Corporate Sustainability: Selling the Sizzle

Leeth was a speaker at the fourth annual Wisconsin Sustainable Business Council Conference held in Madison, Wis., last week, but he wasn't there to talk about Smithfield's past transgressions. Rather, Leeth's presentation was about the company's ongoing efforts to redefine itself as a steward of the environment and a good corporate citizen concerned about the health and welfare of its animals, employees and communities.

One of Smithfield's steps along the way was to hire Leeth in 2008 as assistant vice president of environmental and corporate affairs and senior regulatory counsel. Who better to help the company address its "compliance issues" than one of the attorneys that helped prosecute the case against it?

Now speaking for his former adversary, Leeth said Smithfield has learned from its mistakes.

"As we were growing this company we realized we had to change. We had to be a responsible large corporate citizen. And so what we set out to do in the nineties was to adopt an environmental management system based on the ISO 14000 program. And, it started with our farms: all 500 of our farms became certified under that program in 2001... and that was followed by our plants. All of our facilities became certified in 2004," Leeth said.

Since then, sustainability has become one of Smithfield's primary drivers. "Lessons learned from that program we've applied to our animal care system and to our worker safety system," he said.

The result has been more than just a public relations and marketing campaign for the company, Leeth said. Since 2004, Smithfield has saved an estimated $211.1 million in operating costs through environmental improvement projects such as using box assembly machines that reduce packaging materials and updated control systems for boilers and refrigeration systems. That year, the company launched an employee environmental competition and award program that generated 31 projects suggested by employees, reducing costs by $2 million with virtually no capital investment.

By rewarding employees whose suggestions help the company achieve its environmental and safety goals while reducing energy consumption and related expenses, Smithfield's sustainability competitions have spawned an increasing number of projects over the years, including a record 168 in 2011, saving the company $13.2 million, Leeth said. Even more important, he said, the company's OSHA Recordable Injury and Illness rates have declined every year since 2005 and are now significantly lower than those of the meat industry in general.

"Workers' comp costs have literally been cut in half," he said.

But, the expense savings are miniscule in comparison to the other, less tangible advantages to developing a successful, demonstrable sustainability program, Leeth said. To a company with $3.7 billion in annual sales and 12,300 employees at its facilities in 12 countries around the world, reputation is everything.

"Brand management and helping our customers' brands are some of the most important things that this provides," Leeth said. "It gives us a platform to show that we produce good food responsibly. ... There's a cottage industry out there trying to show that large-scale agriculture is bad and the food industry is bad. There's a lot of inaccuracy in that and it's hard to get a good message across because this bad information sells. So what we're doing is trying to use these programs to show we are producing good food. We're a big company but we're doing this in a responsible way," he said.

Leeth said Smithfield is trying to be as "transparent" as possible, recently launching a new website that addresses its commitment to animal care, employees, the environment, food safety and helping communities. SmithfieldCommitments.com proclaims the company is "a global packaged meats company committed to producing... Good Food. Responsibly®."

Two other speakers at the Wisconsin Sustainable Business Council event shared many of Leeth's conclusions about corporate sustainability. Morgan Wiswall of Menasha Packaging Company and W. Shane Lauterbach of the Lauterbach Group represented two Wisconsin-based packaging companies that have both found ways to use sustainability programs to reduce waste, energy consumption, greenhouse gas emissions and related expenses while enhancing the reputation of an industry that has taken its share of blows over environmental concerns.

Wiswall said Menasha has received a lot of positive press for its investments in wind energy at some of its plants, even though the return on investment for the wind turbines would not normally have been deemed acceptable given the current cost of conventional energy. Like Leeth, Wiswall said his company has seen sustainability as a way to enhance the reputation of its brand and provide a level of resiliency should "cap-and-trade" laws or global events suddenly force energy costs higher.

Since its sustainability initiatives first took root in 2007, Menasha's Neenah, Wis., packaging complex has reduced its CO2 emissions from electricity and natural gas by 759 metric tons per year. Annual water consumption has been reduced by 5.8 million gallons. But Wiswall said the casual observer would never see the changes by walking through the plant, which produces corrugated cardboard boxes and other packaging.

"We do things like capturing waste heat off of our corrugators. A corrugator produces a tremendous amount of heat to bond the layers of paper, and previously that heat was just vented out of the building. Now we capture that heat, pump it back into the building and effectively in the winter we're not using any natural gas to heat the facility. But you can't see that."

So, to make their sustainability program more visible to the public, Menasha invested hundreds of thousands of dollars into wind turbines.

"We really felt that this would be something that would enhance our brand in the marketplace. And this is something that has, in fact, turned out to be true. It's definitely something we're using in our marketing materials. It's really a statement about what we're about as a company."

Wiswall said the wind turbine program has also enhanced the company's image in the eyes of its shareholders and employees, making it easier to find and retain talented staff. And he said, it helps enhance the brands of its customers as well.

Lauterbach said sustainability initiatives work best when they come from the staff level rather than from top management, because most efficiencies occur in the day-to-day processes that are understood best by staff.

"The change you can move forward with a simple idea at the staff level will drive the business far greater than me saying, ‘Hey, we're going to do this,'" Lauterbach said. He said it might be easier to calculate the return on investments in operational equipment and facilities, but improvements in people and processes provide a greater return in the long run.

As an example, he said the Lauterbach Group's printing and packaging operation in Sussex, Wis., diverted 65 percent of its waste from the landfill through staff initiatives in 2011, representing a savings of $70,000 annually, all for a total capital investment of $300. The company's goal for 2012 is to divert 90 percent.