is ready, it is cast into massive 30,000-pound ingots for subsequent processing. It’s then ready to be rolled into sheets 1/16 of an inch thick and shipped in giant coils back to Ford’s stamping plants, where the process begins anew.

Novelis’ goal is to have 70% recycled content in its automotive sheet by 2020, up from 10% five years ago.

Classroom discussion questions:

1. Why is the switch to aluminum a big risk for Ford’s F-150?

2. What are the advantages of this process?

OM in the News: Airlines Fly on a Sugar High

GOL's flight uses a blend of farnesane and jet fuel — GOL’s flight uses a blend of farnesane and jet fuel

The red-and-white Boeing 737 looked like any other plane on the tarmac here at Orlando International Airport. But 2 months ago, the plane became the first commercial flight powered by a new jet fuel made from sugar cane. The passenger flight, operated by the Brazilian airline GOL, flew from Florida to São Paulo on a 10% blend of a clear liquid called farnesane mixed with regular jet fuel. And last month, Lufthansa flew a passenger plane from Frankfurt to Berlin on farnesane, which can be mixed directly with petroleum jet fuel without any changes to planes, engines or fueling equipment.

Renewable bio-jet fuels like farnesane hold the elusive promise of better energy security, reduced carbon emissions and lower fuel costs — an increasingly pressing concern as international regulators prepare to tighten regulations, reports The New York Times (Oct. 8, 2014). The global aviation industry has also set ambitious goals to reduce its greenhouse gas emissions, including slashing emissions by 50% by 2050 compared with 2005.

Airlines like United, KLM and Alaska Airlines have flown planes powered by oil made from algae, used vegetable cooking oil and plants like camelina and jatropha. In spite of initial excitement, commercial airlines have not widely adopted bio-jet fuels, mainly because of their high cost. But farnesane could be more commercially viable because it is produced in Brazil, which has a robust policy and infrastructure to promote and produce biofuels. (Brazil is the world’s largest producer of sugar cane as well as the second-largest producer of ethanol. A majority of light vehicles on the roads in Brazil can run on ethanol, which is made from domestic sugar cane.) According to rigorous testing by plane makers like Boeing, farnesane and other types of bio-jet fuel actually perform better and burn cleaner than conventional jet fuel.

Classroom discussion questions:

1.Why is this new jet fuel an OM issue?

2. What are the advantages and disadvantages of farnesane?

OM in the News: Sustainability and Natural-Gas Truck Sales

A factor limiting natural-gas-powered truck sales is the arrival of new, more fuel efficient diesel engines

“In the midst of the strongest market for commercial trucks in 8 years, sales of natural-gas-powered haulers are just crawling along,” writes The Wall Street Journal (Aug.26, 2014). Higher purchase prices compared with diesel trucks, improved diesel fuel economy and continued scarcity of fueling stations are damping natural-gas-powered truck demand. Forecasters had expected sales to about double to 16,000 vehicles this year amid the trucking industry’s enthusiasm for natural gas a year ago, but only a 20% increase took place.

What happened? A big roadblock remains the premium for a heavy-duty gas truck—$50,000 more than the about $150,000 for a new diesel-powered truck. In theory, the payback for that higher price is recovered from fuel savings of $1.60-$1.70 for the gas equivalent of a gallon of diesel. Paybacks can average 4 years considering the average truck travels 125,000 miles a year. But fleet operators typically replace their vehicles every 3-4 years, leaving little time for them to benefit from the lower fuel costs of natural-gas-powered trucks. And the limited number of natural-gas refueling stations limits the switch to gas. Only about 750 natural-gas fueling stations are available in the U.S., and not all of these can accommodate large trucks.

The good news: UPS this year has ordered about 300 gas-powered heavy-duty trucks and bought 700 gas tractors last year. The trucks operate mostly in corridors in the West and South that have plenty of natural-gas stations, some of which UPS helped to finance. By the end of the year, about 2% of UPS’s 100,000 vehicles world-wide will be powered by natural gas. In addition, Wal-Mart, Office Depot, Lowe’s and P&G are among the companies requesting their trucking suppliers use natural-gas vehicles to comply with corporate policies to reduce carbon dioxide emissions and pollution caused by burning diesel fuel.

This article nicely complements our treatment of Life Cycle Ownership and Break-Even Analysis on p.195 in Supplement 5.

