Are hang tags causing global warming?
Have you every though about the fact that there is an actual industry that specializes in the manufacturing of labels for the garment industry?
Avery Dennison Corporation is a Fortune 500 company with ~6 billion USD of sales annually. The company produces a great variety of products ranging from pressure-sensitive adhesive paper rolls to apparel branding labels (hang tags, woven labels, RFIDs, heat transfers, etc.). The main raw material utilized by the company for all of its products is paper and their current operation is completely dependent of it.
As we all know paper comes from forests. An estimated 18 million acres of forest are lost each year, which equals to an impressive loss of 20 football fields every minute. Over 60% of the 17 billion cubic feet of timber harvested worldwide each year is used for paper and pulp. According to the Forrest Stewardship Council, “deforestation and forest destruction is the second leading cause of carbon pollution, causing 20% of total greenhouse gas emissions”[5]. The Food and Agriculture Organization of the United Nations (FAO) explains that “forests have the potential to absorb about one-tenth of global carbon emissions”.[1] From this we can clearly conclude that deforestation has a spiraling downward effect, given that the lack of forests increases carbon emissions and the possibility of absorbing them, thus affecting climate change, which then in turn increases the average temperature which will ultimately affect the growth of existing forests. It is said that if current deforestation continues, it will take less than 100 years to destroy all the rainforest on earth. For these and many other reasons, taking care of our forests has become imperative in the climate change challenge.
This situation has deeply affected Avery Dennison’s operating model because as the consumer market has become more conscious of climate change. Some conscious customers are questioning to a greater extent what they buy and where it was sourced. It has become very important for companies in the industry to look for alternatives that satisfy the consumer and ultimately the planet. With this, organizations such as the Forrest Stewardship Council (FSC) sparked with the clear mission of promoting environmentally sound management of the world’s forests.
According to the Avery Dennison’s latest sustainability report, in order to combat these challenges, the company has set very aggressive goals for 2025 for their paper which includes sourcing 100% certified paper, of which 70% should be FSC certified. [3]
But not everything is that simple for Avery Dennison, as this certified paper is usually more expensive and demand is very limited. As of now, the demand that Avery Dennison has of paper would not be able to be satisfied by the current supply of FSC certified paper. Unfortunately, many of the customers downstream of the supply chain are not willing to pay more for these certified products. However Avery Dennison has been actively working with their customers to achieve price parity, primarily by sacrificing some of the weight or thickness of the paper, but not many are yet open to compromise on this.
Another issue affecting Avery Dennison’s operating model, same as in with other manufacturing companies, is how globalized their sourcing of raw materials is. For example, the paper of the hang tag label of a new shirt would be sourced from South Korea, this paper would then be coated in the US, printing inks would be bought from the UK, the printing process done in Honduras, the addition to the finished shirt in Nicaragua, and ultimately sold in Italy so that once the end customer buys the garment, it rips out hang tag and throws it to the trash. You could say that this hang tag label has traveled the whole globe emitting carbon emissions just to end up thrown in the trash.
While globalization has introduced significant advantages to the world, you could also argue that it is also fueling global warming because of the transportation factor. This refers to all the carbon dioxide emitted from shipping and flying goods all over the globe. [4]
I believe that the next steps for Avery Dennison given the two issues I have just described are:
- First to actively educate consumers about the underlying risks of continuing deforestation at the current rate. Create awareness of certifications such as the FSC.
- Second, continue on an effort to reduce footprint in the operations supply chain. Besides the opportunity to reduce cost to a great extent, there is a deeper reduction on the impact to the planet.
- Third, educate employees about the importance of sustainability in their day-to-day operations. Making sure that they don’t just take sustainability as a check-the-box, but as a powerful tool to become more efficient. Just like they would do for any other concepts such as TPS, Six Sigma, or Lean Manufacturing.
I am a true believer that constraints and challenges spark innovation. And global warming is one more critical challenge that will result in ground breaking innovations.
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Bibliography
[1] Food and Agriculture Organization of the United Nations. (n.d.). Forestry and climate change. Retrieved November 03, 2016, from http://www.fao.org/forestry/climatechange/53459/en/
[2] Facts About Paper: The Impact of Consumption – The Paperless Project – Join the grassroots movement. (n.d.). Retrieved November 03, 2016, from http://www.thepaperlessproject.com/facts-about-paper-the-impact-of-consumption/
[3] Avery Dennison Corporation – Official Website
http://www.averydennison.com/en/home/sustainability/sustainability-report-20122014/our-2025-goals.html
[4] By Les Leopold / AlterNet. (n.d.). Globalization Is Fueling Global Warming. Retrieved November 03, 2016, from http://www.alternet.org/story/71873/globalization_is_fueling_global_warming
[5] https://us.fsc.org/en-us/what-we-do/facts-figures. “Facts & Figures.” FSC United States. N.p., n.d. Web. 04 Nov. 2016.
I am surprised at the statistic that forests have the potential to absorb one-tenth of global carbon emissions. I would never have guessed that forests would absorb that high of a percentage of the harmful emissions, and I would guess that other people around the world are also not familiar with that fact. Education and building awareness is an important tool in the fight against climate change. Although I do not think that Avery Dennison has to abandon its business of relying on paper in its production process, the company should build awareness about deforestation and continuously seek to improve the efficiency of its supply chain. There will be significant costs to incur while utilizing the certified paper, but the sooner Avery Dennison begins to take these steps, the sooner it will be able to improve the reliability and efficiency of the supply chain. Convincing customers downstream to purchase the more expensive environmentally friendly paper will not be an easy task for Avery Dennison, but it must begin to take the steps now. There could be other sustainability projects for Avery Dennison to look into such as supporting the growth of more forests and printing tags directly onto the apparel rather than using attached paper tags.
