The outdoors equipment and clothes retailer takes a long-term look at sustainability, including the challenges of paper usage, packaging and product stewardship. Find out how this eco-focused cooperative hopes to become more environmentally friendly, with initiatives that include reducing carbon emissions and landfill waste to zero by 2020.

By Abby Schultz

REI is a retailer people expect to care about the environment. After all, REI’s business is about outfitting people with the right equipment and clothes to enjoy the outdoors. The company has a long history of working with communities to take care of parks and trails and to introduce children to the fun of camping, hiking and rock climbing.

Earlier this year, REI came out with what it calls a “stewardship report” to tell its stakeholders what it’s been doing to address environmental and social issues, and the steps it’s taking to do better. The report also reveals REI’s aspirations, like reducing both carbon emissions and waste brought to landfills to zero by 2020. As Sally Jewell, REI’s President and Chief Executive Officer since 2005, tells it, REI has shifted from “random acts of kindness,” to a strategic focus on stewardship. “It is the way we do business,” Jewell says.

Taking care of the environment might not seem all that surprising for an outdoor retailer, but REI is discovering that being truly sustainable, to think about the effects on the environment within every aspect of REI’s business, is hard work.

“There’s a public perception that you just wave a wand and you become a perfect company and do the green thing,” says Kevin Hagen, who came to REI in August 2005 as Manager of Corporate Social Responsibility. One reason for the stewardship report was to “help folks understand what we are up against and appreciate the challenges.”

REI, based south of Seattle in Kent, Wash., is not an ordinary company. It’s a consumer cooperative, where those who pay a one-time fee of $15 become members for life, and get up to 10 percent back on their annual purchases through retail stores, online shopping and catalogues. Last year, REI distributed $58 million to 3.1 million members on sales of $1.18 billion.

Being a cooperative means REI doesn’t have access to the capital markets and has to run a healthier, stronger business, says Jewell. She views corporate social responsibility as a key element to building this strength.

“People can see the link between enjoying the natural world and preserving the natural world and they hold us accountable to it. Beyond that, there is nothing we are doing that is purely altruistic,” Jewell says. “What we are doing is important to the long-term health of the planet and therefore the long-term health of our business.”

REI has determined that the long-term health of the planet requires examining all aspects of its business with the goal of limiting, or eliminating, any harm to the environment.

Hagen gives two reasons for why shifting to a systematic, sustainable approach is challenging to put into practice. First, change within any organization is hard; “it really doesn’t matter what the change is,” he says. Second, the opportunities for making gains in sustainable practices require coordination across business units.

“The challenge is to have the whole organization see the big picture,” Hagen says. “You have to get everyone to play ball in a different way than business-as-usual.”

One of REI’s initiatives is to reduce the amount of waste going to landfills to zero by 2020. Based on an estimated analysis, REI recycles about 67 percent of its retail store waste by volume and landfills the rest. To boost its level of recycling, REI could choose to buy more expensive, recyclable packaging, and offset some of the costs through fewer waste-hauling fees. A sourcing manager who buys packaging material for the cooperative would need to understand the larger goal before voluntarily increasing costs for the company.

Becoming a sustainable business is also hard because of the many ways the environment can be affected from the supply chain through to the customer. The easy changes—like getting at least three trips out of every box used to pack items from REI’s distribution center to its stores—have been done. “Things that are in the waste now, we have to come up with some creativity to fix,” Hagen says.

Another of REI’s goals is the “responsible use of paper,” which, like many sustainable initiatives, is easier said than done. As Jewell notes, whenever REI cuts back on its use of catalogues, “our sales drop like a rock.” Catalogues and direct mail, however, accounted for more than 58 percent of REI’s 2006 paper usage, according to the stewardship report, so doing something about the use of paper in REI’s catalogues is an essential part of becoming a sustainable business.

REI’s first step was to develop a paper purchasing policy in collaboration with stakeholders from industry as well as environmental groups. The policy’s goals include buying lower levels of virgin paper per dollars of sales as well as a commitment to buying paper from well-managed sources. The most desirable sources, according to REI’s new policy, will be forests certified by the Forest Stewardship Council (FSC).

The policy is welcome news to groups like Forest Ethics. The environmental advocacy group gave REI a barely passing grade (D+) last December for not having a paper purchasing policy at the time, and for using virgin paper from non-FSC certified forests for about 90 percent of its catalogue paper, says Aaron Sanger, Director of Forest Ethics’ Corporate Action Program.

