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PAPER OR PLASTIC? THE ECONOMIC IMPLICATIONS OF PLASTIC CARRIER BAG LEGISLATION IN
THE UNITED STATES.
A THESIS
Presented to
The Faculty of the Department of Economics and Business
The Colorado College
In Partial Fulfillment of the Requirements for the Degree
Bachelor of Arts
By
Leeland C. Smith
May 2009
PAPER OR PLASTIC? THE ECONOMIC IMPLICA nONS OF PLASTIC CARRIER BAG LEGISLA nON IN
THE UNITED STATES.
Leeland C. Smith
May, 2009
Economics
Abstract
This study aims to detennine the best possible option for the United States to reduce the number of disposable plastic carrier bags consumed each year. First an evaluation of the economic and environmental implications associated with disposable carrier bag use is discussed to justify the research question. An analysis of global plastic bag regulation is used to demonstrate strategies that can be pursued in the United States. Several initiatives have been introduced by city and state governments within the United States. to control plastic bag consumption. These examples are analyzed and discussed Retailers including Whole Foods, Wal-Mart, and IKEA have also chosen to voluntarily reduce the number of plastic bags used in their stores. The results of these voluntary initiatives are examined in case studies. Two surveys were conducted to compliment the qualitative analysis in this report with quantitative statistics used to predict plastic bag consumption. The results of this analysis indicates that the United States should balance voluntary reductions with legislative actions.
KEYWORDS: (Plastic Bag, United States, Legislation)
ON MY HONOR, I HAVE NEITHER GIVEN NOR RECEIVED UNAUTHORIZED AID ON THIS THESIS
Signature //
TABLE OF CONTENTS
ABSTRACT 1ll
ACKNOWLEDGEMENTS IV
1 INTRODUCTION 1
2 BACKGROUND 5
Definition - Plastic Carrier Bag 5
The History of Carrier Bags 6
Waste 10
Affect on Marine Ecosystems 15
Consumption Statistics 17
Life Cycle Analysis 19
Plastic Bags 21
Paper Bags 23
Reusable Bags 24
Conclusion 25
3 LITERATURE REVIEW 27
Government Responses 29
Retailer-Based Levy 30
Consumer-Based Levy 32
Plastic Bag Ban 34
Voluntary Response 38
The History of Corporate Social Responsibility 39
What is CSR? 40 Why is CSR Necessary? 42
Arguments Against CSR 45 Stakeholder Theory 49 CSRTheory 51
CSR in Practice 54
CSR and Plastic Bags 56
Status Quo 56
Bag Management by the Retail Industry 58
Conclusion 60
4 ANAYLSIS OF BAGGING IN THE UNITED STATES 61
Bagging Legislation in the U.S. 61
Voluntary Plastic Carrier Bag Reductions 66
Case Study #1: Whole Foods Market 67
The History of Whole Foods 67
The Whole Foods Philosophy 68
Whole Foods and Sustainability 69
Whole Foods and Bagging 70
Case Study #2: Wal-Mart Stores Inc. 74
The History ofWal-Mart 74
The Wal-Mart Philosophy 75
Wal-Mart Sustainability 76
Wal-Mart Bagging 79
Case Study #3: IKEA 85
History of IKEA 85
The IKEA Philosophy 86
IKEA Sustainability 87
IKEA Bagging 90
5 DATA AND METHODOLOGY 94
Survey Methodology 94
Data Survey # 1 95
Analysis of Data 95
Data Survey #2 97
Analysis of Data 97
Regression 99
Methods 99
Results 100
Conclusion 101
Interview Methodology 101
6 Conclusion 102
Solution 108
Targets
Timeline
Reusable Bags
Conclusion
APPENDIX SOURCES CONSULTED
109 110 111
112
LIST OF TABLES
3.1 5 STRATEGIES TO REDUCE PLASTIC BAG USE 28
3.2 SEVEN REASONS WHY CORPORATE SOCIAL RESPONSIBILITY EXISTS 44 5.1 Various Descriptive Statistics 95
5.2 Various Descriptive Statistics 97
5.3 Independent Variables 100
LIST OF FIGURES
2.1 MARGARET KNIGHT'S PAPER BAG MACHINE 8
2.2 PLASTIC WASTE GENERATION AND RECOVERY IN THE U.S. FROM 1960-2007 11
2.3 CHRIS JORDAN'S RUNNING THE NUMBERS; AN AMERICAN SELF PORTRAIT EXHIBIT 13
2.4 PLASTIC LITTER 14
2.5 PLASTIC'S EFFECTS ON MARINE LIFE 15
2.6 FLOATING PATTERNS OF WASTE IN THE NORTH PACIFIC 17
2.7 GENERIC LIFECYCLE OF A PLASTIC BAG 22
2.8 GENERIC LIFECYCLE OF A PAPER BAG 24
4.1 IN-STORE ADVERTISING 70
4.2 WHOLE FOODS PAPER BAG 71
4.3 WHOLE FOODS BETTER BAG 71
4.4 SHERYL CROW REUSABLE BAG] 71
4.5 WAL-MART'S BLACK RESUSABLE BAG 82
4.6 W AL-MART'S BLUE REUSABLE BAG 82
4.7 IKEA'S REUSABLE BAG 91
ACKNOWLEDGEMENTS
I would like to thank my thesis advisor Mark Smith for all of his support during this process. A great deal of thanks is also due to the faculty of the Economics and Business department for all of their help over the years. I would also like to thank Matt Kistler and Jan Mowle for agreeing to speak with me about their responsibilities. Finally I would like to extend thanks to everyone that helped me complete my thesis.
CHAPTER I
INTRODUCfION
Every day billions of consumers patronize retail businesses all over the world in the
never-ending search for products that can help improve the quality of life. Each shopping
experience is unique, a fact that can be explained by the variety of stores, products, and
preferences in the market. With few exceptions, however, each shopping experience
ends the same way, products are placed in a thin polyethylene-plastic carrier bag offered
free-of-charge at the check out counter. In most cases these bags are taken home by
consumers, unloaded and thrown into the trash having fulfilled their purpose. A few may
evade this fate and be stuffed away into pantries and closets where they sit until they can
be used to help dispose of other waste, but eventually they too are thrown away. This
short life should not be surprising, plastic bags are a member of the single-use disposable
carrier bag family, they are designed to be used once then thrown away, yet plastic bags
and the rest of the disposable bag group seem unnecessarily when considering the extent
of their useful lives.
The plastic carrier bag is a relatively recent technological innovation and its
importance in the retail world is demonstrated best by the fact that today 90% of
1
2
commercial retailers offer plastic over other types of disposable bags. l Demand has
grown significantly and an estimated 4-trillion single-use disposable plastic bags are
manufactured each year? Assuming that everyone on earth consumes bags equally there
are enough new plastic bags produced every year to provide 597 bags to every individual
on the planet. In the United States 100 billion plastic bags are thrown away per year,
equivalent to every American disposing of roughly 333 bags each year? Plastic's
lightweight, strong, cheap and hygienic qualities gives it a distinct advantage over other
carrier bags and helps explain plastic's dominate position in retail businesses.
Technology has also helped manufacturers produce extremely thin plastic bags without
compromising performance, which minimizes resources used during production and
helps reduce the plastic bag's environmental footprint. This being said, the production of
4 trillion units offsets the resources minimized by individual bags. Additionally as a
byproduct of petroleum, the externalities or unseen impacts of the world's plastic bag use
are extensive. A number of countries and businesses across the world have used plastic's
negative externalities to justify strategies that phase out the use of plastic bags. As of
May 2009, the United States is without comprehensive carrier bag legislation, but several
regional governments within the U.S. have followed the lead of other countries and are
pursuing bagging strategies that reduce the need for plastic bags. The purpose of this
thesis is to analyze the successes and failures of disposable bag initiatives both in the
United States and abroad to determine the most appropriate course of action for the U.S.
on a national level.
1 Urbina, Ian. "Pressure Builds to Ban Plastic Bags in Stores." CommonDreams.org. Available from http://www .commondreams .org/archive/2007 /07 /24/2741/. Internet; accessed 22 September 2008. 2 Halweil, Brian. "PLASTIC BAGS." Worldwatch Institute. Available from http://www.worldwatch.org/nodeIl499. Internet; accessed 22 September 2008 3 Ibid.
The focus of this thesis is the single-use disposable plastic carrier bag. I will
show the economic and environmental case against unnecessary plastic bags in the
United States. The second chapter will discuss the role plastic bags occupy in the U.S.
waste stream, the effects of plastic disposable bags on terrestrial and marine ecosystems,
and the various emissions and pollutants associated with the manufacturing and
distribution of plastic, paper, and reusable bags.
3
I also examine cases from around the world where countries have passed
legislation that reduces disposable plastic carrier bag consumption. The successes and
failures of these cases are important to this research and will help show which strategies
could succeed in the U.S. This third section will also examine the business case for
plastic bag reductions. It is a well acknowledged fact in the field of economics that
regulation results in a dead weight loss. This means that regulation makes business
operate in inefficient and costly ways in order to comply with the new regulations. The
business case is to avoid these inefficiencies, and instead to reduce consumption using
cost effective techniques. I explore the motivations behind such actions and justify why
there is a business case for retailers, particularly in the U.S., to begin voluntarily reducing
the number of plastic carrier bags they give out to customers.
The current bagging situation in the United States is also discussed. I examine
and critique U. S. city and state legislation, and business responses that have appeared in
the last 5 years covering plastic and disposable carrier bags.
Survey research is used in this thesis to evaluate the American consumer's
relationship with plastic bags. Use of regression analysis will help determine the
significant variables that dictate plastic bags use.
The results of this research will show that plastic bags, and all disposable bags,
are unaffordable for modern society based on their direct and indirect economic, social
and environmental costs. Through research, case studies, and survey analysis this thesis
will show that legislation is the only way to effectively deal with the disposable plastic
carrier bag.
4
CHAPTER II
BACKGROUND
Paper, recycled paper, plastic, biodegradable plastic, reusable-made from recycled
plastic bottles, canvas, and mesh are just a few of the carrier bag options available to
consumers. Each bag has its own advantages and disadvantages and each retailer has its
own preferences for which bag to offer. In the United States retailers predominately offer
free 0.5-millimeter (mm) thick, 9x6xll High Density Polyethylene (HDPE) bags at the
checkout counter.! Why? The simplest and best answer, plastic is the cheapest. The next
question to ask is what are the externalities, or unintended effects of this decision? This
section provides background information on the history of disposable bags, the
emergence of plastic bags, the waste problems associated with disposable plastic carrier
bag use, and the impacts of plastic, paper, and reusable bags on the environment through
life cycle analyses. These sections will serve as the foundation for the argument that the
costs of plastic carrier bags outweigh the benefits.
Dejinition- Plastic Carrier Bag
A working definition for the term 'plastic bag' can be found in the 2006 "Plastic
Shopping Bags- Analysis of Levies and Environmental Impacts Final Report" written by
I J.T. McWilliams, "The Thick and Thin of Plastic Bags," available from http://www.multipakusa.comlBags2.pdf. Internet; Internet; accessed March, 2009.
5
Nolan-lTV consultants for the Australian Department of the Environment and Heritage.2
Plastic bags are defined as:
A polymer carry bag provided or utilized at the retail point of sale for carrying and transporting retail goods. This includes all plastic retail carry bags, but excludes produce bags used in-store, dry cleaning bags, garbage bags and other primary product packaging.3
Plastic bags come in a variety of shapes, sizes, and thicknesses however for the purpose
of this thesis the term 'plastic bag' will refer to the high density polyethylene (HDPE)
bags offered at the retail point of sale and used for transporting other products and
merchandise.
The History of Carrier Bags
The carrier bag has its roots in the earliest societies, and coincides closely with the
establishment of public markets where consumers could purchase individually packaged
goods. Bags and baskets were a practical and convenient way for the earliest consumers
to transport their purchases. Materials used in bag production differed between trading
societies based on the local availability of resources but most early bags were made from
animal skin, wood, reeds, canvas. The amount of time and effort that went into the
design and construction of each bag helped to give it its value and bags were maintained
and repaired to ensure the quality of their useful lives. The first bags were also the first
reusable bags as a result of these conditions. The emergence of new technologies,
particularly the invention of paper, changed the way humans thought about bagging, for
2 Nolan-ITU Plastic shopping bags - analysis of Levies and Environmental Impacts (Sydney: Environment Australia, 2002), 75, 3111-02. 3 ARC+, Plastic bags - Policies and Practices to Reduce Consumption (North Yorkshire: Residua Limited, 2008), 53, BD23 6EA.
6
7
the first time sturdy carrying devices could quickly constructed and the disposable bag
began to take form.
The first disposable paper shopping bags appeared in retail stores around Europe
around1630.4 Bookstores during this time were stocked with individual pages of
manuscripts that were bound together into books for customers.5 Retailers saw a use for
the unused and unpopular manuscript pages and purchased them from bookstore owners
at a discounted price.6 By folding the pages into a cone shape, retailers created the first
generation disposable paper bags, capable of carrying a number of small loose
merchandise.7 Throughout the 18th and early 19th centuries, the paper bag slowly evolved,
taking on a more rectangular and contemporary shape by the mid 1800s. Despite its
popularity, the disposable bag remained a luxury product due to the fact that each bag
needed to be folded by hand.
In 1852 Francis Wolle laid the foundation for the mass use of disposable paper bags
by inventing the first paper bag-making machine.8 Bags produced by the machine were
flimsy and had a tapered bottom which limited their convenience and functional uses, but
the invention marked the beginning of the disposable bag revolution.9
4 The New York Times Company. "History of Paper and Paper making," available from http://inventors.about.comllibrary/inventorslblpapermaking.htm; Internet; accessed March 2009. 5 NGS, "Shopping Bag History Project," adapted from Louise Thurn teacher consultant program, available from http://www.silosandsmokestacks.org/resources/files/SHOPPING%20BAG.doc; Internet; accessed March 2009. 6 Ibid. 7 Ibid. 8 Phil Ament. "Fascinating facts about the invention of the paper bag by Francis Wolle in 1852," available from http://www.ideafinder.comlhistory/inventions/paperbag.htm; Internet; accessed March 2009. 9 Ibid.
Figure 2.1 - Margaret Knight's Paper Bag Machine
Source: Paper Bag Machine, available from http://www.flickr.comJphotos/jbparker/50 1709462/
In 1870 U.S. inventor Margaret Knight improved on Wolle's design by designing a
8
machine that could cut, fold and paste paper bag bottoms (shown in figure 2.1). Knight's
invention improved bag functionality as the new flat-bottomed bags could stand on their
own giving them additional value during the packing and unloading process. Despite
these innovations and improvements in technology, pasting paper bags together by hand
remained economical well into the late 1800'S.10 In 1883 Chas Stilwell was issued patent
#279,505 by the U.S. patent office for his machine capable of manufacturing the S.O.S.
or self-opening sack.ll Stilwell introduced pleated sides and used Knight's square
bottom to create a paper bag that could stand on its own and easily fold-flat after use. 12
Stilwell's paper bag machine made the mass production of affordable disposable
bags possible, still bag use did not increase significantly in the U.S. as the retail climate
remained dominated by small specialty and local retailers. Barney Kroger and M.B.
Skaggs helped to solve this distribution efficiency problem. Both men recognized the
potential of a large-scale, one-stop shopping center that offered consumers a wide variety
10 Phil Ament. "Fascinating facts about the invention of the paper bag by Francis Wolle in 1852". I I Ibid. 12 Charles Panati, Extraordinary Origins afEveryday Things . New York: Perennial Library, 1987.
9
of affordable products. This vision led to the founding of Kroger in 1883 and Safeway in
1915, two of the first successful supermarkets chains in the U.S.1314 By 1930 the
American supermarket was a proven success. One-stop shopping centers began operating
in cities around the country, each one providing Stilwell's paper bags to help customers
transport products.
For the next fifty years, American shoppers became accustomed to the
convenience offered by free disposable paper bags, but in 1977 a new more flimsy bag
option gave shoppers a bag choice with the famous question, paper or plastic?15 As is
often the case in well-established markets, consumers tend to change their behavior very
slowly. In 1982 plastic bags were introduced in Kroger and Safeway, the very same
supermarket chains that had helped to make paper so popular. 16 In 1997 a survey found
that 58 percent of American consumers preferred paper bags to plastic, however the Film
and Bag Federation found that 4 out of every 5 bags used were plastic. I? Demand for the
lightweight, synthetic, petrochemical based bags has continued to rise in today's
consumer driven world. Paper is now the bag of the past and plastic demand is only
continuing to grow as more retailer stores are introduced across the world.
13 Kroger. "Time line," available from http://www.thekrogerco.com/corpnews/corpnewsinfo_timeline.htm; Internet; accessed March 2009 14 Safeway. "Our Story," available from http://www.safeway.comJifl/grocery/Our-Story; Internet; accessed March 2009. 15 L.1. Williamson. "Its Not My Bag, Baby!," NRDC, available from http://www .nrdc.org/onearth/03sumibag.asp; Internet; accessed 15 March 2009. 16 1bid. 17 Ibid.
10
Waste
The problem with carrier bags is not that trillions are used each year, people need
some way to move their purchases from store to home; the problem is that the bags most
used by consumers are designed for single use. Ninety-nine percent of carrier bags used
around the world follow the cradle to grave cycle. This use pattern means that carrier
bags, like most other consumer goods, finish their lives decomposing in landfills.
According to a special report on waste conducted by The Economist, the average
westerner produces over 500 kg of municipal waste per year. 18 To manage and properly
dispose of the unwanted material, wealthy countries spend an estimated $120 Billion
each year. 19 In poorer agricultural societies managing waste is a smaller industry;
generally there is not even enough waste to manage. The one glaring exception to this
fact is the plastic bag. According to Phillippe Chalmin of the Universite Paris Dauphine,
"the reason why plastic bags blow around by the roadside in so many poor countries is
not that the local people are litterbugs but that they are frugal enough not to need a waste
collection system of any sort. Plastic bags are among the few items they cannot
recycle. ,,20 It is this lack of reusability, and little recyclable value that encourages people
to litter plastic bags.
Waste generation is invariably linked with income and standard of living.
Americans produce 700kg of waste per capita per year. 21 Plastics account for roughly
18 "Talking rubbish; A special report on waste." Economist. 28 February 2009, 1-18. 19 Ibid. 20 Ibid. 21 Ibid.
11
Figure 2.2 - Plastic Waste Generation and Recovery in the U.s. from 1960-2007
32·
28
24
20
12
8
1960 1965 1970 1975 1980 1985 1990 1995 2000
Source: United States Environmental Protection Agency. Municipal Solid Waste in the United States: 2007 Facts and Figures.
2005
12.1 percent of the total municipal solid waste generated in the U.S., about 30.7 million
tons.22
Plastic generation has increased steadily since 1960 due increased demand, but
demand for used plastic through recovery and recycling has remained low. In 2005 the
U.S. recovered 12.1 million tons, 6.8 percent of plastics manufactured in 2007 (shown in
figure 2.2). Some plastic products have experienced increased recovery rates with 36.6
percent of PET soft drink bottles and 28.0 percent of high-density polyethylene milk and
water bottles recovered in 2007, but the plastic bag is not among the list of plastic
products with high recovery rates. 23
22 United States Environmental Protection Agency. Municipal Solid Waste in the United States: 2007 Facts and Figures (United States Environmental Protection Agency, Office of Solid Waste, 2007),165, EPA530-R-08-010. 23 Ibid, 53.
12
High density polyethylene carrier bags are a part of the general product category
plastic bags, sacks and wraps. In 2007,590 thousand tons ofHDPE plastic bag waste
was generated.24 This statistic means that plastic carrier bags account for roughly 1.9
percent of all plastic waste in the U.S., and .23 percent of total municipal waste generated
in the U.S during 2007.25 As a small contributor to municipal waste one could argue that
plastic carrier bags do not represent a significant part of the waste problem in the U.S. It
is important to note however that waste statistics are measured in tons, not units.
According to plastics industry reports, it takes 7 trucks to provide a store with the same
amount of paper bags that are provided by one truck-load of plastic bags, so units
consumed, not weight is a more important figure when considering plastic bags in the
context of waste.26 Imagine then what 590,000 tons of thin, lightweight plastic bags
would look like. Chris Jordan, a contemporary photographer based in Seattle
Washington has attempted to shed light on American consumerism using photography
and statistics. As part of the Running the Numbers; An American Self Portrait exhibit,
Jordan photographs 60,000 plastic bags, the number used by Americans every 5 seconds,
to give people perspective as to the amount of plastic bag waste generated by
consumerism.27 These photographs are displayed in figure 2.3.
24 United States Environmental Protection Agency. Municipal Solid Waste in the United States: 2007 Facts and Figures, 53. 25 Ibid, 53. 26 American Chemistry Council. "Info Sheet," available from http://www.americanchemistry.com/s ylastics/sec _ content.asp?CID= II 02&DID=56 I 5 ; Internet; accessed March 2009. 27 Chris Jordan, Running the Numbers; An American Self Portrait, available from http://www.chrisjordan.com; Internet; accessed February, 2009.