Classroom discussion questions:

1. What are the advantages and disadvantages of natural -gas-powered trucks?

2. Why have sales stalled?

Video Tip: Sustainability and the Sports Arena

The Eagles' home stadium has 14 wind turbines and 11,000 solar panels — The Eagles’ home stadium has 14 wind turbines and 11,000 solar panels

When you are teaching Supplement 5, Sustainability in the Supply Chain, you may want to show our latest video on sustainability at the Orlando Magic’s Amway Center. This arena became the 1st gold-certified LEED basketball facility in the U.S.

Now The Wall Street Journal (May 19, 2014) reports that NFL teams are starting to see “green” as well. The San Francisco 49er’s new $1.2 billion stadium will be the first in the league to feature a “living roof,” a canopy of green and flowering plants nestled across the top of an 8-story tower of luxury suites; this will reduce the building’s energy use and offer other environmental benefits by providing natural insulation. NFL clubs are also developing green programs to reduce energy emissions. They are using solar panels, wind turbines, electric charging stations and other low-carbon alternatives. The NFL is part of a general effort among U.S. sports leagues to embrace cleaner energy, led by a group launched in 2011 calling itself the Green Sports Alliance.

Alliance officials say sports teams that go green help boost public awareness of environmental goals while also benefiting their operations by lowering their energy costs. The $1.2 billion Atlanta Falcons Stadium, set to open in 2017, will include a rainwater-collection system to use for irrigation and cooling. The Philadelphia Eagles’ Lincoln Financial Field has installed features including energy-saving timers and sensors for lighting and cooling equipment. These and other energy-saving features have cut the team’s power consumption by half. The Houston Texans have created an interactive media guide, saving 2.6 million pages used in printing; the Redskins have installed solar panels at FedEx Field; the Rams have printed game tickets on recycled paper; the Vikings have put in reduced-flow plumbing at the players’ clubhouse and training areas; and the 49er’s stadium is net energy neutral, which means it is expected to generate all the energy it needs for the team’s 10 home games.

OM in the News: The Environmentally Friendly Paper Cup

Starbucks has been serving in paper cups for years

Jamba Juice, McDonald’s, and several other food chains are starting to serve their drinks in paper cups. Drinks stay just as hot and cold in new doubled-walled paper cup as in the old non-biodegradeable foam variety. The paper industry likes it a lot too. Demand for paper cups is growing 5% a year. Environmental concerns from consumers and new bans on plastic foam in more U.S. cities are prompting food chains to make a switch, reports The Wall Street Journal (April 11, 2014).

Jamba Juice said last year it would adopt paper cups for its smoothies and other cold drinks “to improve our environmental footprint.” McDonald’s is replacing plastic-foam cups with double-walled McCafe paper cups at all 14,000 McCafes across the country. The company says it is trying to be more environmentally conscious and cut costs on trash. Dunkin’ Brands Group Inc. has said it is testing paper cups. These companies join Starbucks, which has been using paper for years.

Environmental advocates say paper is easier on the environment than plastic foam because the latter tends to break up in landfills and then is mistaken by animals for food. Plastic foam is difficult to recycle unless it is kept clean and separated from other types of plastics—so many plants in the U.S. don’t take it. It isn’t biodegradable.

Paper cups are slightly more expensive than foam. Extras like double walls for insulation or plant-based lining to make it compostable add to the price. While the paper cups cost a few cents more, McDonald’s says it will make up the difference in the trash. Most of the chain’s waste is paper-based– wraps, fry cartons and Big Mac boxes—so paper cups can go into the same trash bin, and eventually into recycling bins.

Classroom discussion questions:

1. Why is McDonald’s switching from foam to paper cups?

2. Why are plastic foam cups a concern to society?

OM in the News : Wal-Mart’s Green Initiative

In our new chapter, called Sustainability in the Supply Chain, we note Wal-Mart’s role in developing a sustainable product index. A leader in making its operations more environmentally sound, Wal-Mart’s impact on global supply chains is the topic of an interview in The Wall Street Journal (April 9, 2014). Here is what CEO Michael Duke has to say:

It’s not about a corporate team. It’s about getting 2 million people who work for Wal-Mart excited all over the world about sustainability. But also our partners that we work together with. How do we create a company that has zero waste? But we’ve established a goal to reduce energy consumption. We want to have a reduction of 20% of energy consumption, kilowatt-hours per square foot.

This past year, we established something for our merchandising. It relates to the sustainability index, which lets us measure the products that we sell related to sustainability, from the footprint all the way through to the consumption and the full life cycle of the product. It causes the merchants then to look at everything that we sell and say, “How do we improve the index?