Forest Ethics, which was among the stakeholders that worked with REI on the new paper purchasing policy, remains concerned with the amount of virgin non-FSC certified paper REI uses, but Sanger is encouraged by REI’s goal of seeking FSC-certified fiber, and considers the new policy “better than average.” Sanger also praised REI for including Forest Ethics and others in the policy-making process and for publishing its goals and
current practices in the stewardship report and in periodic progress reports. “In terms of engagement with stakeholders and transparency, REI has really distinguished themselves,” Sanger says.

A third goal in REI’s environmental sustainability strategy is to reduce its greenhouse gas emissions to zero by 2020. In its first step toward reaching zero—taking inventory of its greenhouse gas emissions—the cooperative learned 26.2 percent of its annual 100,000 tons of CO2 emissions came from REI Adventures, a tourism business representing less than 5 percent of REI’s revenues. The figure includes roundtrip airplane travel for participants from their homes to destinations ranging from Provence, France, to the Canadian Rockies. REI’s response is to offset 100 percent of the emissions of its customers by buying “Green Tags” issued by the Bonneville Environmental Foundation. Each tag offsets emissions for one person traveling 1,030 miles, and is certified as reliable by Green-e, a certification and verification program administered by the nonprofit Center for Resource Solutions in San Francisco.

Some climate change solutions are more nettlesome to solve. Many of REI’s products are made in Asia in factories that rely on coal to produce heat and electricity, Jewell says. “At this point, we’re taking responsibility for the product when we take ownership of it, but we are not yet taking responsibility for the power generation to produce the product,” she says.

Instead of being discouraged by the complexities of addressing climate change, REI is focusing on the things it can do to make a difference. Its strategy involves driving down all sources of emissions within REI’s businesses, switching to alternative energy where it’s available, and investing in offsets for emissions it can’t reduce, such as customer travel. REI isn’t serial in its approach, Hagen notes. “It’s a parallel attack on all fronts.”

Another front in REI’s battle to become sustainable is in the development of its products and packaging. REI has begun using more sustainable materials, including organic cotton, hemp and even corn-based polymers for clothes it manufacturers, and the cooperative is in the process of conducting life cycle assessments for its products. “I think that it’s real important for companies like ours, both manufacturers and retailers, to really step up to what our responsibilities are in terms of total social and environment impacts of products,” Hagen says.

REI was among businesses involved in creating the Outdoor Industry Association’s (OIA) Fair Labor Toolkit, which gives companies guidance on how to ensure good working conditions at their supplier factories. REI and Timberland have since helped the OIA form a working group on sustainability issues that will address how product manufacturing affects the environment, among other issues. REI reached out to the industry because shifting manufacturing processes is too big a job for one retailer or manufacturer to tackle. “What we are really looking for is collaboration across the industry to have enough clout and resources and background to make substantive change,” Hagen says.

Back in 1996, REI made its first big sustainability statement when it opened its flagship Seattle store. Four years before the U.S. Green Building Association created the Leadership in Energy and Environmental Design standards for new construction, the store used recycled soda bottles as countertops, water-based glues and recycled building materials. REI has since built two stores, in Portland, Ore., and in Pittsburgh, Penn., that received LEED certification, and many other REI stores include green building features. Today, REI is remodeling its Boulder, Colo., location as an experimental prototype, a “working laboratory to help us determine where we can improve our environmental footprint and make fiscally responsible choices,” according to the stewardship report.

For some long-time observers and shoppers at REI who were intrigued by the flagship store and appreciated the company’s outdoor ethics, but were concerned the company wasn’t paying enough attention to issues like waste or packaging, the publication of the stewardship report is welcome news.

“Having been a member and shopped at REI since my childhood, I’ve always expected that they were an environmentally responsible business,” says Peter Drury, Development Director at the Sightline Institute, a nonprofit think tank in Seattle. “I was surprised to learn they weren’t as up-to-date as I expected. I’m thrilled to know they are in a position to lead the way now.”

At REI, its toughest audience is its employees. As Hagen says, REI employees take the garbage out, they know how much gets recycled, but they also know how much does not. For Hagen, the scrutiny makes the job of corporate social responsibility a bigger challenge, “because it’s not about putting together a great story, it’s about really living it and doing it.” n

CREDITS: Cover photography by Rick Dahms, photo of Sally Jewell in Volunteer Shirt by Matt Hagen.

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