13
Figure 2.3 - Chris Jordan's Running the Numbers; An American Self Portrait exhibit
"60,000 plastic bags, the number used in the u.s. every 5 seconds."
Partial Zoom
Source: Chris Jordan, Running the Numbers; An American Self Portrait, available from http://www.chrisjordan.com/
Actual Size
14
The decomposition and photo degradation rate for land filled plastic bags. Is
uncertain and additional research is needed. Estimates range from 15-1000 years
According to the EPA " .. . nothing completely degrades in modem landfills due to the
lack of water, light, oxygen, and other important elements that are necessary for the
degradation process to be completed." 28 As plastic bags do degrade, the chemicals
stored within the plastics are released into the surrounding landfill. These chemicals can
then be transported by rainwater into the soil where they can leach into the water table
and contaminate the water supply. Actual leaching from plastic bags decomposition is
another area where additional research could help policy makers understand the
implications of plastic bag consumption and disposal however the design of the modem
landfill limits decomposition and thus the possibility of chemical leaching. Outside of
landfills however plastic bags are exposed to rain water Figure 2.4 - Plastic Litter
and sunlight which increases the likelihood that bags
will decompose and leach chemicals into the soil.
One of the most notable affects of plastic bags
as a part of litter is their unsightly appearance. It is
not uncommon to see discarded plastic bags wrapped
around fences, or stuck in trees and bushes like the
field shown in figure 2.4. It is difficult to quantify the
cost of an eyesore like loose plastic bags.
There are the obvious expenses associated
Source: Brittany Taylor "The Price of Plastic," available from http://www.hangproud.comlPage/620
with waste clean up and removal, but other
28 Robert Lilienfeld, Review of Life Cycle Data Relating to Disposable, Compostable, Biodegradable and Reusable Grocery Bags ( Rochester: ULS, 2007), 5.
15
more difficult costs like land valuation and impressions on people who see areas with
high amounts of visible litter add a more complicating dimension in quantifying the
plastic bags.
Affect on Marine Ecosystems
The nature and design of plastic carriers as light and open gives them unique
aerodynamic attributes and allows bags which are properly disposed in landfills and other
trash areas to move large distances quickly. The United Nations Environment
programme estimates that every square mile of ocean on the planet contains 46,000
pieces of plastic litter. 29 As a byproduct of Figure 2.5 - Plastic's Effects on Marine Life
plastic pollution, 100,000 marine animals
induding Sea Turtles, Whales, and
Dolphins are killed every year as a result of
ingesting or becoming entangled in plastic
waste (illustrated by figure 2.5).30
Perhaps the most extreme example of
Source: "Plastic Facts," available from http://www.plasticbagfree.com/iframe_facts.php
plastic ' s prevalence in the world's oceans is the North Pacific Gyre (NPG), also known
as The Great Garbage Patch. An oceanic gyre is a body of water that moves in a circular
patter, where water is funneled into a central location much like the wind patterns
exhibited in a tornado or hurricane. There are five oceanic gyres located in the Indian
Ocean and both the northern and southern regions of the Pacific and Atlantic oceans. The
North Pacific Gyre, located 1,000 miles off the coast of California, contains 3.5 million
29 My Own Bag. "Bags by the Numbers," available from http: //www.myownbag.com/activism.html; Internet; accessed March 2009. 30 Ibid.
16
tons of trash in an area roughly the size of Texas and a plastic to sea life ration of 6: 1.31
The chemicals contained in the various pieces of trash break down quickly making the
NPG one of the most inhospitable places for marine life. Figure 2.6 shows the floating
patterns of trash in the north pacific ocean and explains how the North Pacific Gyre has
acquired its 3.5 million tons oftrash.32 Bags that avoid the currents are washed up onto
coastlines across the world, creating additional pollution and requiring cleanup costs. In
the U. S. Plastic bags make up 10 percent of the debris washed up on shore.33 In the
National Marine Debris Monitoring Program Report prepared by the Ocean
Conservancy for the U.S. EPA, plastic bags made up 10.3 percent of the materials
collected by volunteers, the third largest waste category behind plastic bottles (13
percent) and plastic straws (27.5 percent).34
31 "The Great Garbage patch," available from http://www.greatgarbagepatch.org/; Internet; accessed September 2008 32 "The Trash Vortex," available from http://oceans.greenpeace.org/en/the-expedition/news/trashing-ouroceans/ocean yollution _animation; Internet; accessed September 2008. 33 "Twenty -Five Reasons to Go Reusable," available from http://www.reusethisbag.com/25-reasons-to-goreusable.asp; Internet; accessed September 2008. 34 S.B. Sheavly. 2007. "National Marine Debris Monitoring Program: Final Program Report, Data Analysis and Summary." Prepared for U.S. Environmental Protection Agency by Ocean Conservancy, Grant Number X83053401-02. 76 pp.
6 Months 2 Years
4 Years 6 Years
Source: "The Trash Vortex," available from
Consumption Statistics
http:// oceans. greenpeace. orgl enlthe-expeditionlnews/trashing ouroceans/ocean ---'poll utio~ animation
According to the Worldwatch Institute, a Washington D.C. based think tank,
17
factories around the world produced between four and five trillion plastic bags in 2002.35
At least 1 trillion of these bags are used each year, meaning the global population of
consumers goes through more than one million plastic bags each minute.36 The exact
number of plastic bags used each year in the U.S. is unknown as there is no organization,
government or otherwise, tracking consumption; best estimates put bag use at 100 billion
35 "Plastic Basg," available from http://www.worldwatch.org/nodeII499; Internet; Accessed September 2008 36 "The numbers, believe it or not," available from http://www.reusablebags.com/facts.php?id=4; Internet; accessed February 2009.
18
government or otherwise, tracking consumption; best estimates put bag use at 100 billion
bags per year but the number is close to 100 billion.37 12 million barrels of oil are used in
the production of 30 billion plastic bags; so at least 36 million barrels of oil are required
each year to provide U.S. consumers with plastic bags. 38 Given that the U.S. consumes 10
percent of the world's plastic bags, it requires at least 360 million barrels of oil to supply
the world with one trillion plastic bags each year?9
• 1 barrel: 19.6 gallons of gasoline40
• Average fuel economy for light duty vehicles (cars, minivans, SUV sand trucks) in 2008: 20.8 miles per gallon41
• 360 million barrels * 19.6 gallons of gas per barrel = 705,600,000 gallons of gas
• 705,600,000 gallons of gas * 20.8 MPG = 14,676,480,000 Miles
To supply the world with 1 trillion plastic bags enough oil is consumed to drive the
average U.S. car over 14.6 billion miles.
The carbon emissions associated with the production of plastic bags adds another
dimension to the massive consumption numbers. Each kilogram (kg) of polyethylene
(PET or LDPE) requires the equivalent of 1.75 kg of oil for energy and raw materia1.42
Burning 1 kg of oil releases 3kg of C02 so every kg of polyethylene releases 5.25 kg of
CO2 •43 Plastic bags can weigh between 8g and 60g depending on the intended use,
37 "Facts and figures regarding the true cost of plastic bags," available from http://www.reusablebags.comlfacts.php; Internet; accessed February 2009 38 Ned Potter, "saving the world one plastic bag at a time," available from http://abcnews.go.comrrechnology/Story?id=2935417&page=1; Internet; accessed March 2009. 39 "Why Bring Your Own Bag," available from http://www.igotmybag.org/why.htm; Internet; accessed march 2009. . 40 Energy Information Administration, "Frequently Asked Questions - Gasoline," available from http://tonto.eia.doe.gov/askigasolineJaqs.asp; Internet; accessed March 41 Environmental Protection Agency, Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2008 (United States Environmental Protection Agency, Office of Transportation and Air quality, 2008),80, EPA420-R-08-015. 42 "Technical information," available from http://upmplastic.com/Cornstarch_degradable_epi_ oxo _technicaI2.asp; Internet; accessed March 2009. 43 "Plastic bags and plastic bottles - C02 emissions during their lifetime," available from http://timeforchange.orglplastic-bags-and-plastic-bottles-C02-emissions; Internet; accessed March 2009
however the average plastic carrier bag weighs between 8 and 1 ° grams.44 For the
purpose of this thesis plastic carrier bags will be assumed to weigh 8 grams as new
technology has allowed for lighter stronger bags to be used in most retail stores.
• • • •
1 plastic bag: 8 grams 1,000 g (l kg) I 8 grams per bag = 125 plastic bags in 1 kg 1,000 g polyethylene = 5,250 g C02 5,250 g CO2 I 125 bags = 42 g C02 I bag
19
Using the results of this calculation it is possible to calculate the amount of CO2 released
in the production of 1 trillion bags.
• 42g C021 bag * 1 trillion bags = 42 trillion g CO2
• 1 gram = 1 * 1 0-6 metric tons • 42 Trillion grams C02 * .000001 Metric Tons I gram = 42 Million Metric Tons
C0 2
According the U.S. EPA the average passenger car emits 11,450 pounds of C02 in one
year or approximately 5.19 metric tons. 45 This means that producing 1 trillion plastic
bags is equivalent to adding 8 million cars to the road each year.
Life Cycle Analysis
The argument made by this thesis is that reusable bags have a smaller impact on
the environment than disposable bags. It is well published that plastic bags are far more
environmentally friendly than paper, but how do both types of bags compare with
reusable bags? This section will explore the emissions and energy requirements
44 "Plastic retail carry bag use 2002 - 2004 consumption," available from http://www.environment.gov.au/settlements/publications/wasteIplastic-bags/consumptionlbackground.html; Internet; accessed March 2009. 45 Environmental Protection Agency, Average Annual Emissions and Fuel Consumption/or Passenger Cars and Light Trucks (United States Environmental Protection Agency, Office of Transportation and Air Quality, 2000), 3, EPA420-F-00-013.
20
associated with each bag and provide evidence as to why reusable bags are the more
responsible choice. Information will be cited using life cycle analysis techniques.
A life cycle analysis (LCA) analyses the provision of a product or service through
all the different stages of its life, and the effect of each stage on the environment. The
United States Environmental Protection Agency defines a Life Cycle assessment as "an
objective process used to evaluate the environmental burdens associated with a product,
process or activity by identifying and quantifying energy materials used and wastes
released to the environment, and ... to evaluate and implement opportunities to affect
environmental improvements. ,,46
In addition a comparison between paper and plastic must compensate for size
differences. Franklin and Associates determined that the difference between the carrying
capacity of plastic and paper bags was between a 1.5-to-l and 2-to-l plastic to paper
ratio. 47 This thesis will use the 2: 1 relationship to compare plastic and paper bags.
Recycling rates for both paper and plastic bags will also affect the environmental
impact of each bag. Alllifecycle analysis data used in this paper will incorporate the
current recycling rates so as to give the reader a comprehensive understanding of the
current environmental effects of disposable bags. According to the EPA, 0.6 percent of
plastic bags and 19.4 percent of paper bags in the U.S are recycled.48
46 Socio Economic Impact o/the Proposed Plastic Bag Regulations (Bentley West Management Consultants, 1999), 181. 47 Ibid, 31. 48 Franklin Associates, Paper vs. Plastic Bags (Institute for Lifecycle Environment Assessment, 1990), 4.
21
Plastic Bags
The analysis of a product's lifecycle begins with the acquisition of the raw
materials. According to the Michigan Department of Environmental Quality, materials
acquisition and product disposal for 100 pairs of plastic bags requires 39,035 kJ
(kilojoules) of energy and produces 26 g (grams) of pollutants, or 780.7 kJ of energy and
.52 g of pollutants per pair.49 A study conducted by the Institute for Lifecycle
Environmental Assessment found that the manufacturing of two plastic bags requires 990
kJ of natural gas, 240 kJ of petroleum, and 160 kJ of coal. The total energy requirement
for two plastic bags is 1,470 kJ or 1.47 MJ (megajoule). 50 The average car uses 4.18 MJ
to travel 1 km which is equivalent to the production of roughly 7 plastic bags; converted
into miles, 14 bags use the same amount of energy as is needed for a car to travel one
mile. 51!
Plastic bags also contribute to post-consumer solid waste after their useful life.
According to the ILEA report two plastic bags produce 14 grams of solid waste. 52 This
statistic is subject to recycling rates, as recycling rates increase the amount of post-
consumer waste per bag will fall. Another point of interest is the decomposition rate of
plastic bags once they reach landfills. The decomposition and photo degradation rate for
plastic bags is a highly disputed topic however the fact that the rate is measured in
centuries demonstrates another problem with the ever-popular plastic bag. According to
the US EPA however, " ... nothing completely degrades in modem landfills due to the
lack of water, light oxygen and other important elements that are necessary for the
49 "Energy and Air Emissions," available from http://techalive.mtu.edu/meec/module14/AirEmissions.htm; Internet; accessed March 2009. 50 Robert Lilienfeld, Review of Life Cycle Data, 3. 51 Franklin Associates, Paper vs. Plastic Bags, 2. 52 Robert Lilienfeld, Review of Life Cycle Data,3.
22
degradation process to be completed. ,,53 As such arguments against plastic bags due to
their slow decomposition rates are at best flimsy; very few materials decompose
completely in landfills.
Plastic bags production emits a number of green house gasses and other emissions
into the atmosphere including particulates, nitrogen oxide, hydrocarbons, sulfur oxide,
carbon monoxide and odorous sulfur. 54 Two plastic bags produce 1.1 kg of atmospheric
waste. 55
Finally plastic bag production creates water-born pollutants. Four components
were analyzed to determine water waste, dissolved solids, biological oxygen demand
(BOD) suspended solids and acids. 56 Reports found that the production of2 plastic bags
created 0.1 g of water waste. 57
Figure 2.7- Generic Lifecycle of a Plastic Bag
Source: Bentley West Management Consultants Socio-Economic Impact of the Proposed Plastic Bag Regulations
53 Robert Lilienfeld, Review of Life Cycle Data,3. 54 Ibid, 3. 55 Franklin Associates, Paper vs. Plastic Bags, 3. 56 Socio Economic Impact of the Proposed Plastic Bag Regulations,32. 57 Franklin Associates, Paper vs. Plastic Bags, 3.
23
Paper Bags
Single use paper bags follow a similar life cycle to that of plastic. Paper
manufacturing follows three steps, pulp making, pulp processing and finally paper/paper
board production. 58 According to the Michigan Department of Environmental Quality,
raw materials acquisition and product disposal for 100 paper bags requires 76,382 kJ of
energy and produces 145 g of pollutants, or 763.82 kJ of energy and 1.45 g of pollutants
per bag.59 A study conducted by the Institute for Lifecycle Environmental Assessment
found that the manufacturing of a single paper bag uses energy equivalent to 550 kJ of
wood as feedstock in addition to 500 kJ of petroleum and 350 kJ of coal for process
energy.6D The total amount of energy used by a paper bag is 1,680 kJ or 1.68 MJ.61 In
other words 5 paper bags use the same amount of energy needed for a car to travel one
mile.
Paper bags are also a part of the post-consumer waste problem. According to the
ILEA report one paper bag creates 50g of solid waste. As was the case with plastic bags,
an increase in the recycling rates of paper bags will decrease the amount of post-
consumer waste per bag. Still, one advantage that many bag critics use in defense of
paper bags is that they are less harmful on the environment because they have
decomposition rates close to one month. A U.S. EPA study concluded that, "current
research demonstrates that paper in today's landfills does not degrade or break down at a
58 Socio Economic Impact o/the Proposed Plastic Bag Regulations, 32 59 "Energy and Air Emissions." 60 Franklin Associates, Paper vs. Plastic Bags, 2. 61 Ibid, 2.
24
substantially faster rate than plastic does. ,,62 Both paper and plastic are capable of
existing for long periods of time in modem landfills.
The production of paper bags releases a number of gasses and particulates into the
atmosphere. The same six components were analyzed and it was determined that a single
paper bag releases 2.6 kg ofpoUutants into the air. 63
Paper bags also generate a number of waterborne pollutants. Because the paper
making process is water intensive, paper bags are far more impactful, generating 1.5
grams of water pollutants per bag.64
Figure 2.8-Generic Life Cycle of a Paper Bag
Source: Bentley West Management Consultants Socio-Economic Impact of the Proposed Plastic Bag Regulations
62 Robert Lilienfeld, Review of Life Cycle Data,3. 63 Franklin Associates, Paper vs. Plastic Bags, 3. 64 Ibid, 3.
25
Reusable Bags
There are a variety of different types of reusable bags available to consumers.
Low Density Polyethylene Reusable Bags, Polypropylene fiber 'Green Bags, , will be
analyzed in this section to determine the environmental impacts of reusable bags over
their lifecycles. Reusable LDPE bags consume .96kg of materials while materials
consumption for Green Bags is .421 kg.65 Waste generated by LDPE reusable bags is
2.4g and 2.0g for Green Bags.66 Reusable LDPE bags also consume 54.7 MJ of primary
energy while Green Bags consume 46.3 MJ of primary energy.67 The global warming
potential or CO2 equivalent for reusable LDPE bags is 2.14 and 1.96 for Green Bags.
Information relating to the materials and bypro ducts of reusable bags is limited as few
comprehensive lifecycle analyses have been conducted on reusable bags. Still the
information presented in this section shows that reusable bags are superior to disposable
bags across all significant measurements.
Conclusion
Plastic bags have a clear advantage over paper bags, generating 60 percent less
green house gas emissions, 80 percent less solid waste, and 70 percent less air pollutants,
while using 96 percent less water, and 40 percent less energy.68 Research conducted by
the French environmental agency (ADAME) in 2003 showed that despite plastic's
minimal impacts, after three uses reusable bags are superior to all types of disposable
65 Nolan-ITU Plastic shopping bags - analysis of Levies and Environmental Impacts, 38. 66 Ibid, 38. 67 Ibid, 38. 68 Robert Lilienfeld, Review afLife Cycle Data,3.
26
bags across all significant environmental indicators.69 It can thus be concluded that
reusable bags are significantly less impactful in terms of waste and emissions generation
than disposable bags. The United States must recognize this fact and act to reduce its
impacts associated with disposable bag use.
69 Robert Lilienfeld, Review of Life Cycle Data, 3.
CHAPTER III
LITERATURE REVIEW
What is the best way to reduce the number of plastic bags used by consumers
every day? There is no easy answer to this question. Different behavioral strategies have
been adopted across the world, and each strategy has shown the potential for successes.
The American retail industry, the primary providers of plastic bags in the United States
and the largest purchaser of plastic bags in the world, has yet to implement a reduction
strategy. This inaction cannot continue, the United States must follow the lead of
countries like Denmark, Ireland and Australia and create a strategy that eliminates or at
least reduces the disposable bag from retail stores.
There are five basic strategies that can be adopted in an effort to affect consumer
behavior. Each strategy has a different set of advantages and disadvantages as outlined
by table 3.1 and many have been put into practice in some form. These five strategies
can be sub-divided into two groups based on to whom the responsibility of the strategy
falls. The first group is action taken on the part of the government to attempt to change
behavior and reduce plastic bag use. There are three ways for the government to use
legislation to change consumer's behavior at the check-out counter. This section will
examine the successes and failures of these three government strategies and their
implementation in countries across the world.
27
28
Table 3.1 5 Strategies to Reduce Plastic Bag Use
Reduction Strategy Advantazes Disadvantazes • Cost of the tax is born by • Raises cost of goods but
the more financially stable does not necessarily change party behavior concerning bags
• Minimal amounts of new • Technology improvements Retailer-Based Levy infrastructure needed for can make the tax less
retailers to comply effective • Potential shift to paper bags
which are arguably worse than plastic
• Best way to cut • Taxes individuals who may consumption rates using not be able to afford tax taxation- Ireland case • High marketing costs to
• Raises consumer awareness raise awareness • Creates a behavioral change • New infrastructure needed
Consumer-Based Levy • Works best in developed to record tax and deal with retail markets different types of bags.
• Generates revenue for the • Potential shift to paper bags government which can be which are arguably worse used for other than plastic environmental projects
• No need for plastic bags • Potential shift to paper bags • Easy to implement which are arguably worse • Saves money by reducing than plastic
clean up and disposal costs • 'Overnight' change in • Reduces visibility of plastic behavior unlikely
pollution • Retailers must find new
Plastic Bag Ban • Progressive approach, ways to provide consumers generates good publicity for with bags a country • Difficult to enforce,
• Eliminates some of the especially in developing need for oil countries
• GHG emissions from • Reduced demand may plastic bag production and translate to job loss in the distribution plastics industry, especially
in larger markets • No Cost • No reduction on
Do Nothing • No implementation environmental impacts of strategies necessary bags
• No marketing necessary • No change in consumption rates
• Maximizes the efficiencies- • Failure to meet targets does
Targets Set and retailers can reduce bag use not result in financial or
Enforced by the Retail in the most cost efficient other type of penalty way for their operating • Difficult to encourage and
Industry model enforce • No need for complicated
legislation • Enforcement is
responsibilities of the retailers, not the government
29
The second group is voluntary action. Firms both in the United States and abroad
are choosing to adopt strategies that will reduce the number of bags used by shoppers.
