How long has The Warehouse had a sustainability policy?

The board signed off on a sustainability vision statement in about 2000, but the version in our current charter is only about two years old. In the past it was more of an aspirational document, but now it’s a lot more prescriptive; it lays out management responsibilities, reporting responsibilities, KPIs, things like that.

What’s the underlying driver behind it?

There are ethical values underpinning everything we do. It’s no secret that the founder of the business is Sir Stephen Tindall, one of New Zealand’s leading philanthropists and entrepreneurs, so that’s a really important dimension of what we do. The days when companies could operate in a non-transparent manner are well behind us, so we believe the market we’re in from a consumers’ and from an investors’ point of view demand these kinds of policies and focus. The compelling thing about sustainability is it’s a paradigm: it’s a way of integrating economic survival, economic progress with the social and environmental dimensions that underpin that.

How do you marry up being one of the country’s cheapest providers of goods with sustainability, especially given its negative impact on local suppliers?

We produced The Warehouse dollar for exactly this reason, to take a broader look at what our economic and social contribution is. It’s true, in the current liberalised trading environment there are only limited categories that can be sourced competitively from New Zealand and this has progressively weakened over the last 10 years in the wake of the free trade agreement with China and the strength of our currency. But we take a wider view of our local impact: we employ 8000 New Zealanders and pay for a lot of services from local enterprises, like advertising, freight and engineering and electrical services. This is part of the trade off we chose as a society. We elected successive governments who think open markets and free trade are the best way to secure our economic future, so we play in the market within that framework.

How do you ensure that the goods you sell from overseas come from similarly sustainability-focused suppliers?

We have a published policy (see box) which lays out our standards and we audit factories against those standards. We typically discontinue 4% to 6% of the factories that we inspect.
We will never be in a position to provide 100% assurance about our supply chain because it’s simply too diverse so we prioritise those businesses that we have larger volumes with, and hence influence over, or particular categories we consider high risk, like fireworks. But we’re not alone. If we’re not in a factory auditing it, the odds are Walmart, Tesco or another large retailer are doing the work and we share information.

Have you moved away from being the absolute cheapest in everything because of this?

It’s part of it, but also our customers’ expectations around quality have grown over the years and we’ve wanted to grow with that.

What lessons can you share?

There are a lot of dimensions to it. Some of them are easier because there are commercial gains to be had, like efficient waste management, recycling and energy conservation. Everyone should be doing that as a minimum otherwise they are wasting money. But when it’s about those areas that are driven by more intangible values it’s really challenging. There are a lot of complex social, legal and cultural factors that come into play in global supply chains and I think a lot of companies are quite intimidated and don’t know how to get to grips with it. When we first started we hardly knew where our products were made, so it can be a pretty steep mountain to climb at first. But the more actors that participate, the more influence we have as a group. You just need to look at China over the last two decades. Millions of people have been drawn out of poverty as a result of the way they have participated in the global economy. But if you are looking for immediate improvements, you’re going to be frustrated. You need to look at the macro trends over a long period of time, and be prepared to stay in there for the long haul.

How do you define sustainability?

I like the holistic definition. It’s about development that’s conscious of all its social and environmental impacts. It takes those into account and it sets strategies, plans and innovates and develops new technologies in response to those challenges. That’s what I find really compelling about it and why it’s stuck around so long.
We all depend on the elements, on the earth, the air, water and people to make profits and if you don’t take account of those other dimensions at some point you will be faced with the challengers we all are now, which is limited resources, a lot of pollution, climate change and all those other factors that come into play. So the reason sustainability has got traction is it’s actually a close fit to reality; that’s how things are.

The Warehouse – quick facts

* One in five Kiwis visit one of The Warehouse’s 139 stores every week
* The Warehouse employs 8,000 staff and has a retention rate of more than 80% in its stores and 90% in its distribution centres
* In the year ended July 2011 it sold $1.67 billions worth of goods and made $76 million profit
* 64% of its products are sourced from China; 13% from New Zealand
* 40% of every Warehouse dollar goes to overseas manufacturers and suppliers, 35% to New Zealand goods and services, 11% to wages, 3% to shareholders and 11% in tax
* The Warehouse’s Supplier Factory Workplace Standards policy has 120 check points covering health and safety, employee remuneration and work practices and environmental management
* It audited 107 overseas suppliers in the year to July
* It sells 20,000 products online and had more than 8.3 million visits to its site last year
* It gave more than $2.4 million to charity in 2010/11
* It opened its first store in Takapuna, Auckland in 1982, exceeded sales of $100 million in 1991 and became a public company in 1992