The Home Depot Owning the DIY Approach to Climate Change

The Home Depot has made significant strides towards mitigating the effects of climate change within its stores, supply chain networks, and customer base. Is it enough?

Climate Change and The Home Depot (THD)

As one of the largest home improvement retailers in the world, THD gives consumers the opportunity to improve one of their basic human needs – shelter. This places the company in a unique position to influence projects that incorporate sustainability. However, the company also has a corporate social responsibility to employ sustainable practices when delivering this benefit to consumers.

In the past, THD has garnered negative media from environmental groups about certain company practices. For example, the company historically sourced lumber by purchasing 10% of Chile’s annual wood exports, which mostly came from forests that had been clear-cut or burned down [1]. Since then, the company has sought to play a more active role in its sustainability efforts. For example, the firm began lobbying governments and loggers to stop overcutting forests and also stopped purchasing wood from endangered forests. Additionally, climate change has been said to contribute to changing weather patterns and extreme weather trends [2]. Home improvement retailers like THD benefit from natural disasters such as Hurricane Sandy, when “in the three months after the storm, the company attributed $242 million in sales to the event as residents and businesses pieced back together their former homes and livelihoods” [3]. However, the Home Depot Foundation also donated $1 million in disaster relief efforts and provided home rebuilding support [4]. The company has made even larger strides recently to mitigate their carbon footprint and demonstrate their commitment to preserving the environment.

THD Positions its Sustainability Strategy in Three Core Categories:

Products Being Sold

Merchants have been working with suppliers to offer products that not only offer customers considerable cost savings, but also reduce the negative impact on the environment. With over 17,000 ENERGY STAR certified SKUs offered in stores and online, the company has helped its customers save roughly $700 million in annual utility costs and it has decreased greenhouse gas emissions by 4 million metric tons, leading to its ninth year of recognition from the Environmental Protection Agency (EPA) for its continuous innovation in the category [5]. At the same time, the company has exemplified the concept that it is possible to be both financially viable and environmentally-conscious by generating revenues exceeding $8 billion from these products [6].

Daily Operations

With over 2,000 store locations and an average of 100,000 square feet per location, THD store operations can have a considerable impact on the environment. The company has reduced its use of energy consumption in store operations through initiatives such as lower-wattage store lighting and higher-efficiency HVAC units. Additionally, they have made a commitment to leverage innovative renewable energy sources by 2020 through initiatives such as a fuel cell program, which provides up to 85% of energy a store needs to operate [6]. Exhibit 1 below details the multitude of ways the company is making sustainability improvements throughout its stores [6].
thd1capture2

 

 

 

 

 

 

 

Supply Chain

The company also impacts the environment beyond the walls of its retail outlets through its supply chain networks, which emit fossil fuel carbon emissions from combustible engines. The company has aimed to reduce these emissions by optimizing their truckload deliveries from a centralized distribution center. This not only minimizes supply chain expenses, but it also significantly reduces the number of miles driven and optimizes on full truckloads. The company is also seeking to leverage innovative hydrogen fuel cell-powered forklifts, which don’t emit any emissions and have no upstream CO2 impact. Exhibit 2 shows a 1,600,000-square foot Distribution Center that is utilizing 200 of these forklifts, which has saved over 2 million kWh of electricity by not having to charge forklifts and has avoided emitting 800 metric tons of CO2 [6].

capture3

Additional Room for Improvement

While the company has made significant progress in meeting and exceeding their goals towards sustainability, the company can do much more to help the environment. For example, in 2015, the company installed fuel cells in 81 stores, which resulted in the removal of 870,522 pounds of CO2 per year and per store [6]. While this makes progress towards generating electricity without combustion, the company has over 2,000 stores and still has a long way before scaling up to all locations. Additionally, the company made progress within its store operations to implement low-wattage lighting in its stores. The company can make even further progress by switching to LED and preventing a greater amount of greenhouse gas emissions. Lastly, the company should consider complementing its 17,000 ENERGY STAR SKUs with a service to help customers make the transition of being more environmentally friendly. The Home Depot has made significant strides towards mitigating the effects of climate change within its stores, supply chain networks, and customer base. Looking forward, there is a significant opportunity to deepen its impact even further.

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[1]   Carlton, Jim. “Once Targeted by Protesters, Home Depot Plays Green Role.” Wall Street Journal. 06 Aug. 2004. Accessed November 2016. <http://www.wsj.com/articles/SB109175013700484572>.

[2]   Henderson, Rebecca, Reinert, Sophus, Dekhtyar, Polina, and Amtram Migdal. “Climate Change in 2016: Implications for Business”. Harvard Business School. HBS Case N2-317-032. October 14, 2016. Accessed November 2016.