This section will discuss the theory behind this voluntary responsible action. There are
two strategies currently used by business with regards to plastic bags, the status-quo do
nothing approach and the voluntary target set by industry approach. This section will
discuss the theories behind these two voluntary strategies
Government Responses to Disposable Bag Use
The government's ability to draft legislation and create public policy with regards
to the environment is not a recent phenomenon. According to Ken Cousins the first acts
of environmental policy can be traced back to Aristotle and the Greek city-states around
350 B.C.E.] Since this time environmental policy protecting forests, animals, water
quality and air quality have appeared around the world. Modem environmental policy
began roughly four decades ago when humans beings began to accept that their actions
had an unsustainable and degrading effect on the environmenta1.2 From this movement
new ideas and concepts of responsibility have emerged. The Polluter Pays Principle
(PPP), first used in 1972 by the Organization for Economic Co-operation and
Development (OECD) "is an environmental policy principle which requires that the costs
i Ken Cousins, A Brief History Of Environmental Policy. (2003, accessed February 16,2009); available from http://www.bsos.umd.edu/gvpt/kcousinslDocuments/Cousins%202004%20Envl%20Policy%20Eras.pdf; Internet. 2 Zachary A Smith, ed., Environmental Politics and Policy in the west (Boulder: University Press of Colorado, 2007), 8.
30
of pollution be borne by those who cause it.,,3 According to Finn R. Fersund, "The
Polluter Pays Principle is generally accepted as a basis for environmental policy-making
in OECD countries.,,4 (The United States became a member of the OECD in 1961)5 The
idea behind PPP is that the price of a good or service should reflect its scarcity as well as
its impact on the environment. 6 Fersund discusses several formulas capable of
calculating the impacts of a good and determining the appropriate cost, however for the
purpose of this thesis it is more important to understand the theory of PPP and why
governments are able to create environmental legislation. The following three example
of government regulation draw on the idea that state authorities can decide to enact
legislation that "ensures that the environment is in an acceptable state.,,7
Retailer-Based Levy
ARC + provides an excellent overview of the "green" tax introduced in Denmark
in 1994 which included a tax on all carrier bags. The Danish government introduced a 22
Danish Krone (DKK) tax on every kilogram of plastic bags purchased by Danish retailers
(equivalent to $3.89 USD using 2009 exchange rates8), and a 10 DKK (equivalent to
$1.77 USD using 2009 exchange rates9) tax on every kilo of paper bags purchased by
3 Viro de Lucia, "Polluter pays principle," The Encyclopedia of Earth (Encyclopedia online) (eoearth.org,2008); available from http://www.eoearth.org/article/Polluter ~ays~rinciple (Accessed 16 February 2009). 4 Finn R Forsund,. 1975. "The Polluter Pays Principle and Transitional period Measures in a Dynamic Setting." Swedish Journal of Economics 77, no. 1: 56. Business Source Premier, EBSCOhost (accessed March 4, 2009). 5 "OECD member counties." 2009. http://www.oecd.org/documentl58/0.3343.en_2649_201185_1889402_1_1_1_1.00.html(Accessed 18 February 2009). 6 Finn R Forsund,. 1975. "The Polluter Pays Principle and Transitional period Measures in a Dynamic Setting." 7 Ibid. 8 "Currency Calculator." 2009. http://www.x-rates.com/calculator.html(Accessed 30 March 2009). 9 Ibid.
31
retailers. \0 Under the tax, an average weight of 25g per plastic bag and 55g per paper bag
was used to determine the bag tax II .
• •
1 kilogram = 1000 grams = 40 plastic bags: ($3.89/40 plastic bags) = $0.10 per plastic bag 1 kilogram = 1000 grams = 18 paper bags: ($1.77/ 18 paper bags) = $0.10 per paper bag
The Danish green tax was the first attempt by any government to tax carrier bags.
The taxation system was unique in that it did not target consumers but rather put the
burden of the tax on retailers. Retailers were expected to pass the tax on to consumers by
increasing the prices on products. A study conducted by the Danish EPA in 2000 found
that retailers no longer offered carrier bags free of charge to consumers at the checkout
counter. 12 The Danish EPA also conducted a study to determine the success of the 1994
carrier bag tax. The study concluded that the tax should have affected approximately 1
billion bags (75% plastic, 25% paper). 13 The EPA estimated that the total weight of
carrier bags used prior to the tax to be 18,750 metric tons of plastic bags and 13,750
metric tons of paper bags. 14 In 1999 the EPA found that only 7,750 metric tons of plastic
bags and 700 metric tons of paper bags were being purchased by retailers, a 70% drop in
consumption. 15
The actual effect of the tax is harder to measure. During the same period of time,
improvements in plastic bag technology meant that new thinner bags could be
produced. 16 Thinner bags were lighter and thus more bags could be included in each kilo
of bags taxed. As a result, the per-bag effect of the tax fell. The Danish government
10 ARC+, Plastic bags Policies and Practices to Reduce Consumption (North Yorkshire: Residua Limited, 2008) 1-55. II Ibid, 10. 12 Ibid, 10. 13 Ibid, 10. 14 Ibid, 10. 15 Ibid, 10. 16 Ibid, 10.
32
estimates that as a result of the tax, bag consumption has fallen 20 to 65 percent but the
actual effect is impossible to calculate. I? The tax was effective in generating revenue for
the government that could then be used for other green projects; according to Christensen
the greet tax raised almost 1 trillion DKK in its first 6 years, averaging 159.4 billion
(equivalent to $28.2 billion USD using 2009 exchange rates) 18 DKK a year. 19 The
Danish example shows that a retail-based levy can be effective in reducing the amount of
plastic bags used by consumers, but it also shows that placing a tax on bags based on
weight can result in some unforeseen complications that make the tax less effective. If a
retail based levy is to be imposed, a per-bag tax, as opposed to a weight based tax appears
to be more appropriate, and more beneficial at achieving the end goal of reducing the
amount of plastic bags used by shoppers.
Consumer-Based Levy
Convery, Mcdonnell and Ferreira discuss the successes of the second legislative
strategy adopted by Ireland in March of 2002 which places the burden of a new plastic
bag tax on the consumer as opposed to the retailer. Convery et al found the consumer
based levy of 15 Euro cents (equivalent to $0.20 USD using 2009 exchange rates)20 to be
successful in achieving the goal of reducing the number of plastic bags consumed.21
Involvement of the main stakeholders, namely the retailers who would be most directly
affected by the levy was crucial for the successful implementation of the new legislation.
17 ARC+, Plastic bags - Policies and Practices to Reduce Consumption 18 Currency Calculator. 19 ARC+, Plastic bags - Policies and Practices to Reduce Consumption, 11. 20 Currency Calculator. 21 Convery, Frank. "The most popular tax in Europe? Lessons from the Irish plastic bags levy." Environmental and Resource Economics 1, no. 38 (2007): 1-11. SpringerLink. [Database online.] 13 January 2007.
33
Additionally the study found that the levy could not apply to all plastic products, plastic
bags used for sanitary purposes like meat packaging at butcheries are a necessity, not a
convenience like plastic carrier bags. The study found that initial set up costs for the
project were €1.2 million euros ($1.5 million USD), annual administering costs were
€350,000 ($462,000 USD) euros and advertising costs from the publicity campaign
amounted to €358,000 ($472,000 USD) euros however revenues from the program's
implementation total €13-14 million ($17-18.5 million USD) euros annually.22 The study
also found that pre-levy consumption rates in Ireland were 1.2 billion bags per year, and
that after the levy was instituted consumption fell by 94%.23 Plastic bags as a percent of
national litter also decreased by more than 95% according to the Ireland Department of
Environment, Heritage, and Local Government.24 The article concluded, " ... where
policymakers are trying to reduce plastic bag consumption considerably and there is a
well developed and defined retail market (and that has been consulted widely), a
consumer based "downstream" levy is the appropriate policy measure. ,,25
A study performed by Hasson et al in 2007 on the South African consumer based
levy found different results from that of Convery et al. South African legislation on
plastic bags came in two parts. Initially policy makers mandated that all plastic bags
under a thickness of 80 micrometers-fA (.08 milimeters - mm) be banned, however the
legislation was opposed by business and labor on the premise that such a ban would
require substantial capital investment to upgrade machines in addition to negatively
22 Frank Convery. "The most popular tax in Europe? Lessons from the Irish plastic bags levy." 23 Ibid. 24 Ibid. 25 Ibid.
34
impacting the job market.26 In September 2002 a 'Memorandum of Agreement' banned
all bags below a thickness of 30,"", and imposed a mandatory levy on each bag.27 The
initial levy of 46c (equivalent to $0.05 USD using 2009 exchange rates) prompted a
decrease in consumption rates of 80% however the levy was reduced to 17 c (equivalent
to $0.02 USD using 2009 exchange rates) in 2003 as a result of continued complaints
from labor and manufacturing.28 Hasson et al show that cheap goods like plastic bags are
price inelastic meaning that when the legislation was first implemented, there was an
80% reduction in consumption rates however the combination of consumers becoming
used to paying for bags, and the decrease in levy price from 46c to 17c translated into
long term consumption rates falling by only 15%.29 This study is important for this thesis
as it demonstrates the strength of plastic bag policy that includes a legislative ban and
consumer targeted levy. The study also shows that inconsistent legislation undermines
effectiveness, an important issue to address as it shows that the policy adopted by a
corporation or government must be well researched so that when it is instituted all
stakeholders accept it.
Plastic Bag Ban
Changing consumer behavior is difficult and although disincentive programs like
taxes and levies can be effective in changing behavior, the banning of plastic bags on a
national level is the only way to eliminate plastic completely from the retail world. There
26 Reviva Hasson, Anthony Leiman, and Martine Visser. 2007. "The Economics of Plastic Bag Legislation in South Africa." South African Journal of Economics 75, no. I: 66-83. Business Source Premier, EBSCOhost (accessed September 23,2008). 27 Ibid 28 Ibid 29 Ibid
35
are several motivations for governments to enact legislation that bans the use of plastic
bags. Currently no national government has banned the outright distribution of plastic
bags but several governments have banned plastic bags under a certain thickness in
addition to adopting other disincentive programs. One of the most common reasons for
banning plastic bags has nothing to do with the unsightly nature of the bags, or the
immense rate at which the bags are consumed, but rather with the bag's relationship with
human health.
In 2005 Mumbai, India suffered the worst flood it had seen in decades. Over
1000 people were killed in addition to at least 1000 animals and livestock; the citizens of
Mumbai blamed the government, and the government blamed plastic bags.3D Plastic bags
were banned in Mumbai in 1999 following the intense floods of 1988 and 1998.31 City
officials cited that bags clogged the city's storm drains and prevented the monsoon rains
from leaving the city. 32 In addition to causing intense flooding, blocked storm drains also
create pools of stagnant water, allowing mosquitoes to breed more easily within a city.
According to the national center for infectious disease, mosquitoes are capable of
transmitting a variety of lethal diseases including West Nile virus, Dengue Fever,
Malaria, Yellow Fever and several forms ofencephalitis.33 The legislators of Mumbai
therefore decided that because of the potential risk to human health both from flooding
30 "Bags of Misery in Monsoon Mayhem." Asian News online 30 September 2005. http://www.theasiannews.co.uk/communityiheritage/s/504/504628 _bags _ oC misery _in_monsoon _mayhem. html (24 February 2009). 31 Ibid. 32 Ibid. 33 "Mosquito-Born Diseases." National Center for Infectious Disease. 2007. Internet on-line. Available from The Center For Disease Control http://www.cdc.gov/ncidod/diseases/list_mosquitoborne.htrn (Accessed 24 February 2009).
36
and vector born disease, plastic bags should be banned within the city as well as the
surrounding state of Maharashtra.34
The effects of this ban as summarized by Girum Bahri show that although the
theory of the ban is sound, and the potential benefits are appealing, it is very difficult to
enforce.35 The majority of plastic bags that litter the streets oflndia are between 5 and 10
microns(~lm) in thickness (.005mm-.Olmm).36 Thin bags are not durable and have very
little recyclable value, explaining the tendency of consumers to merely toss the bags into
the street as opposed to properly disposing of them. In an attempt to change behavior the
government of Mumbai banned all bags less than 20 microns in thickness (0.02 mm), and
promoted the recycling of the newer thicker plastic bags. 37 Bahri cites that recycling has
not increased and consumers continue to dispose of the newer thicker bags; the result is
that clogging of storm drains, and therefore the reduction in flooding has not occurred.38
Although the available infrastructure in India is much different than it is in the
United States, and enforcement of plastic legislation would be easier in the U.S. due to
the institutions already in place, the plastic bag ban in India is an important case to
understand for this thesis. The Indian case demonstrates that although plastic bags have
been proven to increase flooding, and therefore increase the likelihood of death,
consumer behavior has not changed. It would seem that consumers would be willing to
change their behavior if that behavior increases the possibility of death, however the
increased probability is perceived as so small that it does not provide adequate motivation
34 "Bags of Misery in Monsoon Mayhem." 35 Girum Bari, "Sustainable Management of Plastic Bags Waste: The Case of Nairobi, Kenya," I1IEE reports, no. 3 (2005): 51. Available from http://www.sysav.se/upload/ovrigt/Sysav%20Utveckling%20rapporter/Sustainable%20management%20of %20plastic%20bag%20waste.pdf (Accessed 26 February 2009). 36 Ibid, 51. 37 Ibid, 51. 38 Ibid, 51.
37
for a behavioral change. In addition, Mumbai did not invest the necessary resources into
enforcing the new legislation. If a plastic bag ban is introduced into the United States,
the appropriate resources will have to be dedicated to both the enforcement of the
legislation, and the education of the public; as the Mumbai case shows, legislation is only
as strong as public acceptance of that legislation.
The second reason for banning plastic bags is that they are expensive to clean up
and dispose. In China, the ubiquitous nature of plastic bags has given rise to the term,
'white pollution' which refers to the color of the plastic carrier bags that clog China's
cities and landscape.39 This reason explains why China adopted a plastic bag ban in
2008. Xiufeng Xing discusses the two regulations adopted by the Chinese State
Council.40 First, all plastic bags in China should be no less than .025 mm thick, and
second, the selling price of the plastic bags must be higher than the operating costS.41
This ban has been imposed not only on retailers, but on bookstores and restaurants as
well.42 According to Xing, the ban has been most successful in shopping malls and
supermarkets where consumption has fallen by 66%.43 Xing also cites that public
environmental awareness has improved since the passing of the legislation, and most
consumer have accepted the ban/tax legislation and are bringing their own bags.44 Xing
identifies several problems with the legislation in its current form. First, it is harder to
enforce the ban in markets where most of the thin bags are distributed; sellers have two
39 2008 . "White Pollution Banned in China." Pollution Engineering 43, no. 3: 10-10. Academic Search Premier, EBSCOhost (accessed March 11,2009). 40 Xiufeng Xing, "Study on the Ban on Free Plastic Bags in China," Journal of Sustainable Development, Vol 2, No.1 (2009): 1-3. Available from http://ccsenet.org/journal/index.php/jsd/articie/viewFile/299/267 (Accessed 5 March 2009). 41 Ibid, 2. 42 Xing, "Study on the Ban on Free Plastic Bags in China," 2. 43 Ibid, 2. 44 Ibid, 2.
38
types of bags, ones that meet the standards and ones that are .025mm or thinner.45
Additionally there are not enough substitute bags available to help consumers make the
transition. As a result consumers are turning to non-woven cloth bags made from
petroleum, an option that Xing cites to be merely a step above the single-use plastic
Voluntary Response
No legislation currently exists within the United States that requires retailers to
address the issues associated with plastic bags. Despite this fact many of the major
retailer have announced that they are pursuing strategies that will reduce the number of
plastic bags that they give out to their customers. Why would a company choose to
pursue a strategy that is not profit maximizing and which will create challenges that
would otherwise be avoided? Voluntary responsible action, like reducing plastic bag use,
at first seems like rare and unique practice. In truth voluntary philanthropy and
responsible action on the part of corporations has become an essential part of the way that
modem businesses operate. The modem era and the emergence of conscious
consumerism demand that businesses demonstrate a willingness to change their behavior.
Business, in its ceaseless goal to remain competitive and profitable, must pursue
voluntary strategies that increase social performance even if it means spending money to
do so. The reason is that voluntary actions are invaluable; they give consumers a
favorable opinion of a brand or company and create feelings of loyalty and support.
Voluntary responsible action is an integral part of competition for modem business and
45 Xing, "Study on the Ban on Free Plastic Bags in China," 2.2. 46 Ibid, 3.
39
because plastic bags strategies currently fall into this category in the U.S., it is an area of
literature worth exploring in depth.
This section will give support to the claims made in the earlier paragraph, and
explain why voluntary action, termed corporate social responsibility (CSR), exists today.
This section will also explore the link between profitability and corporate social
responsibility and identify several companies who have incorporated CSR into their
operating philosophies. Finally this section will discuss two voluntary plastic bag
strategies currently employed by retailers around the world.
The History of Corporate Social Responsibility
Corporate social responsibility (CSR) explores the unique relationship that
business has within society and the responsibilities that a business owes to that society.
While the concept is primarily a product of the mid 20th century, the first examples of
corporate social responsibility can be traced back to the industrial revolution at the turn of
the 19th century.47 These early forms of social responsibility focused on employees,
business wanted to maximize the productivity of their workers and to do so new
amenities and services were introduced to the workforce. Hospital clinics, bath houses,
and lunch rooms became standard in many large scale factories, and in addition important
incentive concepts like profit sharing were also introduced to give employees a share of
the company's success.48
Patrick Murphy identifies four distinct eras of CSR which have transformed the
idea of business responsibility from its employee-focused roots, to its current mulit-
47 Andrew Crane. The Oxford Handbook of Corporate Social Responsibility. Oxford; New York: Oxford University Press, 2008. 48 Crane. The Oxford Handbook of Corporate Social Responsibility, 25,
40
dimensioned, management-focused form. 49 The first 'philanthropic' era prior to 1950
was characterized by corporate donations to charities. 50 1953-1967, the 'awareness' era,
saw business recognize its responsibilities and its involvement in the community.51
1968-1973, the 'issue' era was the period where companies addressed specific problems
like racial discrimination, pollution control, and urban decay.52 The modern era,
according to Murphy is the 'responsiveness' era and has been characterized by significant
management and organizational actions; many contemporary companies disclose
measures of their social performance, conduct impact studies, create value systems that
emphasize responsible action, and finally invest in sustainability. 53
What is CSR?
There are two main goals in business. First businesses exist to sell, or at least to
convince consumers that they sell a unique product or service. Second businesses want
to be competitive and offer their product to consumers for as long as possible. This
second purpose of business is achieved by maximizing the bottom line or more
commonly known to as the goal to maximize profits. By maximizing profits, a business
can expand and sell its products to a larger percentage of the market, which in turn
generates additional revenue and maximizes profits. Because everyone's goal is to make
money, the business world is highly competitive and differentiation is an important
strategy that helps companies appear unique to consumers. CSR is one source of
differentiation.
49 Ibid, 25. 50 Ibid, 25. 51 Ibid, 25. 52 Ibid, 25. 53 Ibid, 25.
41
In addition, competition is the fuel for innovations and business institutions are the
primary innovators within society. This fact means that business is responsible for many
of standard ofliving improvements enjoyed in the world's industrial and developed
countries. The scale and scope of business activity also means that businesses receive
criticism for the environmental and social problems that they create as a byproduct of
their activities. Sethi explains that corporations are nothing more than social institution,
and as a result they must operate in a way that reflects the overall values of the social
system if they are to successfully evolve and survive with the constantly changing social
environment.54 This motivates businesses to respond to non-market forces, and engage in
voluntary socially responsible activities or CSR.55 Responding to non-market forces is a
new concept, and it is one that does not fall in line with traditional operating strategies.
Despite this, the fact remains that in the new, global economy, consumers have the power
to choose which companies they support and which companies they neglect. As Sethi
discusses, this means that business must adapt so as to please their consumers; modem
consumers demand socially conscious corporations which is why CSR exists.
CSR is an important concept for the modem business, but to make real progress,
companies need to be held responsible for their actions; there needs to be transparency so
that people can see how much or how little a business is doing. The concept of the triple
bottom line was invented by John Elkington in 1994 as a way for companies to report on
their performance in the areas of CSR without having to create new and complicated
54 S. P. Sethi, "A Conceptual Framework for Environmental Analysis of Social Issues and Evaluation of Business Response Patterns," The Academy of Management Review 4, no. 1 (Jan. 1979) : 63-74. 55 Ibid, 65.