Working with our suppliers, we went to more concentrated, taking water out of liquid laundry detergent. So the liquid detergent that was this big of a bottle became [a smaller] bottle, but did just as many laundry loads. Recently, we’ve worked with Clorox, and now bleach is that way.

We’ve had a big initiative in other countries to try to raise the bar with factories on how product is manufactured. We kicked off with several hundred suppliers in China to increase energy efficiency, create more sustainable production practices throughout China. We kicked off this past year a big initiative on product made in the U.S. With rising cost of energy and moving product all over the world, it makes more sense in the long-term for more product to be made closer to the consumer.

Classroom discussion questions:

1. Why has the firm made this “green initiative”?

2. What is the sustainability index?

OM in the News: Ford Touts Car Parts Made From Plants

If you’re driving a new Ford, chances are you’re sitting on a seat filled with foam made from soybeans, reports the Orlando Sentinel (March 14, 2014). It’s part of the push by many automakers to produce cars that are cleaner and greener. Plant-based materials that are used now or are in some phase of development by Ford include:

1. Fibers from coconut husks that can be included in sound-absorbing underlayment for carpet.

2. Wheat straw that is showing promise as reinforcement for plastics.

3. Latex extracted from dandelion roots to produce natural rubber, potentially replacing rubber from Asia or synthetic rubber made from petroleum.

“We are a group of research scientists developing these formulations and composites and looking at non-traditional materials and implementing them in our vehicles,” says a Ford engineer. The long list of automobile parts and pieces made traditionally from petroleum ingredients include cup holders, floor mats, engine O-rings and seals, dashboard trim and many more. A typical car is made with 100 kinds of plastic materials that weigh a combined 300 pounds, which includes 30 pounds of seat foam. Ford requires plant-based materials to perform as well as and cost no more than conventional products.

Classroom discussion questions:

1. Relate Ford’s move to the “Triple Bottom Line” concept introduced in Supplement 5, Sustainability in the Supply Chain.

2. Why is Ford moving towards green manufacturing?

Good OM Reading: Sustainabilty’s Next Frontier

For the past 5 years, MIT and the Boston Consulting Group have studied the sustainability challenges facing US firms. This new report’s findings are both encouraging and disconcerting. The study found a disconnect between thought and action on the part of many firms. For example, 2/3 of respondents rate social and environmental issues, such as pollution, as “significant” or “very significant” among their sustainability concerns. Yet only about 40% report that their organizations are addressing them. Even worse, only 10% say their companies fully tackle these issues.

More than 90% have developed a sustainability strategy, compared to 62% among all respondents.
70% have placed sustainability permanently on their top management agenda, compared to an average of 39%.
69% have developed a sustainability business case, compared to only 37% of all respondents.

These leading companies suggest a path forward. MIT calls them “Walkers” — companies that “walk the talk” by identifying and addressing significant sustainability concerns. “Talkers,” on the other hand, are equally concerned about the most significant sustainability issues, but address those issues to a far lesser degree.

Data from the past 5 years shows that many organizations are struggling to move forward. For example, the percentage of companies that have established a sustainability business case has only grown from 30% to 37% during this period. More than half of the respondents have either failed to establish a business case or haven’t even tried to create one. The percentage of companies that report their sustainability efforts are adding to profits has consistently come in at roughly 35% since 2010. Many companies have hit a crucial inflection point. They have reaped the immediate gains from sustainability but have yet to embark on the next level: addressing the most significant sustainability issues.

This is an interesting report that you may wish to share with your class when you cover our new chapter on Sustainability in the Supply Chain (Supp.5).

OM in the News: China’s Toxic Legacy From Its Rare Earths

A rare earth ingot is prized for its magnetic properties, but refining is a dirty process

Manufacturers of high tech products rely on a steady stream of 17 “rare earth” metals to make their goods. These lightweight, malleable minerals are essential to hybrid cars, cell phones, and disk drives. Rare earths had skyrocketed in price in the past a few years ago as China, the world’s dominant producer, unilaterally imposed taxes and annual tonnage limits on its exports. Lanthanum, for example, jumped from $4.5/lb to $73/lb. Neodymium surged from $9/lb to $207/lb and dysprosium from $243/lb to $1,135/lb.

But the Chinese export restrictions have become less important recently for two reasons, reports The New York Times (Oct.23, 2013). Alternative rare earth mines have gone into production in the US and Australia, reducing China’s share of global production to 85%, from 95% three years ago. And companies have become much more efficient about economizing on rare earths, especially the costliest ones, such as heavy rare earths like dysprosium. The global oil industry has similarly begun using less lanthanum during oil refining. Only 1.5% of the latest catalyst formulations for oil refining are now lanthanum, down from 4-5% three years ago.