[3]   Liverman, Diana, and Amy Glasmeier. “What Are the Economic Consequences of Climate Change?” The Atlantic. 22 Apr. 2014. Accessed November 2016. <http://www.theatlantic.com/business/archive/2014/04/the-economic-case-for-acting-on-climate-change/360995/>.

[4]  The Home Depot. The Home Depot Foundation Commits $1 Million to the Immediate Relief and Long-Term Rebuilding Efforts in the Wake of Superstorm Sandy. 1 Nov. 2012. Accessed November 2016. <http://ir.homedepot.com/news-releases/2012/11-01-2012>.

[5]  The Home Depot. The Home Depot Receives 2016 Energy Star® Sustained Excellence Award. 28 Mar. 2016. Accessed November 2016. <http://ir.homedepot.com/news-releases/2016/03-28-2016-133240801>.

[6]  The Home Depot 2015 Sustainability Report. Rep. The Home Depot, 10 Nov. 2015. Accessed November 2016. <https://corporate.homedepot.com/sites/default/files/THD_0039_2015_Sustainability_Report_Online_Nov_10.pdf>.

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6 thoughts on “The Home Depot Owning the DIY Approach to Climate Change

  1. Interesting overview of sustainability issues at the Home Depot (THD). I’m sure a whole post could be devoted to THD’s efforts to combat climate change in it’s store design alone. One depressing climate thought whenever I visit THD is the size of the parking lot. Through that helpful graphic above, it is clear that THD is trying to minimize its parking lot and amount of “unporous surfaces.” An alternative I’ve seen at Wal-Mart in the suburbs of Boston is to locate parking underneath the store building, further minimizing the store’s footprint.

    It was also interesting to learn of the large amount of energy-efficiency SKUs in-store. As a company, THD can certainly do a lot to improve its own climate change impact, but the ability for the firm to encourage its customers to embrace energy efficiency and climate change awareness is huge! I agree with your suggestion that THD could offer more advice and in-store services to promote not only energy efficiency, but also climate change resiliency in customer homes. Customers will need to invest in new technologies to prevent damage from flooding, large swings of temperatures, and other climate change effects that put homes and structures at risk.

  2. Great investigation in THD’s role in climate change responsibility. It was interesting to learn how they deal with the tension that certain environmental disasters that allows them to be at an advantage and THD’s response by giving back. It makes me wonder their reaction if/when the opposite happens when forest fires deplete wood supply. Do they increase the price of wood to put their customers at a disadvantage or do they find an alternative means to prevent increase in costs being passed to customers?

    It was also nice to learn that THD is trying to help its customers be more eco-friendly as well by offering more products to customers that have a climate friendly standard. With THD moving into more international regions, are they doing the same there? THD is moving into more parts of Mexico and the question lies whether they are going to initiate the same sustainability strategies in emerging markets.

    http://www.forbes.com/sites/greatspeculations/2015/02/25/home-depot-earnings-review-solid-growth-on-positive-economic-prospects/#2934c8fd59f4

  3. Thanks for bringing to light The Home Depot’s efforts to combat climate change. When thinking about the products they sell, it reminded me of the IKEA case and sourcing sustainable wood since THD is one of the world’s largest lumber purchasers. A point that could be interesting to include in support of what THD has done is their commitment to buying and selling FSC-certified lumber. They were the first to carry FSC-certified wood in 1994 [1] and I was surprised to learn that they sell more sustainable wood than any other retailer in the US [2]. Given their scale it is impressive how much influence this can continue to have.

    [1] http://ecooptions.homedepot.com/sustainable-forestry/
    [2] https://corporate.homedepot.com/sites/default/files/Sustainable%20Forestry%20FAQs.pdf

  4. Awesome topic! I do not think enough can be said about committing to environmentally friendly, sustainable practices that are also profitable. Ultimately, change will happen fastest if it positively impacts the bottom line, and meaningful operational changes are more impactful than policy changes or regulation. Additionally, the Home Depot’s shift to more sustainable wood serves as an outstanding example of the power of the socially conscious consumer.

  5. Great and thorough article about THD efforts towards sustainability. It is especially important for them as a large retailer with an average footprint of 100,000 square feet, to set the standard and the example for other big box retailers when it comes to climate change impact. When comparing THD to other big box stores, it does seem that THD is doing the most towards sustainability in their stores. A few other areas I was curious about and that I thought THD should be exploring.
    1. using solar panels on the parking lots and the roof to get energy to run the store (or at least help to)
    2. harnessing some energy from their green houses – the plants/outdoor area of home depots are quite unique and I wonder if there is anything they could do – also figuring out a way to conserve water when needing to keep all those plants alive
    3. supply chain and transportation – what are they doing to minimize truck routes and number of trucks on the road, as well as to make their supply chain more efficient?

    Thanks again for a great post!

  6. Very cool to learn about sustainable wood and what that would mean for the environment!

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