42
forms of accounting. 56 The triple bottom line (TBL) reports on the performance of a
company using the traditional bottom line of economic performance in addition to new
environmental and social dimensions. 57 "In the simplest terms, the TBL agenda focuses
corporations not just on the economic value that they add, but also on the environmental
and social value that they add - or destroy."s8 Elkington identifies seven revolutions in
business that are reshaping the business culture and motivating companies to engage in
triple bottom line reporting. Table 2.2 identifies the seven revolutions in business and
outlines the reasons for each revolution, and its effects. The information available in
table 2.2 gives seven reason why CSR is an important business strategy; already
stakeholders and financial markets are scrutinizing companies based on the triple bottom
line reporting, a fact that will only intensify with time.
Why CSR is necessary
Corporate social responsibility is a necessary practice of any functional corporation.
CSR serves two purposes. First CSR is important for corporate image and value creation;
modern consumers are critical of the different impacts a company has on the environment
as well as the overall society, and many consumers are beginning to choose to support
companies that have shown a commitment to CSR. Secondly CSR is important for the
benefit that it brings to the society. Unfortunately CSR activities do not always fall into
both categories as Levitt identifies in the previous section, but CSR is still an important
component of business.
56 John Elkington. "Enter the Triple Bottom Line. In The triple bottom line: Does it all add up? Assessing the sustainability of business and CSR," EconLit (2004): 1-16. 57 Ibid, 3. 58 Ibid, 3.
Hugh Grossman argues that,
Social factors now playa major role in the quest for profit maximization, the hypothesis that social engagement should be considered ultra vires from business activities is contradictory ... corporations, in response to increased public scrutiny and heightened stakeholder expectations, have sought to modify internal strategies and engage with the community in order to avoid consumer backlash and continue to maximize profits. 59
43
Geoff Baum et al address this concept from the perspective of value creation. The value
of a firm is the sum of its accounting measures like assets and liabilities but also its
intangible resources like human capital, brand, and intellectual property rights.60 Baum
et al conducted a comparative study asking consumers to rank 8 value-creating
determinants by importance.61
59 Grossman, Hugh Alexander. "Refining the Role of the Corporation: The Impact of Corporate Social Responsibility on Shareholder Primacy Theory." Deakin Law Review 1 0, no. 2 (July 2005): 572-596. Academic Search Premier, EBSCOhost (accessed February 23, 2009). 60 Geoff Baum and Chris Ittner. "Introducing the new Value Creation Index - Forbes.com." Forbes.comBusiness News, Financial News, Stock Market Analysis, Technology & Global Headline News. http://www.forbes.com/asap/2000/04031140.html (accessed March 5, 2009). 61 Ibid.
44
Table 3.2 Seven Reasons Why Corporate Social Responsibility Exists
Revolution Drivers Effects · Extreme competition on both · Companies that are not able to
the domestic and international change with social values will
Revolution 1: level be out-competed by those that can
Markets · Companies will have to become more sustainable to appeal to consumers and markets in order to survive
Revolution 2: · Global shift in social values · Companies with value based · New generations want crises will not survive (Enronl
Values different performance out of Arthur Anderson) the business that they support · Desire on the part of the new · Demand information on what culture to know the 'facts' business is going and planning · Accessibility of information to do through different forms of · Information used to compare,
Revolution 3: media benchmark and rank the performance of competing
Transparency companies · In 200 I the first annual global reporting initiative was published which builds on TBL foundations
· Companies are being asked · As a result of the transparency about their production revolution currently taking
Revolution 4: techniques and their supply place, companies are focusing chain more on reducing impacts at
Life Cycle Technology · Cradle to grave cycle and fate each level of the production of products once useful life is process over · Comparative advantage of · Already corporate and NGO different companies will partnerships are growing to
Revolution 5: facilitate partnerships and assess impacts of business on sharing of knowledge society
Partnerships · The end of friction and conflict between competing companies; knowledge sharing will benefit everyone
Revolution 6: · Traditional time management · Time based competition like has been short- sustainability 'just in time' will continue to
Time demands that time be spur competition and there considered on the order of will be a demand for 'long-decades and centuries time' management strategies
· Decisions that affect TBL · The more effective the system reporting must first be of corporate governance, the approved by upper greater the chance that management of a company decisions made will build
Revolution 7: · What is the balance between toward sustainable capitalism shareholders and stakeholders and the long term growth of a
Corporate Governance and how does that affect the firm. different areas of the triple bottom line · Potential source of com~itive advantage
Source: John Elkington, Enter The Triple Bottom Line
45
Consumers choose consumer satisfaction as the number one determinant of a firm's
value. Using advanced statistical techniques, each value-driven category was analyzed to
determine its importance in explaining value beyond the traditional techniques.62
Correlating the same 8 determinants with a firms actual value reveled that consumer
satisfaction was in fact the least important determinant of value and that innovation was
the most important determinant. 63 Baum et al also showed that companies that have
better environmental performance have" ... significantly higher market values.,,64 Baum
et al demonstrates that corporate social responsibility is not only important, but it is a way
to create value for a company.
Arguments against CSR
The belief that CSR is a value driver is not universally accepted. In" An Inquiry
into the Nature and Causes of the Wealth of Nations" Adam Smith argues,
By preferring the support of the domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.65
This is the idea of the invisible hand that individuals and corporations should not be "do
gooders" as they lack the proper understanding of how to make appropriate social
62 Geoff Baum and Chris Ittner. "Introducing the new Value Creation Index - Forbes.com." 63 Ibid. 64 Ibid. 65 Smith, Adam, R. H. Campbell ed., Andrew S. Skinner ed., and William B. Todd ed. An Inquiry into the Nature and Causes of the Wealth of Nations. Oxford: Clarendon Press, 1976.
46
decisions.66 Instead by seeking to maximize profits in ones own activities, and by
"pursuing his own interest" there will be a normal redistribution of wealth back to the
society that is more beneficial than any conscious action would be. Strong performance
by individuals benefits the rest of the society. This is the argument against corporate
social responsibility as presented by Smith. The argument is applicable to the 18th century
consumer who had little power in deciding what good to purchase and from whom. The
21 5t century consumer, thanks to modem technology and the presence of competitors in
every industry, is far more powerful. As a result value creation has evolved to
incorporate social aspects that did not apply during Smith's era.
Milton Friedman's presented a different argument in opposition of CSR in his 1970
New York Magazine article entitled, "The Social Responsibility of Business is to
Increase its Profits. ,,67 Friedman argues that socially responsible action on the part of
private enterprise is not the purpose, nor the duty of any business. "What does it mean to
say that business has responsibilities? Only people have responsibilities. A corporation
is an artificial person and in this sense may have artificial responsibilities, but business as
a whole cannot be said to have responsibilities ... ,,68 If a private enterprise does have
obligations to act responsibly, then it must be the executives that decide what those
obligations are, and how to fulfill them. Executives, however, are employees of the
owners of the business, and they are hired to conduct business in accordance with the
owner's desires, namely, to make as much money as possible in accordance with the
66 Grossman, Hugh Alexander. "Refining the role of the Corporation: The Impact of Corporate Social Responsibility on Shareholder Primacy Theory." Deakin Law Review 10, no. 2 (July 2005): 572-596. Academic Search Premier, EBSCOhost (accessed February 23, 2009). 67 Milton Friedman, "The Social Responsibility of Business Is to Increase Its Profits," The New York Times Magazine, September 13, 1970, 1-6. http://O-www.springerlink.com.tiger.coloradocollege.edu:80/contentim2141 pp 14981487h1fulltext.pdf (accessed April 6, 2009). 68 Ibid, 1.
47
law.69 Thus if a corporate executive chooses to engage the business in "social
responsibility," they are acting in a way that is not in the interest of their employers.7o
This is to say that socially responsible action is the process of executives spending private
corporate finances for a general social interest, a concept which is inherently socialist. 71
Free enterprises cannot be expected to contribute their private funds to benefit the general
society as that is the function of government. Friedman concludes with an argument
from his book Capitalism and Freedom, stating, "there is one and only one social
responsibility of business-to use its resources and engage in activities designed to
increase profits so long as it stays within the rules of the game ... ,,72 Friedman follows
the same argument as Adam Smith, concluding that the responsibility of business is to
maximize profits, and that by achieving that goal, the beneficiaries of the business will
choose to act in a way that benefits the overall society.
This argument, like the one made by Adam Smith, assumes that social perceptions
of corporations are independent of profits. In reality, the success and thus the
profitability of a company is dependent on the companies relationship with consumers.
In today's world, that relationship has expanded, consumers know more about company
operations then they did before and their purchasing habits reflect that knowledge. Nike
is an excellent example of this; in 1997 Nike was accused of unfair labor practices in its
Asian factories. 73 As a result Nike's stock price fell by over 55% and remained low
throughout the latter half of the 1990s due to a consumer boycott.74
69 Milton Friedman "The Social Responsibility of Business Is to Increase Its Profits," I. 70 Ibid, 2. 71 Ibid, 3. 72 Ibid, 6. 73 Ibid, 6. 74 Ibid, 6.
48
Levitt continues the critique of corporate social responsibility, addressing the
perpetual presence of CSR in the media.75 Levitt begins his argument by introducing the
idea that CSR was originally conceived of by corporations" ... as a purely defensive
maneuver against strident attacks on big corporations and on the moral efficacy of the
profit system. But defense alone no longer explains the motive." 76 Levitt argues that
corporations have begun to practice CSR because it is fashionable and it translates into
profits. However the biggest danger with CSR is the ease with which companies can
portray themselves in a positive light. The fact remains that businesses are more
concerned with their responsibilities to their employees, stockholders, and customers then
they are with CSR.77 In other words CSR is primarily for publicity. Levitt identifies the
potential danger with this; if CSR is primarily a publicity function, but consumers
perceive it to be more of an influential part of business management than it is, then there
is no reason for business to adopt more progressive CSR activities as it is already serving
its function. Further more "if corporation believes its long-run profitability to be
strengthened by these peripheral involvements - if it believes that they are not charity but
self interest - than that much the worse.,,78
Levitt identifies an important flaw within CSR. The only real requirement of CSR
is that it convince consumers that it has some positive affect. The actual extent and
impact of that positive affect is less important. As a result companies that engage in
controversial practices can gain a favorable image in the eyes of consumers by talking
about their involvement in CSR actions, even if the actions are, as Levitt describes,
75 Theodore levitt, "The Dangers of Social Responsibility," Harvard Business Review 36, no. 5 (1958): 4 1-50. Business Source Premier, EBSCOhost (accessed February 25, 2009). 76 Ibid, 42. 77 Ibid, 42. 78 Ibid, 43.
49
primarily peripheral in nature. This explains the broad nature of CSR, beneficial forms of
CSR cannot be differentiated from peripheral forms. In the case of this thesis, reducing
the amount of carrier bags consumed by a retailer's customers has a measurable impact
on the environment as well as the corporate balance sheet.
Stakeholder Theory
Businesses should operate in a way that maximizes the utility of all the individuals
with a 'stake' in the company. For the purpose of this thesis, utility will refer to the
ability of a good or service to satisfy a human desire.79 In traditional business,
shareholders or individuals with a financial stake in a company were the only recognized
stakeholders. As such, business operated to give the greatest possible financial return to
its shareholders. Stakeholder theory expands the definition of stakeholders beyond
shareholders to include all individuals who benefit or who are harmed by corporate
actions. 8o This is an important concept to understand as it the one of the building blocks
theories of corporate social responsibility. It is also an important concept for this thesis
as the action of giving away plastic bags by the world's retailers has countless adverse
affects on both the society and the environment.
Janita Vos discusses the relationship between CSR and Stakeholder in the context
of business management. According to Vos, if a business decides to pursue and
implement CSR, it can only achieve its goals by incorporating the strategies into its
79 Merriam webster. "Utility." Merriam Webster. Available from http://www.merriam-webster.com/dictionary/utility. Internet; accessed 28 Feb2009. 80 Zakhem, Abe 1., Daniel E. Palmer, and Mary Lyn Stoll. Stakeholder Theory: Essential Readings in Ethical Leadership and Management. Amherst, N.Y.: Prometheus Books, 2008.
50
managerialoperations. 8l Once the goal to pursue CSR has been established, there are
two questions that a business must answer, first what are the responsibilities of an
organization, and second who are the stakeholders. 82 The answers to these questions will
help a company identify its responsibilities, and which stakeholder groups it is
responsible to, and thus, which groups it will choose to listen to. Here Vos identifies the
difference between the involved and the affected. 83 A business must recognize that it has
a financial obligation to those involved in its operations, as such it must continue to
operate in a way that is profitable and appropriate for its shareholders. Business must
also recognize that it has a moral obligation to the affected, and although there is no
financial relationship between a business and the affected, certain financial burdens must
be born to fulfill the moral obligations.84
Because there are so many different stakeholders, with such a variety of needs,
decisions are inherently made among conflicting interests and will not benefit every
stakeholder. Vos argues that the purpose of stakeholder theory is not to make decisions
that always benefit every stakeholder. 85 The purpose of stakeholder theory is to create
awareness of the different issues that face a company's operations, and that the awareness
and feeling of obligation will be reflected in a new managerial style and will thus be a
part of each decision made in business's day-to-day operations.86
81 Zakhem, Abe. Stakeholder Theory: Essential Readings in Ethical Leadership and Management. 82 Crane, Andrew. The Oxford Handbook of Corporate Social Responsibility. Oxford; New York: Oxford University Press, 2008. 83 Zakhem, Abe. Stakeholder Theory: Essential Readings in Ethical Leadership and Management.. 84 Ibid. 85 Ibid. 86 Ibid.
51
CSR Theory
This thesis argues that the new global economy and power born by the consumer to
choose which businesses to support and which to avoid has made the arguments against
CSR by Smith, Friedman, and Levitt outdated. Companies must engage in CSR to
remain attractive to consumers and remain competitive. To support this claim it is
possible to look at the literature comparing financial performance and corporate social
responsibility. Over the past 30 years more than 120 papers have been published
exploring this relationship.87 The results of these empirical studies have varied and the
market motivation for firms to engage in CSR remains unclear. Despite this fact, the
demand for business to improve its social and environmental performance is growing.
Aupperle et al examined the relationship between corporate social responsibility
and profitability to determine if the two were positively related. The study used A.B.
Carroll's 1979 Academy of Management review and Carroll's definition of social
responsibility which can be broken down into the four components, 1) Economic, 2)
Legal, 3) Ethical, and 4) discretionary, to rank corporate social responsibility.88 The
profitability indicator, Return on Assets (ROA) was used as the performance criteria.
The study results concluded that, " ... it was not possible to support the notion of a
positive or negative relationship between profitability and an orientation toward corporate
social responsibility ... ,,89 The results did show a clear inverse relationship between
economic and ethical dimensions, which suggest that the more concerned a corporation is
87 Crane, Andrew. The Ox/ord Handbook o/Corporate Social Responsibility. 88 Aupperle, Kenneth E., Archie B. Carroll, and John D. Hatfield. 1985. "An Empirical Examination of the Relationship between Corporate Social Responsibility and Profitability .. " Academy of Management Journal 28, no. 2: 446-463. Business Source Premier, EBSCOhost (accessed September 18,2008). 89 Aupperle, Kenneth E., Archie B. Carroll, and John D. Hatfield. 1985. "An Empirical Examination of the Relationship between Corporate Social Responsibility and Profitability."
52
with its economic performance, the less interested it is in its ethical responsibilities. 90
This study provides important motivational information for this thesis as the lack of
association between social responsibility and profitability could represents a barrier to
entry for some firms.
Chen et al conducted a study examining whether charitable contributions are
made as a part of corporate social responsibility or rather to create an image of
legitimacy.91 The study used the Kinder, Lydenberg, Domini, Inc. (KLD) ratings on
social responsibility and the corporate giving directory to collect their data.92 The study
concluded that firms with poor social performance tend to make more charitable
contributions than firms with better social performance, evidence that supports the
legitimacy theory of giving.93 The study however did conclude that there was also a
positive relationship between corporate social responsibility and firm age, that is, better
established firms are more willing to pursue social responsibility than young and growing
firms. This study provides important background information for this thesis with respect
to the motivations behind socially responsible action, as well as the types of firms who
will be more open to adopting progressive plastic bag policies.
It is also appropriate to study a firms cost and risk reduction strategies to
understand the business case for CSR. The Oxford handbook identifies four reasons why
CSR is an important part ofbusiness.94 First business is concerned with minimizing its
90 Ibid. 91 Jennifer C. Chen, "Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?," Journal of Business Ethics 1, no. 82 (2007): 131-144. Springer link. [Database online.] 29 September 2007. 92 Ibid. 93 Ibid. 94 Crane, Andrew. The Oxford Handbook of Corporate Social Responsibility, 179.
53
costs and its risks. 95 By increasing social performance, a firm incurs unnecessary costs
and reduces its profitability. At the same time, establishing relationships with key
stakeholders is an important part of risk reduction and will reduce the probability that
stakeholders oppose the firm's objectives.96 Thus in the long term, creating healthy
relationships with stakeholders is a way for a firm to reduce its costs.
Second firms are interested in creating competitive advantages.97 By adapting to
the stakeholder's expectations, a firm is able to create value, and optimize its competitive
advantage within its industry. This theory draws upon the theories of competitive
strategic positioning as a form of value creation and a way to " ... build competitive
advantage by enabling a strategic adaptation to the external environment. ,,98 Simply put,
a firm will supply the amount of environmental and social performance that is demanded
of it in pursuit of profit maximization.99
Third firms are concerned with the reputation and legitimacy associated with their
brand. lOO This means that in some cases, CSR is not practiced by business because of the
obligation that businesses feel to the society and the environment, instead CSR is
practiced to create brand value. lOl If consumers perceive a company to be responsible,
they will continue to support it and purchase its goods and services. Because of this fact,
the benefits associated with CSR far outweigh the initial costs, and justify action. Brand
reputation is a dangerous area and justification for CSR because the perceived level of
95 Jennifer C. Chen, "Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?, " % Ibid. 97 Ibid. 98 Ibid. 99 Ibid. 100 Ibid. 101 Ibid.
54
responsibility is in fact more important than the actual level of responsibility .102 This
means that there is an incentive for firms to exaggerate the benefits of their actions, a
phenomenon termed 'green washing' and one that has increased in recent years. Brand
reputation is an important and justifiable reason for businesses to engage in CSR, but it is
arguably an area that also demands some type of oversight.
Finally firms are concerned with a concept called synergistic value creation. 103
By operating in a way that incorporates the triple bottom line, and seeks to understand the
connections between numerous stakeholders, a firm will discover new ways to create
value.104 This is to say that when a firm understands the different desires of stakeholders,
it understands what those stakeholders believe to be a source of value. Synergistic value
creation is thus a way for a firm to educate itself and discover untraditional sources of
value, however because of its untraditional form, it does not represent a realistic
• • C b . . CSR 105 motIvatIOn lor usmesses to engage m .
CSR in Practice
In actuality CSR exists beyond theory. Many companies have incorporated
responsibility into their operating strategies with great success. Almost every company
today practices CSR in some form, but some have chosen to take a more innovative and
progressive approach. In 2001 Nike partnered with the World Wildlife Fund becoming a
member of the elite 'Climate Savers' club, a group of companies who pledge to be
102 Jennifer C. Chen, "Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?, " 103 Ibid. 104 Ibid. 105 Ibid.
55
industry leaders in terms of reducing GHG emissions. 106 In 2001 Nike agreed to reduce
CO2 emissions in Nike owned and operated facilities over 20,000 sq to 13 percent below
1998 levels within four years. 107 During the same period of time Nike stock increased
116 percent from $20.23 in the start of2001 to 40.85 at the start of2005.108 Nike's
success was no doubt due to developments and innovations beyond the commitment to
Climate Savers, however the success does show that adopting a progressive CSR
program did not make Nike significantly less competitive or less profitable.
Another example of a company that recognizes the importance of CSR as a value
creator is Johnson & Johnson (1&J). Johnson and Johnson is the third largest corporate
purchaser of clean energy in the U.S. and in 2000, J&J set five year targets to reduce the
green house gas emissions from all its facilities by 7 percent, and to reduce its vehicle
emissions per mile driven by 30 percent.109 Between 200 and 2005 Johnson &Johnson
surpassed its emissions reductions goals, achieving an 11.55 percent reduction in
facilities emissions and while experiencing a 350 percent increase in sales. llo Johnson &
Johnson's success demonstrates that although sustainability is cost intensive, it does not
undermine the ability of a business to achieve results as illustrated by J&1' s
unprecedented growth over five years. It would be incorrect to assume that J&1's CSR
actions drove its success in the market, but it is clear from this case that CSR was nore
responsible for undermining J&J operations.
