| 03/12/2008 - Hudson Bay Company: A case study |
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By Roslyn McMann Hudson’s Bay operates over 580 banner stores across Canada. The Company is Canada’s oldest diversified general merchandise retailer and fifth largest employer with nearly 70,000 associates and operations in every province in Canada. The company became private in 2006. “Its major retail channels - the Bay, Zellers, Home Outfitters, Designer Depot and Fields - together provide more than two-thirds of the retail needs of Canadians.”1 The beginnings of an environmental & energy program… Hudson’s Bay began implementing a coordinated environmental and energy program in 1999. Today, Hudson’s Bay has three core principles that dictate its environmental programs: 1. Continuous evaluation of environmental policies and procedures 2. Environmental improvements in operations 3. Educating associates, customers and partners. Continuous evaluation of policies and procedures is achieved through an ‘Environmental Sustainability Team’ that meets regularly to “review energy consumption and waste throughout Hbc and to develop programs and policies to help reduce energy use, waste, packaging and emissions.” 2 This committee has representation from various divisions from Engineering to Finance and Marketing. Procedures are also reviewed through surveys and continuous monitoring of energy consumption in stores. Environmental improvements in operations are tracked through annual greenhouse gas tracking, which includes: natural gas, propane, fleet, oil, steam and electricity emissions. Education is done through involving employees in recycling, internal newsletters and the involvement with the Retail Council of Canada environmental committee. Since beginning its program, Hbc has reduced its emissions intensity by 16% and saved over 12% on their overall operating costs. A competitive industry According to Michael Porter, “the nature and degree of competition in an industry hinges on five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services and the jockeying among current contestants.”3 In the Canadian retail market, new international entrants and global forces, such as Walmart, are increasingly filling the landscape. In addition, with a wider selection of products, customers are able to demand lower prices and better quality. These forces have lead to a competitive retail environment with low profit margins. This high level of competition makes it imperative for Canadian companies to look to new areas to attract investment, new customers, and build competitive advantage through reducing costs, innovation and process improvements. Sustaining the competitive advantage In their 2006 study “Canadian Powers of Retailing: the search for sustainable growth” Deloitte suggests six trends for Canadian retailers to help them sustain competitive advantage, one being to go-green: “green retailers will add green to the bottom line.”4 From the resource-based perspective, sustaining a competitive advantage is dependent on developing key resources that are valuable, rare, inimitable and non-substitutable.5 The ways cited in the report include increasing energy efficiency, reducing waste, energy use and emissions, and green product innovation. Orlitzky et al. conducted one of the most conclusive and comprehensive studies on the positive correlation between environmental performance and financial performance (2003). Research included a meta-analysis of 52 studies on the relationship between corporate social/environmental performance and financial performance. The study found that companies that have good environmental/social performance are also good financial performers and vice versa. Hbc has an annual energy spend of several million making it the third highest expenditure in operating costs. It is both a material expense and a significant contribution to their annual greenhouse gases emissions. Hudson’s Bay has been implementing programs to reduce energy and emissions since 2000. This approach has resulted in savings both in energy and emissions, with electricity savings of over 12% per year6 and an emissions reduction from its operations by 16% since the baseline year. Business risks and opportunities
When Hudson’s Bay embarked on its energy and environmental program, the benefits were considered to be twofold: cost savings and competitive advantage.
Hbc perceives both risks and opportunities associated with climate change*:
Hbc may be able to realize the opportunities below associated with climate change:
The perceptions of an issue as a threat or an opportunity has a key influence on how environmental strategies are formulated. Managers who interpret an issue as an opportunity are proactive and take early action to “manage organizational identity, image and reputation with key stakeholders…” (Sharma et al., 1998) and are successful in creating competitive advantage, while managers who perceive the issue as a threat are reactive and take no action until it is mandated. Hbc began taking action prior to the ‘tipping point’ environmental movement in 2006, indicating that managers perceived the issue as an opportunity. Energy Efficiency Hbc’s environmental strategy has evolved since it first started implementing programs to reduce energy in 2000. The company started with focusing on energy reduction through energy efficiency programs (such as lighting, building and HVAC retrofit programs) and energy conservation (energy awareness programs). These programs were very successful; by 2003 the company had avoided several million dollars in energy costs from the baseline year 2000.7 More recently, the company has begun to test new technologies and introduce new products. Innovation – Clean Technology/Sustainable Technology In 2006, Hbc completed a pilot test on 12 of its fleet vehicles, running on Biodiesel. The company reduced emissions of its fleet during this pilot, and found no appreciable difference in performance and is looking to expand this fleet. Also in 2006, Hbc in Toronto began using an innovative system to cool its 32-story head office and 1-million-square-foot Bay store on Queen Street. The new system, called ‘deep-water cooling’, “uses 90 percent less electricity than conventional chillers, conserving close to 23 million litres of water each year and eliminating ozone-depleting refrigerants.”8 By reducing the need for chillers in these facilities, the company reduced its emissions by 1,112 tonnes of carbon dioxide equivalent. The company also supports new technology through its green procurement program. Hbc has committed to purchasing 2000 Green Power Certificates from BC Hydro each year until the 2010 Olympic Games.
"As part of our national efficiency strategy, we will continue to find new and innovative ways to conserve energy and contribute to protecting the environment.”
- Marc Gagnier, Vice-President, Operations, Hbc.9
Right to operate –Transparency, Green Design As one of Canada’s most recognized businesses, Hudson’s Bay is “socially vulnerable” (Hall, et al., 2005). Research shows that these socially vulnerable companies may have to go beyond legal compliance to achieve community approval or a ‘social license’ to operate (Hall et al., 2005). As Hbc plans to expand two of its main lines of big box retail stores significantly, (Home outfitters by 35% and Designer Depot by 500%) the company will need to ensure its ‘social licence’ is valid. In addition to producing a CSR transparency report, the company has advanced its green building design. On December 1, 2007, the company opened a ‘green test store’ in Waterdown, Ontario. The building, a Zellers store, is the greenest Zellers store to date. The facility has wind turbines, solar panels, Interface carpet, green cleaning suppliers, the most efficient lighting, roof top economizers, and waterless urinals, among others. A sustainable future Hbc has taken many steps towards becoming sustainable. “Pollution prevention, product stewardship and clean technology all move a company toward sustainability.”10 Hart & Milestein (1998) state “foresight is the key to survival. Managers able to perceive trends and weak signals where others see only noise or chaos can capitalize on the changing nature of the market to reposition their firms before new entrants become a serious threat.”11
“Knowing where the world is going is being perceptive. It evolved from ‘we might as well start now, it means saving costs in the future’. Now the curve shows a payback quicker than we thought – so that’s a bonus for early action.”
- Brian Benson, Director of National Energy Programs, Hbc
1 Hudson’s Bay Website, accessed December 2, 2007.
http://www.hbc.com/hbcheritage/history/overview.asp |