Smithfield Foods Improves its Brand with a Robust Sustainability Program

In 2015, Smithfield Foods, the largest pork producer in the world, got terrible publicity when a spy drone flew over farms operated by one of their subsidiaries and took pictures of lagoons filled with pig feces and urine. Sustainability initiatives provide a way for global brands to improve their brand reputation and reduce risks of further damage to the brand.

Smithfield has certainly upped their sustainability game. Last week, on May 8th, the company released its 17th sustainability report. As a supply chain practitioner, I found that section the most interesting. This section highlights the company’s ambitious goal to reduce greenhouse gas (GHG) emissions and its progress toward meeting its 2020 environmental targets which include a commitment to reducing GHG emissions 25 percent by 2025 throughout its entire supply chain.

Sustainability: Progress was Made

The report provides detailed information about Smithfield’s environmental progress and initiatives. Progress was made. Normalized greenhouse gas (GHG) emissions, water use, and solid waste all went down (improved) from 2014 to 2017. Normalized energy use increased, which is partly attributable to their production of more ready-to-eat foods, which require greater energy use at their production plants but use less energy when customers prepare the food.

Smithfield also reported significant reductions in water usage and sending much less waste to landfills. But the focus of this article will be on the GHG initiative.

The Importance of a Life-cycle Analysis

To reach their GHG goals, the company did a life-cycle analysis to understand the company’s carbon impacts across a supply chain spanning from upstream grain farms to consumer’s kitchens. To really understand the full impact of a supply chain’s emissions, life-cycle analyses are necessary. They are not easy or inexpensive. In Smithfield’s case they worked with the University of Minnesota’s NorthStar Initiative for Sustainable Enterprise (NorthStar) to help them collect the data, use the right tools, and contribute analytical expertise to the analysis.  The result was an estimate of emissions from the growing (including fertilizer production and use) and processing of corn used to feed the hogs. That same model estimated the potential GHG impact of all farms that supply hogs to Smithfield facilities and then tracked the impacts of transportation and energy use associated with primary processing.

Smithfield’s environmental efforts extend throughout its supply chain. This includes the farms that grow feed grain for its hogs, the farming operations that raise the animals, the processing facilities, and finally the transportation network that delivers finished products to retail stores and restaurants. The company works within its supply chain to ensure that the products provided to consumers are high quality and produced in a responsible manner.

The Transportation and Logistics Network

Implementing a transportation management system (TMS) and reconfiguring the logistics network has long been low hanging fruit in GHG initiatives.  Smithfield has done both. They implemented a new TMS and real-time transportation tracking solution in 2015. The real time tracking solution was purchased from FourKites. Despite closely covering the TMS market, I can’t figure out who they bought their newest TMS solution from.  Better routing and filling the trucks more fully has reduced the distance their drivers travel by 465,000 miles, saving 58,600 gallons of fuel, and reducing the carbon footprint by 655 tons carbon dioxide. The company also has an initiative to reduce the size and amount of packaging material which also contributed to better trailer utilization.

Sustainability and Network Design

Current State of Distribution Network

The report also talked about their network realignment: “Until recently, we operated three separate massive distribution and logistics networks. Transportation inefficiencies were the norm, creating millions of miles worth of redundant trips that expanded our environmental footprint and reduced profits. For example, pork bellies harvested in Tar Heel, North Carolina, might be turned into bacon in Milwaukee, Wisconsin, then driven back to the Southeast for sale at retail stores.”

Future State of Distribution Network

The Upstream Supply Chain

The lifecycle analysis highlighted that the feed the company purchases from their grain suppliers accounts for 15 to 20 percent of their carbon footprint. Smithfield buys an enormous amount of grain; in 2017 they fed their hogs more than 7.4 billion pounds. Although they don’t own the grain farms, they have been working with farmers to help them use fertilizer more efficiently and switch to lower-input crops, such as sorghum. They have committed to engaging 75 percent of their grain sourcing supply -grown on nearly 450,000 acres – in sustainable farming practices by the end of 2018. Their metrics show they are well on the way to meeting that goal.

The report highlights the role of fertilizer in GHG emissions. “GHG is an essential tool for agriculture. But it is also one of the primary drivers of crop-related GHG emissions; on average, more than half of the nutrients applied to fields are not absorbed by crops in the year applied. For example, if too much nitrogen is applied to a crop, it can be converted by microbes in the soil into nitrous oxide, a highly potent greenhouse gas.”

The company has a tool and a program that helps farmers optimize their fertilizer usage by modeling water, soil, planting, and field management dynamics. The technology also helps their growers improve profits – by as much as $30 per acre – application efficiency. In the middle of 2017, Smithfield purchased the tool – the Adapt-N platform. This occurred in the middle of the 2017 corn-growing season, so progress was somewhat limited. But they did get many farmers to sign up for the program for the 2018 growing season.

They also have programs in place to encourage farmers to grow winter cover crops, use nitrogen sensors, and practice conservation tillage. These practices can increase yields while using less fertilizer.

Hog Production and Processing Plants

Smithfield is generating wind and solar energy on their farms and working to turn manure into natural gas. This helps to offset their fossil fuel usage. As much as 45 percent of Smithfield’s carbon footprint stems from methane emissions resulting from hog manure on company and contract farms. One endeavor is located in Duplin County, North Carolina, “where anaerobic waste digesters are now capturing biogas from some 60,000 hogs on five Smithfield contract farms.”

They are also working to improve the efficiency by which hogs turn feed into meat. “A few decades ago, a hog required four pounds of feed in order to yield one pound of pork. Today’s hogs, by contrast, require less than 2.5 pounds of feed for every one pound of pork—a dramatic improvement in a relatively short period of time.”  Less feed, in turn, reduces the acres of grain needed to feed their hogs and leads to less manure that must be managed.

Pork processing makes up less than 10 percent of our greenhouse gas (GHG) footprint, but improvements in this area are not being ignored. In 2017, they reduced our normalized GHG footprint with GHG emissions per hundred pounds of product by 7.4 percent over their 2014 baseline. Here the main drivers stemmed from joining a U.S. Department of Energy program that offers companies technical assistance as they work toward energy improvements and increased usage of LED lighting.

The Consumer, the End of the Supply Chain

The consumer use stage includes refrigeration, cooking, cleanup, and waste disposal. It accounts for a 20 to 25 percent of the GHG footprint. Because they have little control over how consumers use their products and they don’t want to engage in efforts that will decrease sales, they are not focusing their GHG reduction efforts there. However, the trend in the marketplace toward shelf-stable, pre-cooked foods with smaller portion sizes tends to reduce consumer energy use while increasing it at their facilities, where they are actively working on energy efficiency programs and scale arguably will result in energy efficiencies a consumer might not be able to match.

Some might view the use of a sustainability campaign to improve brand reputation as cynical, I view it as good business. And really, who cares about the motive if the results are good for the environment? And in Smithfield’s case, many of these efforts also have a positive return on investment.