I totally agree that educating consumers and raising awareness to sustainability and climate change is the most important tool to fight global warming and GHG emissions. Consumer demand changes the economic landscape and the motivations of companies. Today, most consumers are aware of the issue mostly in the context of the large industry sectors that are actively creating emissions – transportation, energy, oil & gas etc. There lies a strong need to educate the consumers of how other industries are related to global warming, directly or indirectly. I was actually quite surprised when reading this article, as I have never thought about hang tags as a contributor to global warming.
In this light, my only concern is why should Avery Dennison have the motivation to take this step and educate the consumer? Doing so, creates bad publicity for the company and essentially raises awareness to a problem that most consumers didn’t even notice.
Jorge, I’m fascinated by the insights in your article; I chose to write about Avery Dennison as well, naturally with substantially less knowledge than someone who actually worked on their global manufacturing projects! In that, I would be excited to hear your thoughts, as what I know simply reflects what the company has chosen to publicly state, and you were clearly in a powerful position to make impact:
First and foremost – paper! I would hope FSC and other certified materials will become cheaper over time, and that recycled material becomes more abundant and perhaps less expensive than new material. What do you think it would take for Avery Dennison’s clients – a public uproar for and/or declining stock prices for them to react? Price parity? Absolute cost savings?
Second, I was unaware each clothing tag alone traveled all around the world. Wow! To your point, that actually makes me want to buy fewer clothes, along with the environmental impact that clothes alone make. I would hope the company is evaluating costs and savings based on different prospective ways to localize or consolidate these processes to reduce emissions. Is it even possible to model this, or possible to implement? It sounds extremely complicated.
Third, regarding your first bullet point recommendation, I suspect Avery Dennison has less public brand awareness compared to its customers. For example, 2 people in our class blogged about Avery Dennison (you & me), and 25 wrote about Coca-Cola! This would make it difficult for the Avery Dennison alone to educate consumers. I wonder if there would be a way to leverage its customers who care about FSC and can make a bigger splash in consumer education. For instance, if some could agree to print “FSC certified” on their labels, with an asterisk leading to “learn more at http://www.loreal.com/...” this could be an opportunity for them to look good and generate awareness.
Finally, regarding your second bullet point recommendation, I blogged about what Avery Dennison has disclosed about its supply chain emissions reduction efforts. I gathered based on the company’s communications, these efforts have taken Avery Dennison a good ways towards their 2025 goals already. Would you propose more aggressive goals and thus more aggressive emission reduction efforts? What do you think it would take to stimulate more aspirational emission reduction efforts?
Jorge, thanks for this interesting read. What stood out to me was the astounding fact that the hang tag label we find on clothes actually had to travel the world to be produced, only to be thrown into the trash by the consumer almost instantaneously after a purchase! I am definitely guilty of that.
Just as ASimon mentioned, I too feel that there is little incentive for Avery Dennison to resolve the problem. This would firstly make consumers aware of a problem that currently is not at the top of most minds when we think about climate change. Moreover, the (seemingly) most direct resolution to the problem – to eliminate these tags that consumers arguably do not value – would be to try to remove tags from clothes altogether. This would essentially destroy one of Avery Dennison’s lines of business.
Based on the above logic, it may seem that the best cause of action for Avery Dennison would be to downplay the situation. I hence applaud Avery Dennison’s efforts to instead raise consumers’ awareness to the issue of deforestation and its implications, and concur with you that investing in innovation is necessary to ensure the longevity of Avery Dennison. In the nearer term, it seems like the “globalized” nature of Avery Dennison’s manufacturing process (having the materials sourced, treated and produced from the world over) is accounted in such a way that only the benefits are reflected (i.e. through cost savings), but not the costs (e.g. the carbon emissions related to the hand tag travelling the world). I am curious whether there is a way to put a monetary value to the latter, which may motivate companies to think twice about their manufacturing decisions.
Super interesting topic that I haven’t really thought much about prior to reading. Thinking to my new clothing purchases over the last few months and years, I noticed that many manufacturers actually don’t use tags anymore, preferring instead to print the text on the clothing item itself. I imagine this trend will continue as a way to both reduce costs and the companies’ impact on climate change. So, as you mention, Avery Dennison is in a very difficult predicament. How will they continue to grow a main line of business when customers just don’t seem to want their product anymore, especially if their efforts to make it sustainable are costly? Per your point, challenges like these are what fuel innovation in companies or cause to them to die. I think Avery Dennison needs to look to sustainably improve their supply chain while not improving costs. I also think they should be looking to build other lines of business that leverage their existing relationships but offer new products or services that are cost-effective for the customers and environmentally friendly. It just seems to me that the clothing labeling business in particular will not be a growing business due to concerns by customers and consumers alike and because their main raw material is increasingly depleting.
This is a great example of something that has no functional value add for the end customer (the brand tag)but has an emotional value for the end customer ( the brand name). I think Avery Dennison will have a hard time producing more environment friendly hang tags. It will be difficult because the brands who have these tags made require that the tags look appealing to the customer. Also businesses tend to be selfish and only take care of their own social responsibility. As far as the brands are paying to Avery Dennison for the service they will require the tags to look the way they ordered them. If Avery Dennison is not able to deliver the service at a given price the brands will look for a cheaper supplier.
Avery Dennison has two options either to convince the brands ( the clothes makers) or the end customer that a shift towards more sustainable labels is needed. In order to be successful, I believe they should focus on changing the mindset of the end customer. You mention as your first action point that Avery Dennison should educate the consumer about the underlying risk of the climate change. My question to you would be: How do you think they should do that? Should they spend money on campaigns? Should they pass the message through the brands ( clothes makers)? I would be interested to hear your thoughts on that.