106 World Wildlife Fund. "WWF Climate Savers Companies - Factsheets January 2007." Panda.org. Available from http://assets.panda.org/downloads/cs_factsheets _ web.pdf. Internet; accessed Mar 2009. 107 Ibid. 108 Yahoo Finance. "Nike Inc. (NKE)." Yahoo Finance. Available from http://finance . yahoo. com/ echarts ?s= NKE#chart 1 : symbo I=nke ;range= 1 d; ind icator=vo lume ;charttype= line; c rosshair=on;ohlcvalues=O;logscale=off;source=undefined. Internet; accessed 27 April 2009. 109 World Wildlife Fund. "WWF Climate Savers Companies - Factsheets January 2007." 110 Ibid.
56
CSR and Plastic Bags
Corporate social responsibility is a modem value creator. Firms investment in
responsible strategies and technologies to ensure their long-term viability. The different
companies that make up the various industries of the economy are all capable of engaging
in socially responsible action, however each industry has a set of best practices that are
only realistic for that industry. This thesis deals with the retail industry, specifically the
American retail industry. Many of America's largest retailers have already started to
redefine themselves, purchasing clean energy, making energy efficiency decisions in their
stores, contributing to non-profit social groups, and even offering reusable bags. It is
clear that retailers recognize the importance of CSR in creating value and ensuring long
term success. The disposable carrier bag has recently come under the microscope in the
retail industry. The following two voluntary responses discuss the overlap between
social responsibility and carrier bag strategies
Status Quo
The first voluntary plastic bag consumption strategy is the simplest to adopt and not
surprisingly the most widely practiced strategy throughout the retail world. The easiest
strategy is to do nothing. Do nothing has changed over time and perhaps is more
appropriately titled, do nothing, but give options. Many modem retailers, especially in
the developed world offer alternatives to the normal plastic bag at the check out counter.
What motivates people to switch from the thin white carrier bags is not legislation then
but instead individual choice. There is a division of economics, know as behavioral
economics that attempts to understand the way consumer make decisions and why they
purchase the products that they do. Behavioral economics helps to hypothesize, at the
57
voluntary level, what motivates individuals to change their behavior; in this case what is
the motivation for consumers to stop using free, convenient plastic bags?
Colin F. Camerer summarizes the purpose of behavioral economics stating,
... behavioral economics is the conviction that increasing the realism of the psychological underpinnings of economic analysis will improve economics on its own terms- generating theoretical insights, making better predictions of field phenomena, and suggesting better policy. III
Behavioral economics attempts to explain the human side of economics. There are many
different applications for the theories of behavioral economics but for this thesis,
understanding the principles of the discipline will be sufficient. There are seven basic
principles as outlined by the New Economics Foundation (NEF) I 12:
•
•
•
•
•
•
Principle 1: Other people's behavior matters - humans observe the behavior of others to determine the appropriate behavior in a given situation. If someone is seen using reusable bags, it will have an impact on others. Principle 2: Habits are Important - many actions are a result of habit meaning that they often done without cognitive effort. It is habit to go to the store without bags because we know that there are free plastic bags available. Principle 3: People are motivated to "do the right thing" - there are intrinsic motivations in people which compels them to do something for the feeling of reward that follows. This is true for those that use reusable bags, there is a feeling of reward or accomplishment for helping to conserve. Principle 4: People' self-expectations influence how they behave - people have expectation of themselves and want their actions to mirror those expectations. Those individuals that expect themselves to playa role in the environmental movement may recognize the consumption problem associated with disposable plastic bags. Principle 5: People are loss averse - people will consciously act so as to avoid a loss, even if that action requires a large amount of effort, while very little effort is given to situations where something is to be gained. People tend to avoid changes meaning that they will continue with what they are comfortable with, in this case continue using plastic although the effort required to use reusable bags is arguably small. Principle 6: People are bad at computation - there is a natural tendency to
III Camerer, Colin F .. "Behavioral Economcs: Past, Present, Future." Caltech. Available from http://www.hss.caltech.edu/~camerer/ribe239.pdf. Internet; accessed 4 March 2009. 112 New Economics Foundation, Behavioural economics: seven principles for policy-makers. Available from neweconomics.org.
58
overestimate probabilities and likelihoods, specifically when deciding between two actions, humans are influenced by how the outcomes are presented. Because the outcome of consuming a plastic bag and using a reusable bag are both presented as close to neutral, people are not motivated to change their behavior.
• Principle 7: People need to be involved and effective to make a change - the feeling of helplessness or lack of control results in a lack of motivation. Because there is no way to see the plastic bags that are prevented from entering landfills, consumers feel their actions are inconsequential and avoid change.
The seven principles are important for understanding what motivates individual
consumers, and each helps explain why even without comprehensive carrier bag
legislation in the U.S., there has been an increase in the use of reusable bags in recent
years.
Bag Management by The Retail Industry
The second plastic bag consumption strategy that can be used by retailers is to
voluntarily set reduction targets. In 2002 the Australian Retailers Association (ARA)
developed a voluntary agreement that set targets for plastic bag consumption. I 13 The
agreement was applied to all Australian retailers regardless of membership in the
ARA.114 The voluntary targets set are as follows 1l5:
• 25% reduction in the number of plastic bags issued by the end of 2004 • 50% reduction in the number of plastic bags issued by the end of 2005 • 30% increase in in-store plastic bag recycling rates • 75% reduction in plastic bag litter by the end of 2005
Australian minister for the Environment and Heritage, Ian Campbell, announced in mid-
2005 that the voluntary goals set by retailers had been successful and that the number of
113 ARC+, Plastic bags - Policies and Practices to Reduce Consumption 114 Ibid 115 Ibid
59
plastic bags used in 2005 was more than one billion bags less than the number used in
2002 (6.9 billion), a 33.8% decrease. I 16 According to the ARA the motivation behind the
voluntary action was to avoid a legislation instituting a ban or a 25-cent per bag tax,
which would cost consumers millions of dollars and create many operational and
administrative inefficiencies for the retailers themselves. I 17 To avoid these inefficiencies,
the ARA decided that giving the reduction power to the retailers, and setting 4-year
reduction goals would minimize inefficiencies and minimize the cost to consumers.
To meet targets, the ARA bagging code focused on lightweight HDPE carry bags
rather than other forms of plastic carry bags. 118 As HDPE bags represented 85% of the
6.9 billion disposable bags in Australia. I 19 By promoting recycling and educating
customers and employees, the ARA aimed to reduce the number of HDPE bags that it
gave out. 120
Although the voluntary reduction by retailers was successful it was unable to meet
its goal of a 50% reduction by the end of 2005. 121 In late 2005 the Environment
protection and Heritage council (EPHC) agreed that single use plastic carrier bags should
be phased out by 2008. 122 The EPHC set 2008 as the deadline for retailers to meet the
goal and stated that the inability to make satisfactory progress would result in legislative
measures that ensured the successful phase-out of plastic bags. 123
This is an important voluntary case to understand as the retailers in the United
States are also capable of setting and achieving voluntary targets. As stated by the ARA,
116 ARC+, Plastic bags - Policies and Practices to Reduce Consumption 117 Ibid.
118 Plastic retail carry bag use 2002 - 2004 consumption. 119 Ibid. 120 Ibid.
121 ARC+, Plastic bags - Policies and Practices to Reduce Consumption. 122 Ibid.
123 ARC+, Plastic bags - Policies and Practices to Reduce Consumption.
reduction strategies that are implemented voluntarily and created by the retailers
themselves minimize inefficiencies and save money for both consumers and retailers.
This fact makes voluntary action very appealing to retailers however it should be noted
that the ARA did not choose to set reduction targets until they were certain that a
legislative ban or tax on plastic bags was a realistic possibility.
Conclusion
60
Plastic bags are a convenience. They make our lives easier, they are compact,
waterproof, resilient, and they provide a clean way to transport groceries and other
products. Few studies have been conducted on the current plastic bag strategies within
the United States and their resulting successes and failures, a gap that this thesis will
attempt to fill. Using the examples provided in this chapter this thesis will explore the
businesses examples of reduced plastic carrier bag use, and the possibility of regulation in
the U.S. regarding plastic bag use.
CHAPTER IV
ANALYSIS OF BAGGING IN THE UNITED STATES
An argument against disposable carrier bag use cannot be made without a
comprehensive understanding ofthe underlying issues. The United States has yet to
recognize this fact on the national level, but on an individual basis several institutions and
governing bodies have taken it upon themselves to act. This chapter will discuss the
different pieces of regulatory legislation that have appeared on both the city and state
level regarding disposable bag use in the United States. This chapter will also examine
the voluntary response; case studies on three major retail businesses in the United States
that have approached the carrier bag problem in three differently ways, but have
strengthened their business and strengthened their bottom line in the process.
Bagging Legislation in the U.S.
In January 2005 the city of San Francisco announced its intention to pass the first
carrier bag law in the United States. I If passed, the legislation would require retailers to
charge consumers, at the point of sale, 17 cents for every disposable carrier bag used.2
City officials expected to reduce demand for bags by 20 percent, equivalent to 95 tons of
plastic and there by reduce the economic commitment being made by the city each year
J ARC+, Plastic bags - Policies and Practices to Reduce Consumption (North Yorkshire: Residua Limited, 2008) 2. 2 Ibid, 2.
61
62
to clean up and dispose of disposable carrier bags.3 Instead of passing the legislation,
San Francisco lawmakers reached an agreement with Albertsons, Andronicos, Bell
Markets, CaiMart, Cala Foods, Foods Co, Mollie Stone's, and Safeway that the retailers
would reduce bag use 20 percent or roughly 10 million bags by the end of2006.4 To
achieve this goal the supermarkets agreed to install plastic recycling bins in all stores,
promote bag recycling, educate employees, sell reusable bags, and contribute to
education programs that promoted recycling.5 The agreement represented the first
pUblic-private bag reduction agreement of its kind in the United States. However, as was
the case with a similar program instituted in Australia, retailers failed to meet the
voluntary recycling targets. In 2007 San Francisco brought back the legislation and
decided upon a non-compostable plastic bags ban for all supermarkets with gross annual
sales of $2 million dollars or more.6 The ordinance went into effect on November 20,
2007.7 As a result compostable plastic, recyclable paper, and reusable bags are the only
carrier bags available to shoppers in San Francisco. Critics of the legislation point out
that retailers regulated by the ban will most likely to turn to paper bags in their effort to
minimize costs. This is a valid point and it undermines the environmental effectiveness
of the legislation as bag for bag paper has a higher impact on the environment. It is,
however, near impossible to quantify the importance of a first step legislative initiative
like that made in San Francisco. The groundbreaking nature of the legislation generated
an enormous amount of local and national publicity and is therefore important because of
3 ARC+, Plastic bags - Policies and Practices to Reduce Consumption (North Yorkshire: Residua Limited, 2008) 2. 4 San Francisco Board of Supervisors. "Plastic Bag Reduction Ordinance - 106883." SFgov.org. Available from http://www.sfgov.orglsite/sf3llrfs_index.asp?id=71355. Internet; accessed I April 2009 5 ARC+, Plastic bags - Policies and Practices to Reduce Consumption. 6 Ibid. 7 Ibid.
63
the educational and informational value that it provides. The legislation also encourages
local governments around the country to follow suit and start considering the costs and
benefits of disposable bags regulations. California has used San Francisco's ban to
springboard plastic bag legislation into state law. Each year Californians consume 19
billion bags, 517 plastic bags per person, and each year the state spends $25 million
dollars to landfill dispose of the bags, plastic inparticular. 8 An additional 300 million is
spent each year on litter clean Up.9 Assembly Bill 68 (A.B. No 68) would "prohibit a
store, as defined, from providing a single-use carryout bag to a customer unless the store
charges a fee of not less than $0.25 per bag at the point of sale." 10 The California state
law represents a more comprehensive regulation by taxing all disposable carrier bags.
The proposed law will not ensure that plastic bags disappear from the state of California,
but it will create an incentive for shoppers to find alternative ways to carry their
purchases.
In New York City, city officials are in the process of instituting the United States
first city-wide plastic bags tax. Mayor Michael R. Bloomberg has proposed a $0.05 USD
tax on plastic carrier bags distributed not only at grocery stores, but department stores,
restaurants and other retailers. II City officials have estimated that revenue from the tax
will approach $84 million within the first year, and upwards of $144 million by 2011. 12
Because the legislation is being presented as a tax, and not a fee, it requires approval
from New York State legislators in Albany which could delay the implementation of the
8 ARC+, Plastic bags - Policies and Practices to Reduce Consumption. 9 Ibid. 10 Total Capitol. "AB 68- Solid waste: single-use carryout bags." TotalCapitol.com. Available from http://www.totalcapitol.coml?biIUd=8554. Internet; accessed I April 2009. II Jennifer B. Lee. "Taxing Plastic Bags, From Pennies Here to Millions There." The New York Times. A vai lab Ie from http://cityroom.blogs.nytimes . com/2 009 102!02/taxing-p lasti c-bags-from- penn ies-here-tomillions-there/. Internet; accessed 2 April 2009. 12 Ibid.
64
legislation. Critics believe that the tax would be an unwanted burden for many New
Yorkers; most city residents are walking commuters which means they would have to
carry reusable bags with them when they go out for the day. This is a valid point
however some behavioral changes must be endured to eliminate bad habits; carrying
reusable bags in New York is one such example.
Rhode Island is another example where state legislators have identified plastic
bags as a problem and have chosen to act. According to state statistics, 95 percent of
households use plastic bags, totaling 192 million each year. 13 On August 22, 2005 Rhode
Island became the first US state to institute a statewide plastic bag-recycling program free
for both consumers and participating retailers. 14 As of March 30, 2008 "ReStore," as the
program was called, has helped Rhode Island consumers recycled 81 tons of plastic
bags. IS Although ReStore has been a success, Rhode Island is pursuing additional
legislation, both a disposable bag ban and a 5-cent tax are being considered. I6 A number
of other U.S. cities are also in the process of considering or passing plastic bag
legislation. Boston, Portland, Phoenix, Austin, New Haven, Los Angeles, Annapolis,
Baltimore, and Seattle are all considering a ban or tax on plastic carrier bags. 17
Despite the success of programs like San Francisco and Rhode Island, plastic bag
legislation faces obstacles. Oakland, California instituted a plastic bags ban similar to the
13 Rhode Island Resource Recovery Corporation. "Nation's First Statewide Plastic Bag Recycling Program Started Labor Day Weekend." rirrc.org. Available from http://www.rirrc.org/main.cfm?story=162. Internet; accessed 2 April 2009. 14 Rhode Island Resource Recovery Corporation. "Nation's First Statewide Plastic Bag Recycling Program Started Labor Day Weekend." 15 Natalie Garcia. "Lawmakers take aim at plastic bags." The Providence Journal. Available from http://www.projo.com/news/contentiplastic_bags_03-31-08_DB9D04L_v33.38f57bd.html. Internet; accessed 2 April 2009. 16 Ibid 17 David Gorn. "San Francisco Plastic Bag Ban Interests Other Cities." npr.org. Available from http://www.npr.org/templates/story/story.php?storyld=89135360. Internet; accessed 3 April 2009.
65
one in San Francisco which was set to go into effect an January 18,2008. 18 A law suit
was filed in protest of the legislation on behalf of the Coalition to Support Plastic Bag
Recycling, a group that represents the interest of the plastics industry .19 On April 17 a
judge ruled that the city of Oakland did not have evidence sufficient to prove that the ban
would have beneficial environmental effect and thus could not be instituted using the
City's justification.2o The ruling represents a significant barrier to future legislation in
the U.S. In order for cities or other government agencies to institute a plastic carrier bag
ban on the basis of 'protecting the environment' they must be able to provide evidence in
support of that claim. As demonstrated by this thesis, it is near impossible to quantify the
total economic impact of plastic carrier bags. To prove that a ban would benefit the
environment, Oakland was required to conduct an environmental impact review at a cost
of$125,000 with no guarantee that the review would support the ban.21 There is
therefore an element of cost and an element of inconvenience that could dissuade U.S.
cities from pursuing plastic legislation in the future.
Legislation is the only way to regulate the actions of privately owned institutions,
however for the regulation to have merit, the government must prove that the law is in the
best interest of the public. To this point governments have used the environmental and
economic threats posed by plastic bags to justify legislation. The case of Oakland
California undermines this justification, a government must be able to use statistical data
to justify action, the notion that plastic bags are bad is not enough.
18 Mike Verespej, "Bag ban on hold in Oakland. (cover story)." Plastics News 20, no. 8 (April 28, 2008): 1-27. Business Source Premier, EBSCOhost (accessed April 9, 2009). 19 Ibid. 20 Ibid. 21 Ibid.
66
Voluntary Plastic Carrier Bag Reductions
It's not the strongest of the species that survives, nor the most intelligent, but those most adaptive to change.22
- Charles Darwin
Despite the need for legislation, several major retailers have decided to focus on
carrier bags as a part of their business strategy. Charles Darwin's quote explains this
behavior best. The three retailers discussed in this section recognize that plastic bag
legislation is becoming a realistic possibility in the U.S. and by moving preemptively to
address the problem, the stores are able to choose the method that best fits the demands
of their customers and the operational strategy of the business. This form of CSR
benefits retailers that would be affected by a legislative ban or tax as voluntary action
allows retailers to undertake reduction strategies in the most efficient and costs effective
way. Each case will discuss a different reduction strategy including banning, taxing, and
voluntarily reducing plastic carrier bags.
22 Causes for SUCCESS
67
Case Study #1: Whole Foods Market
The History of Whole Foods
In 1978 John Mackey and Rene Lawson Hardy founded a small natural foods
store called Saferway in Austin, Texas.23 Two years later Saferway merged with local
competitor Clarksville Natural Grocery to form the first Whole Foods Market, which
opened on September 20, 1980. The rapid success of the store fueled a 1984 expansion
from Austin to Houston, Dallas and later to New Orleans. Whole Foods revenue
continued to grow and in 1989 the company opened a store in Palo Alto, California,
marking its first western branch. The Whole Foods growth model was centered on the
desire to open new stores and also to acquire regionally established competitors. In 1992
Whole Foods conducted its initial public offering (lPO) at a split -adjusted price of $2.125
per share.24 The capital raised by the successful IPO allowed Whole Foods to acquire
Wellspring Grocery of North Carolina, Bread & Circus of Massachusetts and Rhode
Island, Mrs. Gooch's Natural Foods Markets of Los Angeles, Bread of Life of Northern
California, Fresh Fields Markets on the East Coast and in the Midwest, Florida Bread of
23 Whole Foods. "Company History." Whole Foods. Available /Tom http://www.wholefoodsmarket.comlcompanylhistory.php. Internet; accessed 20 October 2008. 24 Whole Foods. "Fast Facts." Whole Foods. Available /Tom http://media.wholefoodsmarket.com/pr/wf/fast-facts.aspx. Internet; accessed 20 October 2008.
68
Life stores, Detroit area Merchant of Vino stores, and Nature's Heartland of Boston
throughout the 1990s and in 1999 Whole Foods Opened its 100th Store. Today Whole
Foods Operates 276 stores in 37 U.S. states, 6 stores in the United Kingdom and 7 stores
in Canada.25
The Whole Foods Philosophy
Whole Foods believes that there is a strong relationship between its social
responsibility and its success as a business. Because of this strong belief, Whole Foods's
self-proclaimed mission reads as follows.
Our Company mission is to promote the vitality and well being of all individuals by supplying the highest quality, most wholesome foods available. Since the purity of our food and the health of our bodies is directly related to the purity and health of the environment, our core mission is devoted to the promotion of organically grown foods, food safety concerns, and the sustainability of the entire ecosystem.26
To fulfill this core mission Whole Foods has developed a business strategy that reinforces
its beliefs. By empowering team members, selecting the highest quality products and
promoting sustainability in its supply chain, Whole Foods has not lost sight of its goals
despite sustained company growth of30 percent in the 1990's and upwards of20 percent
in the last few years.27 Further, The Whole Foods motto "Whole Foods, Whole People,
Whole Planet," is another important part of the Whole Foods identity. The motto
provides no new philosophies or insights however it's prominently display in every store
to remind customers and team members why the business exists and what it strives to do.
25 "Form IO-K." Whole Foods. Available from http://www.wholefoodsmarket.com/company/pdfs/2007 _I OK.pdf. Internet; accessed 18 October 2008. 26 Ibid 27 "Form 10-K." Whole Foods
69
Whole Foods and Sustainability
When the name Whole Foods is mentioned one of the first things that comes to
mind is organic, the second is perhaps responsible or sustainable and the third is pricey.
This reputation places Whole Foods in a category separate from most retailers as the
public acknowledges that Whole Foods operates in a conscious and sustainable manner
albeit for a slightly higher price. Brand perception is important but what is Whole Foods
actual relationship with sustainability? The Whole Foods commitment to sustainability
comes in many forms including offsetting 100 percent of the company's energy needs
with wind power starting in 2006, reducing waste, promoting recycling, using green
building practices, and specializing in the distribution of organic products.28 Whole
Foods refers to this commitment as its Green Mission and requires that each store
establish a committee for the sole purpose of upholding that mission.
