Climate Change Disclosure We recognize that climate change is a significant global issue. The company is taking steps to reduce its energy use and greenhouse gas (GHG) emissions. Grainger has participated in the CDP since 2009, providing detail on business risks and opportunities related to climate change. In 2012, we became the first industrial distributor to publicly disclose its carbon footprint.
Dow Jones Sustainability Index Grainger, recognized for its corporate sustainability leadership, debuted in 2017 on the North American Dow Jones Sustainability Index. The Dow Jones Sustainability Indices are a family of global benchmarks for corporate sustainability, tracking companies based on investment firm RobecoSAM’s analysis of financially relevant environmental social and governance factors. Currently, Grainger is the only industrial distributor in the North American Index.
Greenhouse Gas Emissions (GHG)
We are committed to the global effort to reduce GHG. We focus our reduction strategy around two specific areas: reducing GHG intensity and waste in our own operations and supporting emissions reduction strategies in our supply chain through collaboration and increased transparency. Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy.
Scope 1 and 2 We chose 2011 as our baseline year, in which emissions totaled 142,306 metric tons. Since 2011, we have reduced Scope 1 and Scope 2 emissions by nearly 22 percent. In 2017, our Scope 1 and 2 GHG emissions were 110,654 metric tons. To help offset these emissions we generate renewable, zero emissions energy and participate in green energy procurement.
Grainger’s intensity metric includes the GHG emissions from operations that were under direct operational control as of 2014, the year our goal was set. This includes W.W. Grainger, Inc. in the U.S., Grainger Mexico and Acklands- Grainger in Canada. Starting in 2015, Grainger improved its calculations to include all North American business within operational control after 2014. We verified only our U.S. data through a third party in 2011. Therefore our baseline year calculations include estimates for Acklands-Grainger and Grainger Mexico. We calculated these estimates using the average of 2012 and 2013.
Intensity Target In 2013, Grainger became the first industrial distributor to set a GHG reduction goal. Our target is to reduce our North American Scope 1 and Scope 2 GHG emissions intensity per unit revenue 33 percent by 2020. The goal was designed to be achievable, yet challenge our operations to identify innovative ways to operate more efficiently. We are right on our target, and have reduced MTCO2E/Revenue intensity to 12.5, a 33 percent reduction since 2011. Our 2020 goal focused Grainger on doing business the right way by investing in 5.3 MW of renewable energy and energy efficiency through the installation of Building Management Systems (BMS). To drive progress toward this goal, our GHG target is included in the performance appraisals for our corporate sustainability team. In addition, energy reduction projects reduce utility expenses and improve operating expenses, indirectly affecting profit sharing for U.S. team members.
Energy Use We continue to invest in key facility enhancements, engage employees, and incorporate sustainability principles and continuous improvement into our real estate footprint. Grainger’s facilities account for about 90 percent of our annual energy use in North America. We focus our efforts to improve energy efficiency in our largest buildings, including corporate offices and DCs.
Facility Performance Optimization
In 2017, in order to help benchmark and standardize opportunities across our network, we conducted deep dive energy audits on 4 of our 10 major DCs in North America. We discovered commonalities among energy loads and batteries, HVAC systems, lighting, conveyor systems and air compressors, to name a few. All of these areas offered strategic opportunities for long-term efficiency gains. We then rolled out our discoveries to our branch network and corporate and administrative facilities, with similar success. Additionally, we found it to be very effective to implement comprehensive building management systems in key locations, update to LED lighting and other turn-key solutions with great return on investment timeframes, and various other initiatives.
Renewable Energy We are committed to doing business the right way and embed sustainability into our operations wherever feasible. In total, Grainger currently has 5.3 MW of solar panels installed on the rooftops of its DCs. These systems have met all energy generation and financial expectations, have minimal maintenance requirements, provide a reliable monthly financial benefit and offer a significant percentage of energy independence, lowering operational risks.
In 2017, Grainger celebrated the grand opening of its new DC in Bordentown Township, N.J. (NEDC) The 1.4 million-square-foot facility stocks more than 300,000 items and allows the company to deliver more products by the next day to customers in the Northeast. The DC runs on state-of-the-art distribution technology enabling real-time order processing. A 4.3 megawatt solar panel system was installed on the facility’s roof. This system included 13,000 high efficiency SunPower solar panels that generate on average about 40 percent of the DC’s annual electricity requirements, which is equivalent to 1.6 percent of Grainger’s North American carbon footprint. In early 2018, the U.S. Green Building Council (USGBC) approved LEED GOLD certification for the NEDC. This project will not only reduce annual operational expenditures significantly, but it will also play a key role in helping us meet our GHG reduction goals.
We consider investments in renewable energy on a case-by-case basis as part of new project plans. Our decisions to invest often occur in locations where we can offset energy use, improve operational efficiency and create a return on investment.