Communities scattered across China face heavy environmental damage that accumulated through 2 decades of unregulated rare earth mining and refining. China’s recent white paper detailed environmental harm caused by the industry, and was used to try to justify the need for export restrictions. “Excessive rare earth mining has resulted in landslides, clogged rivers, environmental pollution emergencies and even major accidents and disasters, causing great damage to people’s safety and health and the ecological environment,” said the government report. Whole villages in Inner Mongolia have been evacuated and resettled elsewhere after reports of high cancer rates associated with the refineries there. A hazardous stew of toxic chemicals and low-level radioactive waste from refineries has been dumped into the world’s largest tailings pond, which covers 4 square miles near the Yellow River.

Classroom discussion questions:

1. Why are rare earths important in manufacturing?

2. Provide examples of products (not mentioned in the article) and their specific rare earths.

OM in the News: Sustainabilty in Trucking Logistics

Here is a great article that ties into our new chapter, “Sustainability in the Supply Chain” and its Example S2 (see p. 195) dealing with life cycle ownership/break-even analysis. The Wall Street Journal (Oct.30, 2013) writes: “Operators of some of the largest U.S. truck fleets, including Lowe’s , P&G, and UPS are accelerating a shift to natural gas fueled trucks, betting on new engine technology that promises to drop the cost of shifting from diesel fuel.” Lowe’s wants its delivery company to shift all of its several hundred trucks to natural gas by 2017. P&G already has 7% of its trucks on gas and could reach as much as 20% within two years. UPS says it plans to buy 1,000 natural gas trucks by the end of next year. FedEx plans to shift 30% of its long-distance trucks to natural gas over the next decade.

The nation’s supply of relatively cheap natural gas is helping spur this shift. So are new natural gas engines that can power heavy-duty trucks that weigh up to 80,000 pounds. About 5% of all heavy-duty trucks sold next year will run on natural gas, up from 1% this year. Barriers to wider use are coming down, driven by the relatively low-cost of compressed natural gas, or CNG, which sells for about $1.50 less a gallon than its equivalent in diesel fuel, which averages about $3.87. Natural gas also produces less carbon dioxide, carbon monoxide and sulfur-based pollution than diesel or gasoline per mile driven. Diesel-engine trucks get 5-7 mpg and average 100,000 miles a year.

Waste Management, Inc. has converted 15% of its 22,000 truck fleet to natural gas, and 90% of its future purchases will be natural gas fueled, helping it save $15,000-$20,000 a year per truck, a 2-year payoff. The cost of the natural gas vehicles is still an issue. CNG trucks cost $40,000-$50,000 more than a diesel truck, which costs about $120,000. In large fleets, that premium could add millions of dollars to equipment cost.

Classroom discussion questions:

1. Why is the switch to CNG trucks an OM issue?

2. What factors are driving the change?

OM in the News: Walgreen’s “Net Zero Energy” Stores

Roof of new Walgreen store in Evanston, IL contains 800 solar panels

As the Walgreen Company expands its sales items to fresh salads, Redbox DVD rentals and digital photo scanners, among other products, its consumption of power keeps inching up. While the drugstore chain cannot significantly reduce its electricity use in all stores immediately, it is building its first “net zero energy” store in Evanston, IL, that it hopes will produce more energy than it consumes. Alternative energy equipment at the store includes more than 800 solar panels on the roof, two 35-foot wind turbines and a geothermal energy system dug hundreds of feet beneath the store’s foundation.

The net zero concept is part of the retail giant’s overall sustainability plan to reduce energy use by 20% by 2020 across all of its more than 8,000 stores, reports The New York Times (June 5, 2013). The cost of building the new store will be about twice that of a typical new store. Over time, however, executives expect to recoup the extra costs from reductions in the store’s energy use, tax credits and rebates from utility companies.

Walgreen is also incorporating several conservation and energy producing strategies in existing stores, including LED lighting, energy-efficient building materials and carbon dioxide refrigerant for heating, cooling and refrigeration.

The new store, on the site of an old store that had been razed, is being built by recycling more than 85% of the demolished store’s material like bricks, concrete and metal. In addition, Walgreen has drilled eight 550-foot holes for pipes — about as deep as the landmark Chicago Board of Trade building is tall — to create a geothermal energy system that will use the constant temperature of earth to heat and cool the building.

Discussion questions:

1. Why is Walgreen developing the “net zero energy” store?

2. What is the chain’s sustainability strategy?