According to Jan Mowle, the Marketing Director for Pikes Peak Whole Foods in
Colorado Springs Colorado, committees are made up of 9 members, one from each
department?9 One of the responsibilities of this committee is minimizing trash on the
store level. To do this Whole Foods employs trash porters who sort through store
receptacles and move recyclable or compostable items into the appropriate bins?O To
encourage employees to minimize waste, Whole Foods Green Mission Committees hold
contests between store teams with prizes for the team that is able to most effectively
reduce the amount of waste their department collects.3' Whole Foods commitment to
28 "Fonn 10-K.If Whole Foods 29 Jan Mowle, interview by author, 17 November 2008, Colorado Springs, CO, tape recording. 30 Ibid. 31 Ibid.
70
sustainability is clear and well recognized so it is not surprising that Whole Foods has
decided to take a progressive approach toward the way they use plastic bags.
Whole Foods Bagging
On April 22, 2008, Earth Day 2008, Whole Foods Markets stopped providing
plastic bags to its shoppers. The company estimated that over the remaining 8 months of
the year, 100 million bags would be saved as a result of the decision.32 According to
A.C. Gallo, the company's co president, "This is something our customers want us to do.
It's central to our core values of caring for communities and the environment. ,,33
To educate customers about the choice to
eliminate plastic bags, Whole Foods stores placed
signs around the stores and at check out counters like the
one seen in figure 4.1. These signs appeared in February
of 2008, giving customers 2 months to prepare for the
actual start date.34 According to Mowle instituting the
new policy was simple. Plastic bags were considered part
of the supply budget and were purchased and managed by
the customer service department. 35 On April 22nd the
customer service department simply stopped ordering
plastic bags. Jan Mowle recalls that throughout the
Figure 4.1 - In-store Advertising
H~ us in 0Uf miuioolo ~ IOnd 10 1M ~t by reusingyout b<lp'
Source: Whole Foods Website
32 Bruce Horovitz. "Whole Foods sacks plastic bags." USA Today. Available from http://www.usatoday.comlmoney/industries/food/2008-01-21-whole-foods-bags_N.htm. Internet; accessed 4 April 2009. 33 Ibid. 34 Jan Mowle, interview by author. 35 Ibid.
71
process she received very few complaints from customers; instead customers actually
requested that Whole Foods examine plastic bag use storewide to determine other places
where plastic bags could be eliminated (bakery, deli, fresh
food, etc.).36
On April 22nd, the Pike Peak Whole Foods branch
distributed 3,000 disposable bags free to customers as a way
to generate positive sentiment and educate people about the
new policy.37 In addition, the progressive and unique
Figure 4.3-Whole Foods
Better Bag
nature of the program meant that
local news stations followed the
Figure 4.2 - Whole Foods Paper Bag
Source: Whole Foods Website
launch closely and many choose to run stories during their nightly
broadcasts. These news stories generated a great deal of public
interest and served as a free way to
educate people about the decision.
According to Mowle, the largest cost
Source: Whole Foods Website from the entire process was the
design and production of the in-store signs.38
Figure 4.4 - Sheryl Crow Reusable Bag
Instead of plastic, Whole Foods will offer four sizes of
100 percent recycled paper bags (figure 4.2), reusable
bags made 80 percent from recycled bottles ($0.99 USD) Source: Whole Foods Website
shown in figure 4.3 and Canvas bags ($6.99-$35 USD) to its customers at the point of
36 Jan Mowle, interview by author. 37 Ibid . 38 Ibid .
72
sale.39 Once bags wear out or break, they can be returned to a Whole Foods store where
they are recycled; customers also receive a new bag free of charge.4o As of April 6, 2009
Whole Food reported that reusable bag sales had tripled since last year and more than 150
million plastic bags have been kept out of landfills and the environment.41 Whole Foods
has also partnered with celebrities like Sheryl Crow to launch limited edition reusable
bags as seen in figure 4.4. According to Mowle, all reusable bags have been selling well
since the April start date, but the designer limited edition bags are easily the most
popular.42 In addition every time a customer brings in his or her own bags, Whole Foods
gives a lO-cent discount (per bag used) to that customer. Customers can then choose to
keep the credit or donate it to a local school.
A final point of interest deals with the actual bagging process. Many critics of
reusable bags say that it takes baggers longer to load a reusable bag, making them less
efficient and slowing down lines. Jan Mowle adamantly disagrees with this perception
and says that there have been no complaints from either team members or customers
about the new bagging systems. "Frankly if I were bagging I would rather bag something
square than in a bag that moves around ... " Mowle asserted, "and the presence of reusable
bags in lines does not slow down the bagging process."43
Whole Foods has been able to successfully eliminate plastic bags from the point
of sale. The decision has proven to be a successful one and the Whole Foods case
demonstrates that customers are receptive to a plastic bag ban despite what some may
39 Whole Foods Market. "More Shoppers Bring Their Own Bags." Whole Foods. Available from http://www.wholefoodsmarket.comipressroom/2009/04/06/more-shoppers-bring-their-own-bags/. Internet; accessed 5 April 2009. 40 Ibid. 41 Ibid. 42 Jan Mowle, interview by author. 43 Ibid.
73
think. One critique of the Whole Foods model is that it only focuses on single-use
disposable plastic carrier bags, which means that most Whole Foods shoppers are using
the single-use recyclable paper bags instead. It is hard to measure the actual
environmental change from this bagging shift but it is worth noting that the Whole Foods
model, albeit important, would not be an appropriate model for the U.S. to pursue
because the U.S. cannot afford to replace one inefficient bagging system with another.
74
Case Study #2: Walmart Stores Inc.
,,~
Walmart '*1' Save money. Live better.
The History of Walmart
In 1950 Sam and Helen Walton opened the first Walton 5 & lOa part of the Ben
Franklin Franchise in the Northwest Arkansas town of Bentonville.44 By 1959 Sam and
his brother Bud Walton owned and operated 9 Ben Franklin franchise stores and were
ready to open their own independent retail store in rural Arkansas.45 The First Wal-Mart
store opened in 1962 in the small town of Rogers Arkansas and within 5 years there were
25 successful Wal-Mart stores located throughout Arkansas.46 In 1970 Wal-Mart opened
its first distribution center and two years later the company went public on the New York
Stock Exchange. The infusion of capital helped Wal-Mart expand into 10 states by 1975
and helped Wal-Mart make its first acquisition of 16 Mohr-Value stores located
throughout Michigan and Illinois.47 In 1981 Wal-Mart made expanded operations again
by acquiring 92 Kuhn's Bike K stores in Texas, and in 1983 Wal-Mart expanded its
business opening the first members only Sam's Club in Oklahoma.48 Wal-Mart
tremendous rate of growth continued into the latter half of the 1980's began to explore
the possibilities of improving its business using technology. In 1987 Wal-Mart
44 Wal-Mart. "History Timeline." walmartstores.com. Available from http://walmartstores.com/AboutUs17603.aspx. Internet; accessed 10 April 2009. 45 Ibid. 46 Ibid. 47 Ibid. 48 Ibid.
75
completed the largest private satellite communication system in the U.S. connecting all
stores and the home office with two-way voice, data, and one-way video capabilities.49 A
year later Wal-Mart began operations in its 29th state and by 1990 Wal-Mart was the
number one retailer in the US.50 Mid-way through the 1990s Wal-Mart operated in 49
states and 6 countries with total sales of$93.6 billion. 51 By 1997 Wal-Mart reported that
90 million customers shopped its stores world wide each week and Wal-Mart replaced
Woolworth on the Dow Jones Industrial Average.52 Today Walmart employs more than
2 million associates in 7,899 stores around the world and 374.5 billion in sales.53
The Wal-Mart Philosophy
Wal-Mart is well recognized in the retail world as a cost leader. This means that
Wal-Mart strives to offer consumers the widest selection of quality products for the
lowest prices. This goal is embodied in the Wal-Mart mission statement which reads:
"Our mission/purpose statement is: Saving people money so they can live better. ,,54
Walmart has developed a business strategy to help the company achieve this lofty goal.
Wal-Mart's founder Sam Walton believed strongly that it was the people who worked in
Wal-Mart stores that made the business so successful. Thus the first ofWalmart's three
basic operating tenants is respect for the individual. 55 Customer service is also important
for Wal-Mart's success as they say, "our customers are the reason we're in business, so
49 Wal-Mart. "History Timeline." 50 Ibid. 5! Ibid. 52 Ibid. 53 Wal-Mart Stores Inc., Annual report (Wal-Mart Stores Inc., 2008), I-51. 54 Wal-Mart. "Mission." walmartstores.com. Available from http://walmartstores.com/AboutUs17649.aspx. Internet; accessed 8 April 2009. 55 Wal-Mart. "3 basic beliefs and values." walmartstores.com. Available from http://walmartstores.com/AboutUs/32I.aspx. Internet; accessed 9April 2009.
76
we should treat them that way ... we look for every opportunity that we can to exceed our
customers' expectations.,,56 The last operating belief it's the continuous drive to be
better. Wal-Mart is committed to saving its customers money so by increasing
efficiencies within its operations, by making customers feel welcome in the store, and by
offering products that people want, Wal-Mart is working to fulfill its goal of helping
people to live better.
Wal-Mart Sustain ability
The Wal-Mart commitment to sustainability began in 2005 when then CEO Lee
Scott outlined the environmental goals of the company in his "twenty-first century
leadership speech. 57 Since 2005 Walmart has committed itself to three sustainability
goals: to be supplied 100 percent by renewable energy; to create zero waste (nothing goes
to landfill); and to sell sustainable and responsible products that do not have a negative
impact on the environment.58 Wal-Mart's progress and initiatives are outlined in a
sustainability progress report which is published annually. This level of transparency,
allowing consumers to read about Wal-Mart's different sustainability projects, as well as
being able ascertain Wal-Mart's footprint and impact on the natural environment is a
progressive and important part of the Wal-Mart sustainability commitment. As discussed
earlier in this thesis, the 21 5t century consumer is far more powerful due to the availability
of information and transportation. Wal-Mart is demonstrating that they recognize and
respect this power and they consider it their responsibility to inform their customers as to
the company's performance beyond the typical financial metrics.
56 Wal-Mart. "3 basic beliefs and values." 57 Wal-Mart Stores Inc. "Sustainability progress to date 2007-2008." (Wal-Mart Stores Inc., 2008),1-60. 58 Ibid.
77
Perhaps even more impressive than Wal-Mart's internal commitment is the
initiative launched in February of 2007 by Lee Scott entitled, "Sustainability 360.,,59
Sustainability 360 is Wal-Mart's commitment to extend its sustainability goals beyond
the company and to motivate its associates, suppliers, and communities to change their
behavior. The program recognizes that although Wal-Mart has an extensive footprint,
globally Wal-Mart is responsible for 20,388,574 tons of CO2, this impact is a mere
fraction of global emissions, but by engaging suppliers (Wal-Mart has 66,000 of them)
there are far more energy and emissions savings to be had.6o Behind each and every one
of these initiatives Wal-Mart is able to identify savings for itself as well as suppliers.
Wal-Mart believes that if suppliers can reduce their energy demands and their energy
expenses, they can pass those savings onto Wal-Mart which can inturn pass the savings
onto the customer, helping people to "save money so they can live better." In all ofWal-
Mart's publications and sustainability initiatives, this is the driving point. Wal-Mart is
attacking sustainability from a business, cost-saving perspective so as to better achieve its
mission statement. At Wal-Mart, sustainability is an investment and a business decision;
it has to make financial sense to work. According to Matt Kistler, the senior vice
president of sustainability for Wal-Mart Stores Inc., "I think its [sustainability] made us,
much more competitive. Sustainability done right can definitely provide you a
competitive advantage. It can be a license for you to grow, but also to I think
fundamentally .. .its just the right thing to do." 61 This perception differs from that of rival
retailer Whole Foods, where the moral advantages that come with sustainability appear
more in the operating philosophy and the DNA of the company then they do in the case
59 Wal-Mart Stores Inc. "Sustainability progress to date 2007-2008." 3. 60 Ibid, 4l. 61 Matt Kistler. Interview by author, 24 October 2008. Bentonville, AK. Tape recording.
78
ofWal-Mart.
A critical view of Wal-Mart's actions reveals that the company is only really
addressing the "low hanging-fruit" or the programs that are easy to institute. This is true,
however from a business perspective, these programs should be the first to be addressed
as they are the lowest cost and the simplest; and the fact that they are simple does not
mean that their effect is small or inconsequential. Each year Wal-Mart invests $500
Million USD into sustainability programs to achieve the following goals62:
• Existing store 20% more efficient by 2015 • New stores 30% more efficient by 2012 • Fleet 25% more efficient in 3 years, and 50% more efficient in 10 years • 25% reduction in solid waste in 3 years • 20% of suppliers adopt Wal-Mart sustainability goals within 3 years
Wal-Mart has already begun to realize some of its savings. In November 2006 Wal-Mart
retrofitted refrigeration units in 500 stores saving the company $2.6 million annually in
energy costs and keeping 16,000 tons of C02 out of the atmosphere.63 In May, 2006
Wal-Mart installed Auxiliary Power Units (APUs) on all of its trucks allowing drivers to
switch the engine off during breaks but still power the cabin climate system as well as
communications, which reduced CO2 emissions by 100,000 tons, saved 10 millions
gallons of diesel fuel, for a cost savings of $25 million each year.64 Although most
sustainability initiatives are currently limited to U.S. operations (ie store retrofits),
international operations in countries like Brazil and the UK are also underway. ASDA,
Wal-Marts UK subsidiary plans to be zero waste by the end of2010, and Wal-Mart stores
in Brazil have partnered with local NGOs to help employ 'garbage pickers' at local trash
62 Wal-Mart Stores Inc. "Sustainability progress to date 2007-2008." 41. 63 Ibid, 41. 64 Ibid, 42.
79
recycling facilities. 65 Many ofWal-Mart's suppliers are located outside of the U.S. and
are therefore bound be less stringent health and emissions standards. Wal-Mart has
partnered with these suppliers to help increase the efficiency of operations, reduce energy
demand and save costs.
The Wal-Mart Sustainability initiatives attempt to create solutions to problems at
every level of the supply chain, from the extraction of raw materials to the production and
transportation of goods, through the purchase and use of the goods by consumers, and
finally the disposal of these goods. The Wal-Mart model, while still young, is a
comprehensive approach and creates solutions that resolve the sustainability and
environmental problems associated with Wal-Mart's business.
Wal-Mart Bagging
As the largest retailer in the world, bagging is a represents a substantial expense
for Wal-Mart. Over 176 million people shop Wal-Mart stores every week and assuming
that the average person uses 3 plastic bags per week, a low estimate, it is possible to
estimate the number of plastic bags used per year by Wal-Mart shoppers alone66.
• 176 Million Shoppers * 3 bags Each = 528,000,000 bags per week • 528,000,000 per week* 52 Weeks per year = 27,456,000,000 bags per year
Because Wal-Mart uses cost saving analyses to assess and justify most of its sustainable
initiatives, estimating the cost of these 27 billion bags gives one the idea of the potential
savings available.
• Most statistics identify the cost of a single plastic carrier bag to the store to be
65 Wal-Mart Stores Inc. "Sustainability progress to date 2007-2008." 2. 66 Ibid, 42.
80
$0.01 USD67
• Plastic bags cost Wal-Mart: 27,456,000,000 * $0.01 = $274.56 Million USD
Reducing plastic bags can be justified on the basis of its environmental as well as
financial impacts. Wal-Mart recognized this fact and on September 25,2008 at the
Clinton Global Initiative Wal-Mart announced its commitment to reduce waste generated
from the use of plastic bags by 33 percent per store by 2013.68 The reduction goal
actually calls for a reduction in consumption rates of 50 percent outside of the U.S. and
25 percent within the U.S., so the 33 percent goal per store represents an average
reduction rate.69 The commitment includes a partnership with the Environmental
Defense Fund (EDF) who will independently monitor the performance ofWal-Mart
stores and enforce the commitment. Matt Kistler confirmed that EDF is "a good business
partner and very important stakeholder in the process towards making us better."
Wal-Mart believes that it can achieve the 113 reduction goal by adopting new
'best practices' at the point of sale. The strategy is currently outlined on Wal-Mart's
website and includes but is not limited to 70:
Reduce - "Reduce the number of plastic bags per transaction at our registers and optimize plastic bag design to reduce waste."
• Train cashiers in new bagging efficiency techniques • Provide incentive to associates the reward decreased bag use • Reduce bag size and thickness • Promote campaign using in-store advertising
Reuse - "Increase reusable bag use by making them accessible and affordable to everyone, and motivate customers to reuse bags."
• Reduce costs of reusable bags
67 Adam Akullian. "Plastic Bag Externalities and Policy in Rhode Island." Seattle bag tax. Available from http://seattlebagtax.org/referencedpdfs/en-akullianetal.pdf. Internet; accessed 8 April 2009. 68 Wal-Mart Stores Inc .. "Wal-Mart Sets Goal to Reduce its Global Plastic Shopping Bag Waste by OneThird." Wal-mart. Available from http://walmartstores.com/FactsNewslNewsRooml8628.aspx. Internet; accessed II April 2009 69 Wal-Mart Stores Inc .. "Wal-Mart Sets Goal to Reduce its Global Plastic Shopping Bag Waste by OneThird." 70 Ibid.
• Train associates as to proper reusable bag bagging techniques • Promote reusable bags in stores
Recycle - "Increase the number of plastic bags recycled and close the loop on recycled plastic."
• Educate customers about the impacts of recycling plastic bags
81
• Identify methods and options where recycled plastics can be sold to Wal-Mart suppliers creating a closed loop cycle.
• Recycle reusable bags • Introduce larger and easily accessible receptacles to collect plastic recycling
It is important to understand that the Wal-Mart commitment pledges to reduce plastic bag
waste, not plastic bag use so options like recycling plastic bags, and reducing plastic bag
size and thickness may not actually reduce the number of bags used, but will reduce the
plastic waste generated from stores. When asked about the average recycling rates of
plastic bags in Wal-Mart stores, Mr. Kistler provided the follow information,
Its very low, but the reason why is two fold. First we haven't done it in all stores, we will now do it in all stores as a result of the COl (Clinton Global Initiative), and two is that not all of the jurisdictions, municipalities where there are Walmart stores recycle. So if we do not have infrastructure that allows us to recycle, then it is futile to have customers bring in plastic bags because there is nothing that we can do with them ... 71
Despite this fact Wal-Mart reports that its voluntary reduction will reduce waste
equivalent to 9 billion bags per year.72 The effects of this reduction stretch across many
areas, governments like California spend $25 million to transport plastic bags to landfills,
less bags will demand less money for their disposal. In addition plastic bags are a well
know polluter, especially in marine environments so 9 billion less bags will limit the
number of bags that could find their way into marine ecosystems. Finally Wal-Mart has
published that the one-third reduction is equivalent to eliminating 290,000 metric tons of
71 Matt Kislter, Interview by author. 72 Wal-Mart Stores Inc. "Wal-Mart Sets Goal to Reduce its Global Plastic Shopping Bag Waste by OneThird."
82
green house gasses from the atmosphere annually, saving 678,000 barrels of oil or
enough energy to power more than 25,000 homes in the U.S. for a year. 73
Internationally Wal-Mart has already achieved some impressive bag reductions.
In Argentina and Brazil bag use has fallen by 20 percent due to better cashier training and
the 'one more item per bag' program. ASDA, Wal-Mart's United Kingdom (U.K.)
branch no longer offer single use carrier bags at the point of sale
and has seen a 30 percent reduction in use and in Japan, 46 percent of
Wal-Mart customers bring their own bags. 74
In the U.S. bag use reductions are slower to materialize but
reusable bag sales in Wal-Mart are slowly increasing. Beginning in
October 2007 Wal-Mart began offering 2 types of reusable bags to its
Figure 4.6 - Wal-Mart's U.S. shoppers. The first, shown
Figure 4.5 - Wal-Mart's Black Reusable Bag
Blue Reusable Bag Source: Wal-Mart Website in figure 4.5 is Wal-Mart's black
reusable bag ($1.00 USD) made with recycled polyethylene
terephthalate plastic (soda and water bottles) and capable of
transporting 35 lbs of merchandise with a useful lifetime of2
years.75 Wal-Mart's blue reusable bags ($0.50 USD) shown
in figure 4.6 are made from non-woven polypropylene Source: Wal-Mart Website
and are capable of holding 22 lbs of merchandise with
73 Wal-Mart Stores Inc. "Wal-Mart Sets Goal to Reduce its Global Plastic Shopping Bag Waste by OneThird." 74 Wal-Mart Stores Inc. "Sustainability progress to date 2007-2008." 43. 75 Wal-Mart Stores Inc .. "Reusable bags." Wal-mart. Available from http://walmartstores.com/Sustainability17990.aspx. Internet; accessed \0 April 2009.
a useful lifetime of 6 months.76 Both bags are fully recyclable and have already been
sold to eliminate the need for more than l.5 billion single use plastic bags. 77 Many
retailers like Wal-Mart have begun offering reusable bags to customers at the point of
sale but Wal-Mart has differentiated itself by choosing to not reward shoppers for
bringing in their own bags (Kroger, Whole Foods, and Safeway are all examples of
retailers that give a credit to shoppers who bring in their own bags). The reasoning
behind this decision is that such a program does not fit with Wal-Mart's business
philosophy .