Building Management Systems Our BMS are the primary means through which Grainger achieves its energy efficiency goals. When operating optimally, they allow facility managers to provide the proper working environment while minimizing Grainger’s energy costs. Effective utilization allows us to extend the operational life of equipment and systems through reduced energy consumption and operating hours. As a result, maintenance and capital costs are reduced, and less embedded energy is consumed through equipment replacement and upgrades.
Currently, 14 of our largest facilities have either been built with or retrofitted with BMS. On average, Grainger has realized a 10 to 15 percent reduction in energy use and expenses at its facilities after installing BMS.
LEED Certification Grainger has been a member of the U.S. Green Building Council (USGBC) since 2007, and remains committed to building Leadership in Energy and Environmental Design (LEED) certified facilities. We use the USGBC’s LEED certification programs to guide best practices for the design, construction and operation of our facilities. Since 2008, we have made a commitment to build all new corporate projects to meet LEED standards, and seek certification under rigorous third party reviews. It’s proven that LEED-certified buildings use 25 percent less energy with a 19 percent reduction in aggregate operational costs in comparison to non-certified buildings. Grainger currently maintains 5.5 million square feet of LEED certified space through 17 North American facilities, representing 24 percent of Grainger’s total square feet in North America. This includes the first LEED certified building in the MRO industry, the first LEED certified DC in Monterrey, Mexico, the largest LEED-CI Platinum project of 2015, and the world’s first LEED V4 data center.
Ship Complete Given our 90 years of experience and more than 100,000 transactions a day, we understand the purchasing habits and buying behaviors of our customers. We know how they purchase online at home is different than at work. While a general consumer shopping for personal products at home may be fine with a staggered approach to completing a multi-product order, that same person has a completely different mindset at work when all of the products need to be there together to complete a critical project.
Grainger strives to ship all items in an order in one box and on the same or next day, depending on customer needs. Internally, we refer to this practice as “ship complete.” This approach and commitment to serving customers in the most efficient way possible also has positive implications on the environment. Ship complete reduces the amount of boxes we need overall, thereby increasing energy efficiency and producing fewer emissions through our transportation partners.
Sustainable Packaging As part of Grainger’s commitment to ethical sourcing, we work closely with suppliers to identify potential opportunities to minimize unnecessary packaging while reducing the risk of damage to the products we offer. In 2015, we introduced Supplier Packaging Guidelines to our U.S. and GGS suppliers to encourage them to take sustainability into account when making packaging decisions. The guidelines include best practices to help reduce damage and waste while maximizing recyclable materials. For example, the iconic Grainger boxes are fully recyclable, made from 43% post-consumer content and certified by the Sustainable Forestry Initiative.
In 2016, all U.S. Grainger DCs transitioned packaging materials for light bulbs from foam to kraft paper made with 100 percent recycled raw materials. The paper is produced at a paper mill certified by the Sustainable Forestry Initiative with a closed-loop water system that produces no municipal wastewater. The transition was a win-win-win: a cost saving for Grainger, easy to recycle for our customers and better at protecting our product.
In select DCs, we have transitioned to a custom wrapping solution that employs automated technology to provide right-sized packaging for oversized items, reducing the overall amount of packaging required. We continue to expand our use of plastic air pillows as dunnage for small parcel shipments, of which most are bio-degradable (non-oxo-salt containing material), and, in 2016, we transitioned to a high-efficiency film air pillow, which helps reduce overall plastic use.
Packaging Performance Grainger’s DCs are dedicated to reducing corrugate usage and packaging and freight expenses. We measure packaging and corrugate efficiency by tracking the number of boxes we send over the number of orders we receive. This data point, called carton-to-order ratio (CTO), helps us understand the positive effect that shipping orders containing multiple items in one box can have on our environment.
Company initiatives, such as pricing changes and adjustments to order routing logic, favor shipping orders in one box. Nevertheless, slight increases in CTO are expected, given the effect these initiatives may have on the way DCs experience volume. An increase in customer orders and products per order may require additional cartons. However, when mapped against increases in volume, CTO has remained relatively flat YoY.
Recycling and Waste
By standardizing recycling practices and sharing best practices across our network, we are continually improving the recycling rate in our U.S. DCs. Teams are trained to use a color-coded system to separate and bale materials such as cardboard, plastic wrap and metal and are encouraged to share and test ideas for ongoing improvements. As a result of these efforts, our U.S. DCs routinely recycle upwards of 84 percent of what would otherwise be waste streams. To that end, in 2017 we began to lay out a longer-term strategy and framework for how to achieve landfill-free operations in our DCs.
To maintain a high level of accountability in our materials management process, the sustainability team shares monthly reporting with the DC teams and members of the operations leadership team. Local DC facility managers also have recycling rate as part of their annual performance goals.
Grainger does not directly manufacture the products it sells so our water consumption is minimal. However, we do measure our water footprint and look for opportunities to reduce usage, such as installing water-efficient fixtures and landscaping irrigation at our largest facilities. Grainger’s total water consumption in the U.S. in 2017 was 467,840 cubic meters.