... we could come up with some kind of scheme, but would the operational commitment required, and the resources required to do that, cost more than to just give them (shoppers) a reusable bag? You can't create a program that costs more than what you've got right now. The trick would be how do you create a program that uses reusable bags that doesn't cost Wal-Mart any more, that doesn't cost the consumer any more, that provides a solution that is safe and preferably affordable. And have we figured it out yet no, are we looking at those things yes. That's what the ultimate goal is.78
The question then remains, what is Wal-Mart's plan and what strategies are they
considering with respect to reusable bags that fit into Wal-Mart's operating model? Mr.
Kistler outlined one possible strategy that would fit the Wal-Mart model.
... a reusable bag from an efficiency or speed stand point, is slower than a plastic bag, so you have a consumer bring in a bag, the cashier has to stage the bag, that slows down the productivity of a cashier, so then you have to staff more cashiers ... so how do you avoid that? The trick would be how do you have a reusable bag system where the consumer can bring back a reusable bag, get a new reusable bag that's clean, that doesn't have any health concerns because its been somewhere else ... those are all things that we are thinking about. .. so the system that we are doing probably doesn't exist today, anywhere. That's what we have to figure out ... and I always say ifit were easy, It'd have already been done ... today there is not the perfect solution. And charging more, putting a tax on a bag, you know giving someone a rebate for bringing a bag back ... you're creating costs
76 Wal-Mart Stores Inc,"Reusable bags." 77 Ibid. 78 Matt Kistler, interview by author.
83
by doing that that aren't sustainable, you're putting more costs into the system and your not necessarily providing a sustainable solution that you can replicate easily throughout the system, that is sustainable. You're solving quickly for something that is a much bigger idea and has to be discovered before you can just do it.79
Wal-Mart is built on the principles of convenience and affordability. A new bagging
system form Wal-Mart must follow these central tenants and create a solution that does
84
not sacrifice quality of service and the Wal-Mart experience for the sake of sustainability.
This philosophy is not surprising as Wal-Mart's previous success has been built on its
goal to save people money so they can live better. Reducing plastic bags use by 1/3 falls
inline with this goal and will translate into financial savings for the company on the
purchasing and disposal ends. What is clear from this case is that the world's largest
retailer has no intention of voluntarily introducing a tax or even eliminating plastic bags
from the checkout counter because of the inconvenience such a decision would have on
its customers. This being said, Wal-Mart's commitment to reducing global bag waste by
1/3 per store is by no means an inconsequential decision and the retailer deserves credit
and admiration for being the first U.S. retailer to voluntarily pursue such an important
strategy.
79 Matt Kistler, interview by author.
85
Case Study #3: IKEA
History of lKEA
IKEA was founded in 1943 by a seventeen year old Swede, Ingvar Kamprad.8o
The unique name lKEA is a combination ofthe founder's initials (IK) and the first letters
of the farm and village where he grew up.81 From the beginning lKEA was a discount
retailer specializing in pens, wallets, picture frames, table runners, stockings, watches and
jewelry.82 Five years after opening IKEA expanded and began selling locally built
furniture to its customers.83 To give customers access to the full IKEA line of furniture
IKEA introduced its first catalog in 1951 and in 1953 the first furniture show room was
opened in Almhult, Sweden giving customers the opportunity to see and touch IKEA
furniture before ordering it from the catalog.84 IKE A was quick to realize that if it
wanted sell furniture to people around Sweden at affordable prices, it needed to find an
efficient and cost effective way to transport its products. In 1956 IKEA introduced its
first flat pack and self-assembly furniture helping the company to transport products more
efficiently and eliminate assembly costS.85 The success of the IKEA model inspired
Ingvar Kamprad to open the first IKEA store with 6,700 square meters to display space in
80 "About IKEA," available from http://www.ikea.com/ms/en_ US/aboutjkea _new/aboutlhistory/fullhistory.html ; Internet; accessed March 2008 81 Ibid. 82 Ibid. 83 Ibid. 84 Ibid. 85 About IKEA.
86
1958.86 IKEA entered the international market in 1963, opening a store in Oslo, Norway
and over the next 20 years IKEA expanding operations into 8 different countries on 2
more continents. 87 In 1982 IKEA ownership transferred to the Stitching INGKA
Foundation and IKEA was renamed the IKEA Group.88 From 1984-1990 IKEA
surpassed 100,000 co-workers with 60 stores in 12 countries including opening its first
U.S. store in Philadelphia.89 By the end of the 1990s IKEA operated 158 stores in 29
countries and had introduced IKEA.com to take advantage of the growing internet
market.90 The new millennium was highlighted by the launch oflKEA's code of conduct
or IW A Y. IW A Y outlined the specific expectations IKEA demanded of its suppliers
including working conditions, prevention of child labor, active environment and forestry
management, and legal requirements. 91 Over the last 8 Year IKEA has continued its
tremendous and impressive growth as the home furnishing retail leader, operating 292
stores in 36 countries with annual sales of 21.1 Billion Euros in 2007 (28 Billion USD
using 2009 exchange rates).
The IKEA Philosophy
IKEA's core mission is to help people live more comfortable lives, a goal that is
reinforced in the company's mission statement.
86 Ibid. 87 Ibid. 88 Ibid. 89 Ibid. 90 Ibid. 91 Ibid.
The IKEA vision is to create a better everyday life for the many people. We make this possible by offering a wide range of well designed, functional home furnishing products at prices so low that as many people
87
as possible will be able to afford them.92
To achieve this goal IKEA has adopted an operating philosophy that minimizes costs at
every step of the supply chain and the production process. Products are designed with
both functionality and cost in mind allowing lKEA to maximize raw material use. The
IKEA catalog is also one ofIKEA's most important cost-saving strategies. The catalog
allows consumers to browse lKEA merchandise without traveling to a store which means
that IKEA is able to sell its products to a large customer base, without the capital
investment needed to build and run stores. Once customers purchase a product from the
catalog, they can either have the product shipped, or they can pick it up themselves at one
ofIKEA's self-sevice warehouses. 93 The flat-pack model means that assembly falls on
the consumer, however, the consumer benefits by paying a lower cost due to the fact that
no assembly or transportation fees are imbedded in the price of IKEA products. 94 By
removing costs and designing functional products, IKEA has revolutionized the horne
furnishing business by offering high-quality, aesthetic products to customers outside of
the traditional upper and middle classes.
IKEA Sustainability
The IKEA philosophy, helping to create a better every day life for the many, is a
strategy with social, economic and environmental implications. Over the past two
decades IKEA has demonstrated its commitment to environmental performance and
improvement by analyzing every element of its business and finding more efficient and
92 "Facts & Figures," available from http://www.ikea.com/ms/en_US/abouUkea_new/img/FF08GB.pdf; Internet; accessed March 2009 93 PRCommunications, Social and Environmental Responsibility (IKEA, 2000), 35. 94 Ibid, 35.
88
less impactful ways of operating. IKEA's outward commitment to responsible business
and sustainability began in 1990 when it introduced its first environmental policy which
holds both the company and its co-workers responsible for their activities.95 Thomas
Bergmark, head of social and environmental responsibility for lKEA affirms that IKEA
has always had a focus on sustainability,
One of the cornerstones since IKEA was founded more than 60 years ago is to care about resources -- we are clever with resources. For the first 20 years, this was only about turning and twisting the materials to utilize them in the best possible way, to save on material and thereby save on costs. But today we know it's a perfect win-win also for the environment.%
The lKEA commitment to efficient use of resources expanded in the early 1990s when
the company began examining its supply chain. IKEA realized that by purchasing from
suppliers that used irresponsible and unsustainable techniques, IKEA was indirectly
supporting environmental degradation and increasing its overall footprint. In 1993 IKEA
became a member of the Forest Stewardship Council (FSC) a global forest certification
organization, and committed to purchasing wood and other raw materials from
sustainable sources.97 IKEA's pledge to protect forests lead to a partnership with the
World Wildlife Fund (WWF) in 2002 to "promote legal compliance in forestry and trade,
reduce unsustainable logging and strengthen multi-stakeholder based forest certification
and management.,,98 The partnership has been particularly important in China and Russia
where forest management is difficult to enforce, however IKEAs position as one of the
largest lumber purchasers gives it a great deal of power within the market and suppliers
have begun to incorporate FSC standards into their operations so as to continue business
95 PR Communications, Social and Environmental Responsibility. % Ibid. 97 WWF and IKEA, Co-operation onforestry projects - a partnership to promote responsible forestry (WWF, 2006) Summary Report, 2. 98 Ibid
89
with IKEA.
IKEA is also committed to reducing the environmental impacts of its direct
operations. In 2008 the company estimated that it released 1,188,726 tons of C02 into
the atmosphere.99 IKEA is pursuing several strategies to reduce these emissions. By
2009 IKEA's goal was to have 60 percent of its energy supplied from renewable
resources and to increase the energy efficiency of its stores, and distribution centers by 15
percent with that number increasing to 25 percent in the near future. 100 An example of
one such project is the IKEA distribution center in Peterborough, U.K. "Sun pipes," a
new technology that funnels sunlight into buildings and reduces the need for artificial
lighting, have been installed in the roof of the warehouse, on bright days, the building is
lit completely using naturallight. 101 To continue the energy savings, offices within the
distribution center have been designed to use geothermal energy to regulate the
temperature and IKEA is committed to using best practices and the best technology in all
of its retrofits.
One of IKEA' s biggest challenges is how to reduce the impact of its catalogues.
In 2008 190 million copies of the IKEA catalog were printed. 102 To reduce the impacts
of these catalogues IKEA has committed to working with suppliers that use certified
forestry fibers to create their paper. In 2008 70 percent of the paper used to print the
catalogues were from certified forests. 103
IKEA's commitment to sustainability has business justifications, however the
99 PR and Communications, Social and Environmental Responsibility 100 DavidRoberts, "Interview with lKEA sustainability Director Thomas Bergmark," available from http://www.grist.org/article/ikea; Internet; accessed March 2009. 101 PR Communications, Social and Environmental Responsibility. 102 Ibid \03 Ibid
90
company has demonstrated that it is concerned with the overall impacts of its operations
in addition to the savings. This philosophy is reflected in IKEA's choice to source its
wood and paper from sustainably managed forests. Costs for the resources tend to be
slightly higher, but IKEA is reducing its footprint and so far, the ends have justified the
means for the IKEA Group.
lKEA Bagging
Last year lKEA stores hosted over 300million visitors world wide. 104 It is easy
for one to imagine the potential effect such a high visitation rate could have on IKEA
bagging. In the United States alone, lKEA reported that customers use over 70 million
bags each year. 105 On March 15,2007 IKEA U.S. instituted a 5-cent tax on all plastic
bags sold in its stores, hoping to reduce consumption rates by 50 percent to 35 Million
bags. 106 Thomas Bergmark discussed the campaign and its relationship with IKEA's
sustainability goals in his interview with David Roberts of Grist Magazine,
It might be the first campaign where we are more on the offense. The basic strategy not only in the U.S. but in all our markets has been to be quiet, low-key. We should first do and then talk. We have from time to time been a bit criticized because we have been too quiet. Different stakeholders have realized that we try hard and we do a lot -- so why don't we talk about it? We have now for three years issued a yearly social and environmental report on the web. We communicate more in different kinds of media, of course in the catalogue and in IKEA family magazines for our customer club and so forth. This campaign is one step in that direction, to be more aggressive and more transparent in these issues. 107
104 PR Communications, Social and Environmental Responsibility 105 Zubin Jelveh, "IKEA's Plastic Bag Tax: Amazingly Successful," available from http://www.portfolio.com/views/b logs/ odd-n urn bers/200 8/04/12/ ikeas-p lastic-bag -tax -amazinglysuccessful; Internet: accessed march 2009. 106 Collin Dunn, "IKEA US to 'Bag the Plastic Bag'" available from http://www.treehugger.comlfiles/2007/02/ikea _us_to _ bag.php; Internet; accessed March, 2009. 107 DavidRoberts, "Interview with lKEA sustainability Director Thomas Bergmark."
91
The nickel per bag tax is expected to generate $7 million dollars in proceeds which IKEA
will donate to American Forests, a conservation organization dedicated to forest
restoration and protection. lOS The IKEA bag campaign in the U.S. was preceded by a
similar campaign in the U.K. which began in spring of2006. Taxing U.K. consumers 5p
(0.07 USD) per bag lead to a 95 percent reduction in the number of plastic bags
demanded. 109 IKEA UK reported that prior to the tax 32 million bags were given away
each year, however post tax the 15 IKEA locations only use about 1.6 million bags each
year. 110
A year after the tax was instituted in the U.S., IKEA U.S. reported that demand
for plastic bags has fallen 92 percent from 70 Million bags per year to 6 million. III
Additionally IKEA U.S. reported that the tax was so well received by U.S. consumers
Figure 4.7- IKEA's Reusable Bag
Source: IKEA website
that only $300,000 in proceeds were raised for American
Forestry, much less than expected. lI2
The success of both the U.S. and U.K. bag
campaigns has motivated IKEA to go farther in its effort to
reduce bag use. In 2007 IKEA decided to eliminate plastic
bags entirely from its UK operations. 113 On April 3, 2008
IKEA announced that the policy would also extend to the
108 Collin Dunn, "IKEA US to 'Bag the Plastic Bag'" 109IKEA Checks Out of Plaastic Bags," available from http://www.ikea.comlms/en_GB/abouUkealpress_room/pressJelease/national/plastic_bag_campaign.htm; Internet; accessed March 2009. 110 "IKEA Checks Out of Plaastic Bags," III Zubin Jelveh, "IKEA's Plastic Bag Tax: Amazingly Successful," 11 2 Ibid .. 113 Ibid.
92
US, and all U.S. operations would be plastic bag free starting in October 2008. 114 As an
alternative to plastic bags, IKEA provides customers with the IKEA reusable 'big blue
bag' pictured in figure 4.7. Big blue bags are available for .59 cents in the u.s.
The IKEA case shows the success a bag taxation system could have in the United
States. Consumers appear receptive to the idea of charging for single-use carrier bags
and it is clear from both the U.S. and U.K. cases that consumers will opt for reusable
bags instead of paying for the plastic ones. This is encouraging however it is difficult to
say how much ofIKEA's success can be extrapolated to the American retail market.
IKEA is one of the only retails in the U.S. that is able to offer such a wide variety of
quality home furnishing products for discounted prices. The lack of competition makes
IKEA irreplaceable. This is to say that IKEA's unique position in the market means that
customers have few alternatives, so imposing a tax system that penalizes consumers for
poor behavior would not alienate IKEA' s customers because those customers have no
other retailer to choose. As such the success rate of the IKEA tax may not be mirrored if
a retailer like Wal-Mart or Safeway choose to voluntarily charge for plastic bags. The
grocery and consumer goods retail market is far more saturated, and it is easy for
consumers to choose to shop at the store that maximizes convenience for them whether
that be a result of prices or location. The introducing of an inconvenience like paying for
plastic bags could motivate shoppers to avoid that retailer. In other words a voluntary tax
system for most retailers could be a business ending decision and explains why IKEA is
the first retailer to use a tax system.
In addition to this point, IKEA is a store that a consumer would visit a few times a
114 Green Biz "IKEA to Phase out Plastic Bags in the US," available from http://www.greenbiz.com/news/200S/04/03/ikea-phase-out-p lastic-bags-us; Internet; accessed March 2009.
93
year. This means that bringing a reusable bag every time a consumer wants to shop at
IKEA is not as inconvenient as it would be for a shopper that visits a retailer on a daily or
at lest weekly basis.
Finally, IKEA caters to a middle class market, and thus a market that is more
willing to accept, or at least pay for a green tax system. Not all retailers have the luxury
of selling products to consumers that can afford such a tax. The implications of this fact
are uncertain, a tax on a lower class market may be more effective as people attempt to
save as much as possible. Then again it could be met with extreme opposition,
generating bad brand publicity and ruining a retailer's relationship with its customers.
All this being said the IKEA case is and important example of how a taxation
system could be a success in the US. It is evident from this case that at least some part of
US consumers recognize that plastic bags are an unnecessary luxury otherwise the tax
system would have met much higher opposition and most likely generated more than
$300,000 in revenues.
CHAPTER V
DATA AND METHODOLOGY
The purpose of this chapter is to explain the methods used for data collection and
to provide an empirical analysis of the data to supplement the qualitative information
already presented. The questions contained in the survey as well as the interviews are
available in appendixes 2 and 3 respectively. Two surveys were conducted during this
research. in an effort to understand the shopping behavior of the American consumer.
Both surveys was designed to identify the shopping behavior of the American consumer
as it relates to plastic and reusable carrier bags.
Survey Methodology
Two surveys were performed in this thesis. Both survey was designed and
administered on Survey Monkey. The first survey targeted college-age students.
Students were sent a link to the survey using the social networking website Facebook.
Over 390 individuals were invited to take the survey. Response was voluntary and 73
surveys were filled out.
The second survey was administered to people who had just completed their
grocery shopping. To administer the survey one hundred and fifty 2.5 in. x 8.5 in. slips
with a link to the survey were printed. Thirty slips were then randomly placed on car
94
95
windshields in the parking lots of two Wal-Mart, two Safeway, and one Whole Foods
store in the Colorado Springs area. 43 surveys were collected on SurveyMonkey.
Data Survey #1
Table 5.1 Various Descriptive Statistics
Std. Variable Mean Maximum Minimum Dev.
Age 21-30 NA NA NA
Family Income $120,000+ NA NA NA
Preferred Retail Store Kroger NA NA NA
Trips per Week to
The Store 1.3611 4 1 0.7181
Disposable Bags used per Visit 3.296 10 1 1.88
Amount WilIing to pay for a
Disposable Bag 8.61 100 0 19.07
Reusable Bags
Owned 3.377 5 1 1.404
Analysis of Data
A total of 73 surveys were started and 44 were completed for a total completion
rate of 60.3 percent. The average age of respondents was between 21 and 30. 37.5
percent of participants were a part of a family with annual income over $120,000 dollars.
27.8 percent had family incomes between $80,000 and $120,000 dollars, and 20.8 percent
had family incomes between $40,000 and $80,000 dollars. The average household
income in the United States is $50,233 so the majority of respondents are members of the
96
wealthiest 50 percent of Americans.! 38.4 percent of those surveyed said that they
normally shop at Kroger, while 16.4 percent chose Safeway, 5.5 percent chose Whole
Foods and 2.7 percent chose Wal-Mart. The average American makes 1.9 visits to the
store per week? This survey found that on average respondents visited the store 1.36
times per week with standard deviation 0.7181. This number is below the national
average, a fact that is most likely a result of respondent age and occupation. Determining
bags used per customer is an important statistic that will reveal a great deal about
consumer plastic bag consumption. Average bag use for respondents was 3.296 begs per
visit with standard deviation 1.88. This statistic shows that disposable bags are the
preferred to other types of bags, and at least three are needed per visit. 59.7 percent of
those surveyed said they used the plastic bags as trash bags before disposing of them.
When asked how much respondents would be willing to pay for a plastic bag, 53.4
percent responded that they would not be willing to pay. This finding is similar to the
one made by the Irish Department of Environment and Heritage. In Ireland 40 percent of
people surveyed were not willing to pay for plastic, 27 percent said they would pay 1-2
cents,25 percent would bay 3-5 cents and only 8 percent would pay over 6 cents.3 This
survey revealed that 17.8% of respondents would pay 5 cents per bag and 13.7% were
willing to pay 10 cents. Average willingness to pay was 8 cents with standard deviation
of 19 cents. If stores began charging for plastic bags 41.1 % of respondents would buy
! "Household Income Rises, Poverty Rate Unchanged, Number of Uninsured Down," available from http://www.census.gov/PressRelease/wwwlreleases/archives/income_wealthlOI2528.html; Internet; accessed April 2009 2 Green Seal Proposed Revised Environmental Standard/or Reusable Bags (GS-J6) (Green Seal, Inc., 2(08),14, GS-16.
3 Convery, Frank. "The most popular tax in Europe? Lessons from the Irish plastic bags levy." Environmental and Resource Economics I, no. 38 (2007): I-II. SpringerLink. [Database online.] 13 January 2007.
97
reusable bags and stop using plastic while 42.5% said that they would bring their own
bags from home. Only 6.8% of respondents said that they would pay the bag fee. As a
final point of interest 65.8% of respondents said they own a reusable bag with average
ownership rates of 3.78 bags. Only 47.9% of those who own a reusable bag use the bag
for grocery purchases. 85.7% of students surveyed also said that they felt comfortable
using their reusable bags at a variety of retailers, despite the company logo printed on the
side of their bags.
Data Survey #2
Table 5.2 Various Descriptive Statistics
Std. Variable Mean Maximum Minimum Dev.
Age 51-60 NA NA NA
Family Income $120,000+ NA NA NA
Perfered Retail Store Safeway NA NA NA
Store Trips Per Week 2.244 4 1 1.067
Bags Used Per Visit 3.22 8 1 2.068
Willingness to Pay for a Plastic Bag
(Centsl 3.93 50 0 1.74 Reusable
Bags Owned 2.833 5 0 2.241
Analysis of Data A total of 43 surveys were started and 39 were completed. The average age of
respondents was between 51 and 60. 52.4 percent of participants were a part of a family
with annual income over $120,000 dollars. 26.2 percent had family incomes between
$80,000 and $120,000 dollars, and 11.9 percent had family incomes between $40,000 and
98
$80,000 dollars. This finding is significant as the majority of respondents are part of the
wealthiest 50 percent of American families.4 22.5 percent of those surveyed said that
they normally shop at Kroger, 20% shop at Safe way , 10% at Whole Foods and 7.5% at
Wal-Mart. The remaining 40% of respondents identified local markets including Stop
and Shop, Shop Rite, and Harris Teeter as their preferred retail grocer. This survey found
that on average respondents visited the store 2.24 times per week with standard deviation
1.067. This number is above the national average, a fact that is most likely a result of
respondent age and family status. Determining bags used per customer is an important
statistic that will reveal a great deal about consumer plastic bag consumption. Average
bag use for respondents was 3.22 begs per visit with standard deviation 2.068. This
statistic shows a result similar to the first survey, disposable bags are the preferred to
other types of bags, and at least three are needed per visit. 45.2% of respondents said that
the bags were used as trash bags at home and then thrown away and 14.3% of
respondents said that the bags were trashed right away. When asked how much
respondents would be willing to pay for a plastic bag, 76.2 percent of respondents said
they would not be willing to pay to use plastic bags and 50% of respondents said that if
stores started charging for plastic bags they would buy a reusable bag as opposed to the
2.4% who said they would pay the charge. Average willingness to pay was 3 cents with
standard deviation of 1.7 cents. 61.9% of respondents claimed that they owned a reusable
bag and average ownership was 2.8 bags however 57.9% of those who own a bag only
use them for grocery purchases.
4 "Household Income Rises, Poverty Rate Unchanged, Number of Uninsured Down," available from http://www.census.gov/PressRelease/www/releases/archives/income_ wealthiO 12528 .html; Internet; accessed April 2009
99
Regression
Methods To understand the determinants of disposable bags use, I will run a multiple
regression using the data collected in the two surveys previously discussed. The
regression will predict the dependent variable (Y) or the number of disposable bags used
by a retail store using two independent variables. Independent variable B1, family
income, should have a positive relationship with disposable bag usage rates as higher
levels of income usually translates into more disposable income, more groceries
purchased per visit, and thus more plastic bags used. For this regression a number was
assigned to each of the 5 possible responses in the survey with 1 representing $0-$20,000
dollars of family income, 2 representing $20,001-40,000 dollars in income, 3
representing $40,001-$80,000 dollars in income, 4 representing $80,001-$120,000 dollars
in income, and 5 representing over $120,000 dollars in income.
Independent variable B2 , retail store, was chosen to reflect other independent
variables like social responsibility and environmental awareness. The store a consumer
chooses to support will generally reflect that consumer's own relationship with
sustainability. Four retailers, Whole Foods, Wal-Mart, Safeway, and Kroger were used
in this regression. Indicator variables were used to identify each store. Data was
analyzed using Minitab 15 statistical software and an alpha of .05 was used to determine
significance
100
Results
I ran the regression and checked for homoscedasiticy and skewness. The original
regression failed the Jaque-Berra normalcy test. To correct for this the natural log of the
dependent variable was taken. I re-ran the regression and the results met all tests of
normalcy. The equation of the regression is:
LN bags = 1.26 - 0.839 Store_l - 0.247 Store_2 - 0.478 Store_3 - 0.0147 Income
This equation shows that all independent variables are negatively related to the dependent
variable LN bags. The F-statistic for the regression is 2.75 with a p-value of .038. This
result is significant at the 95 percent confidence level. This means that the regression is
statistically significant and the independent variables used have a discernable relationship
with the dependent variable. The R-squared and adjusted R-squared are 17.5 and 11.1
percent respectively. This means that the independent variable explain 11.1 percent of
the variation in the dependent variable.
An analysis of the independent variables is important to determine which are
statistically significant. The follow table summarizes the findings:
Table 5.3 - Independent Variables
Predictor Coef SE Coef T P Constant 1. 2648 0.3505 3.61 0.001 Store 1 -0.8390 0.3109 -2.70 0.009 -Store 2 -0.2471 0.3415 -0.72 0.473 -Store 3 -0.4777 0.2016 -2.37 0.022 -Income -0.01467 0.08018 -0.18 0.856
This table shows that the independent variable 'Income' is not statistically significant
with a p-value of .856. This means that there is an 85% chance that income will hate a t-
statistic of -.18 or higher. The independent variable 'store' is statistically significant. To
represent' store' three indicator variables were used. Two of the indicator variables are
101
statistically significant with p- values less than .05. This means that there IS a
relationship between these variables and the dependent variable.
Conclusion
This regression shows that income cannot be used to predict the number of bags a
customer chooses to use, but the store that the customer shops at does has a relationship
with the number of bags that are used. This fining makes sense as one would expect that
retailers like Whole Foods will attract customers that tend to be more socially and
environmentally active. The results of this regression show that policy implication in the
U.S. will also affect different retailers in different ways. Retailers whose customers tend
to rely more on disposable bags may face more difficulties as they try to reduce
consumption.
Interview Methodology
Interviews were also conducted during the research process. To schedule
interviews I called local Whole Foods stores and asked to speak with the representative in
charge of sustainability. Jane Mowle is the Marketing Director for Pikes Peak Whole
Foods and agreed to an interview on site. The second interview I conducted was with the
Vice President of Sustainability at Wal-Mart Stores Inc. Matt Kistler. The interview with
Mr. Kistler was conducted in person at Wal-Mart's corporate headquarters in
Bentonville, Arkansas.
CHAPTER VI
CONCLUSION
The purpose of this thesis is to help answer the question, what is the best way for
the United States to reduce the amount of single-use disposable bags used. There are two
solutions that will help answers this important question.
First, the United States can rely on regulation and legislation to motivate
consumer behavior. Legislation is an effective way to ensure that reduction goals are
met. Government will also face smaller clean up and disposal costs from disposable bag
waste. The drawback is the inefficiency costs that must be born by consumers and
retailers to institute this type of legislation.
The second solution is for businesses responsible for disposable bag distribution
to phase disposable bags out of their operations voluntarily. Voluntary responsible
action, like bag reduction, generates value through positive brand association and it helps
the businesses to reduce operating costs. The actual effects of responsible action are
uncertain and motivation for bag-intensive businesses to eliminate bags is low.
There are nine options for the U.S. to pursue that fall under theses two solutions:
• • • •
Status Quo Recycling Litter Education Promote Biodegradable Bags
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• • • • •
Promote Reusable Bags Disposable Bag Ban Voluntary Reduction Vol untary Levy Legislative Levy
Status quo - Leave bagging practices as they are
103
A solution that seeks to introduce no new laws, education programs, or attempts
to reduce disposable bag use in any way is an unacceptable direction for the United
States. The consumption of 100 billion plastic bags each year pollutes terrestrial and
marine ecosystems. Valuable resources are consumed in massive quantities to supply the
U.S. and the rest of the world with a product that's useful life is measured in hours.
Hundreds of million of dollars are spent each year to control waste problems associated
with disposable bags creating a financial and environmental justification supporting bag
reduction.
Recycling - Educate consumers and improve recycling infrastructure
Recycling is extremely important as it reintroduces materials into the production
process and limits the demand for virgin materials. In 2005, recycling in the U.S. helped
to divert 54.4 million tons of waste from landfills, an overall acquisition rate of 23.8%, or
1.46 pounds of materials recycled per person per day. 1 Plastic bags have one of the
lowest recycling rates in the U.S., 0.6 percent of all bags are recycled. This rate can be
explained by the recyclable value of the bags. Recycled plastic bags are sold on the open
1 United States Environmental Protection Agency. Municipal Solid Waste in the United States: 2007 Facts and Figures (United States Environmental Protection Agency, Office of Solid Waste, 2007),165, EPA530-R-08-0 1 0., 1
104
market for approximately $120 per ton. 2 Because each bag is approximately 8 grams in
weight 114,000 bags are needed meaning that each bag has a recyclable value of .1 cents.
Even if plastic bag recycling rose to the national average 23.8%, the U.S. would still
require 76.2 billion plastic bags per year. The fact is that the scale of the disposable bag
problem means that recycling cannot be the only solution, but recycling must play an
increased role in helping to minimize the virgin materials used in bag production.
Litter Education
The U.S. has a strong tradition of educating the public about the impacts of litter
and the costs associated with waste disposal. Education however cannot be the only
solution for the United State's bagging problem. Information campaigns are important
parts of generating support and helping change behavior. Documentaries including An
Inconvenient Truth, and Planet Earth, along with Hollywood films like The Day After
Tomorrow have popularized environmental terms like 'carbon footprint,' 'sustainability,'
and 'carbon neutral.' Information is limited in its actual ability to inspire behavior
changes. In the end costs and prices dictate how people act and whether they act in the
best interest of the environment. Intuitions like government and businesses with the
power to influence economics and prices must take a leadership role in the sustainability
movement and help encourage behavioral changes that reduce impacts. This same idea
applies to disposable bags. Education must therefore supplement action and serve as a
justification for why difficult and controversial bagging decisions must be made.
2 Nolan-ITU Plastic shopping bags - analysis of Levies and Environmental Impacts (Sydney: Environment
Australia, 2002), 3111-02, 44.
105
Promote Biodegradable Bags
Biodegradable bags are in many ways worse for the environment than plastic.
First modern landfills are designed to prevent, air, light and water from entering, so little
actually biodegrades, a fact that updermines the main advantage biodegradable bags.
Energy requirements and pollutants associated with the production of biodegradable bags
are also far larger than those associated with the production of plastic bags as
demonstrated by LeA analyses presented earlier in this thesis. From an environmental
impact perspective, the plastic bag is the best disposable bag option. Thus to replace
plastic bags with biodegradable bags would serve no environment benefit.
Promote Reusable Bags
Reusable bags are best possible option for consumers. Higher reusable bag use
translates into less overall waste, emissions and pollutants. Promoting and offering
affordable reusable bags will be key to increasing reusable bag use in the U.S. The
market is already becoming saturated with reusable bags and most major retailers offer
their branded reusable bags about a dollar a piece. Despite this fact the plastic carrier bag
dominates the bagging world because of its established place within the market.
Government and business must provide motivation and encouragement consumers to
choose reusable bags over disposable.
Disposable Bag Ban
Banning disposable bags is a realistic option for the United States. A ban would
achieve the ultimate reduction goal by eliminating the need for disposable bags. The
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elimination of all disposable bags is unrealistic. Countries like China and Taiwan that
have already banned bags have done so based on plastic thickness; most disposable bags
are not affected by the ban. A ban in the U.S. would most likely mirror the programs
being used in other countries. If a disposable bag ban were used in the U.S., the
legislation would demand a detailed list of those bags that are no longer legal for
distribution in the U.S. Despite the potential of a disposable bag ban, it is not the
recommendation of this thesis. Bans cause overnight changes in consumption, and would
result in a number of inconveniences for both consumers and retailers. In addition
because a bag ban usually only targets a few specific disposable bags, the actual benefits
could be reduced as retailers choose to provide consumers with other types of disposable
bags.
Voluntary Reduction
A voluntary reduction is the best possible reduction option for the United States.
Voluntary reductions give bag intensive business the power to choose bag reduction
strategies and minimize the associated costs. Some substantial reductions can be
achieved using simple strategies like placing more items in each bag, increasing the
convenience of on-site recycling, creating incentives to recycle, and reducing the costs of
reusable bags. The chapter 4 case studies demonstrate that bag reduction does not
destroy a business's ability to be competitive. This being said the majority of businesses
have opted for the status quo and continued offering disposable bags. Voluntary
reductions are not necessarily the best solution. If done wrong voluntary reductions
107
could replace plastic with another, higher-impact disposable bag which would increase
the overall environmental impact.
Voluntary Levy
Retailers pay for the disposable bags that they give free to customers. Current
accounting systems are designed to incorporate these costs into the overall operating
costs of a store, which is then reflected in the price of goods. This means that providing
plastic bags for free is a cost driver, it helps explain some of the price stores charge for
their products. It makes sense then for a business to charge for the bags it gives to its
customers and convert a cost into a source of profit for the business. In 2006 IKEA
introduced a 5-cent tax for its disposable bags in its U.S. stores. The tax lead to a 92
percent decrease in the consumption for disposable bags, and has had no noticeable effect
on the IKEA' s growth or success. The problem with this strategy in the U.S. is that
consumers will tend to shop at businesses that offers similar products but do not charge
for bags. IKEA was able to avoid this problem due to its unique position in the market.
Legislative levy
A legislative levy is the next best option for the United States after voluntary
reductions. There are two types of legislative levies, consumer-based and retailer-based,
the difference being where the burden of the tax falls. Convery et al concluded, " ...
where policymakers are trying to reduce plastic bag consumption considerably and there
is a well developed and defined retail market (and that has been consulted widely), a
108
consumer based "downstream" levy is the appropriate policy measure.") Due to the U.S.
retail markets similarities with Ireland, a consumer-based levy is more appropriate. This
conclusion is also supported by the success rates of consumer based-levies as opposed to
retailer based-levies. The best comparison is one between Ireland and Denmark, with
Ireland's bag use falling 95 percent after its levy was introduced and Denmark's bag use
falling 60 percent. Levies can also be non-discriminatory toward bags. Unlike a bag ban,
levies allow disposable bags to remain in the retail system, consumer are just forced to
pay a fee for their use. The availability of bags remains constant so all bags can be taxed
without introducing an excessive inconvenience.
Solution
The analysis presented in this thesis suggests that the best course of action for the
United States is to adopt a system that integrates voluntary reductions with a consumer-
based levy. In this system retailers have the freedom to reduce disposable carrier bag use
by the means they deem most appropriate. To motivate this voluntary action, reduction
targets are set by the government. Failure to meet the targets on the part of retailers
results in the dissolution of the voluntary reduction system, and the institution of
legislation requiring all businesses that distribute disposable bag charge customers for
each bag used.
This reduction strategy is similar to the policies adopted by the Australian
government in 2002. Cases have shown that consumer-based levies add costs to business
and consumers. The tax results in a bagging shift and retailers are forced to adapt their
3 Convery, Frank. "The most popular tax in Europe? Lessons from the Irish plastic bags levy." Environmental and Resource Economics 1, no. 38 (2007): 1-11. SpringerLink. [Database online.] 13 January 2007.
109
existing infrastructure to be able to deal with the new bags. Other costs like training
employees and installing software into registers to process the tax are also needed. This
will provide sufficient motivation for voluntary action. Some of the costs are
unavoidable, infrastructure will have to change if disposable bags are eliminated, but
voluntary action will allow those costs to be allocated over longer periods of time. It is
therefore reasonable to assume that given the option retailers will choose to voluntarily
reduce the number of disposable bags used.
Voluntary reductions must be monitored to ensure that sufficient progress is
made. The Australian Retailers Association (ARA) entered into a partnership with the
Australian Department of the Environment and Heritage (ADEH) to ensure success. The
ARA-ADEH partnership gave oversight and enforcement powers to the Australian
government, if ADEH determined that insufficient progress was being made, or if the
ARA failed to meet the predetermined reduction goals, voluntary bag reduction could be
replaced by a consumer-based levy system. A similar partnership and similar contingent
relationship can be created between the U.S. government and retailers. In this system,
goals are achieved regardless of whether a voluntary or legislative system is used.
Targets
The United States is capable of achieving a 90% reduction in disposable carrier
bag use. The target of 90% reduction was chosen using the success rates from other bag
reduction programs specifically, the success of the Irish plastic bag tax. Different from
the Irish tax however, the U.S. should focus on all disposable carrier bags, not merely
disposable plastic carrier bags. A partnership needs to be created between the federal
110
government and U.S. retailers so that targets and dates can be established. Success will
be measured by the percent of bags removed from the waste stream so recycling will help
stores achieve their goals.
Timeline
• 1 Year Goal- 20% reduction in disposable bag use.
Wal-Mart's South American operations were able to achieve a 20% reduction in plastic
bag use with its "one more item per bag" program.4 A 20% reduction in one year was
also the target set in San Francisco so there is already president for this number within the
U.S. In Australia the retailers association (ARA) was required to meet a 25% reduction
in bag use within the first two years. A 20% reduction would be less stringent than
Australia's 25% reduction, but it would be required to occur within one year as opposed
to two.
• 3 Year Goal- 50% reduction in disposable bag use.
This number is mirrored by the Australian voluntary reduction, retailers had to use 50%
less plastic bags within the first 3 years. The logic behind this U.S. 3-year goal is that
retailers should have two years to reduce bag use by 30% to a total of 50%. In Australia,
the ARA was required to make the jump from a 25% reduction to a 50% reduction within
one year, a goal that they failed to achieve.
• 5 Year Goal- 90% reduction in disposable bag use.
This gives retailers two years to reduce consumption rates by the additional 40% to the
target 90%. After three years of experience, retailers should understand the methods of
4
III
strategies that most affect disposable bag distribution. Two years is enough time for the
remaining reductions to be achieved.
Reusable Bags
The purpose of the voluntary-levy approach to is to reduce the number of
disposable bags that are land filled in the U.S. Consumers still need a way to transport
merchandise from the store so reusable bag use will increase substantially after program
implementation. To ensure the environmental benefit of the bag reduction program,
reusable bag need to meet a set of basic specifications. The Green Seal™ Environmental
Standard for Reusable Bags was first created on published in 1994 and was revised in
200S. The Green Seal™ is a voluntary set of standards designed to ensure reusable bag
quality.
The average American consumer makes 1.9 trips to the grocery store per week,
totaling 9S.S trips per year.5 The benefit of a reusable bag is that it can be used for each
of the 9S.S and for multiple years. The suggested minimum lifecycle of a reusable bag
according to Green Seal™ should be 500 uses or roughly 5 years carrying 22 pounds of
merchandise in wet conditions.6 For reusable bags with a volume of 3000 cm3 or less,
minimum requirements should be 500 uses carrying 4.4 pounds in wet conditions?
Useful life is generally dependent on the strength of bag fibers and the lifespan of the
handles. Green Seal suggests that all reusable bags include reinforced handles to
5 Green Seal Proposed Revised Environmental Standard/or Reusable Bags (GS-16) (Green Seal, Inc., 2008),14, GS-J6. 6 Ibid 4. 7
112
maximize the useful life of the bag.8 Green Seal™ also suggests that reusable bags have
minimal color rub-off under both wet and dry conditions so that the appearance of the
bag remains consistent over its usefullife.9 Reusable bags must also meet basic material,
manufacturing and health standards to minimize their social and environmental impacts. 1O
Conclusion
Picture your favorite store. Every minute customers walk through the sliding
glass doors into the parking lot, their hands wrapped tightly around a thin piece of
polyethylene-plastic that sags with the weight of their groceries. Now imagine this same
scenario duplicated in millions of stores, in every country in the world and you begin to
understand the scale at which bags are used. Ninety-nine percent of these bags will find
their way into the trash, or blow away and pollute the terrestrial and marine ecosystems
on the planet. Millions of barrels of oil, and millions of trees are used each year to
facilitate this behavior. This thesis has attempted to explain the various unseen and little
known consequences associated with the world's disposable bag use. Several countries
have come to realize these effects and have changed their behavior to reflect the new
information. The U.S. however has done little to address this problem. As one of the
largest consumers of disposable bags on the planet, this irresponsible behavior cannot
continue. Cities like San Francisco and New York demonstrate that disposable bag
reduction is a realistic option, and their successes must serve to motivate the rest of the
United States. Disposable bags are a problem, but the problem is not without a solution.
8 Green Seal Proposed Revised Environmental Standard/or Reusable Bags, 4. 9 Ibid, 4. 10 Ibid, 4.
113
Progressive action on this issue will help place the U.S. among the world's elite countries
and show others that U.S. commitment to sustainability is more than political and
environmental theory.
Appendix 2 Purpose of Survey
• What do people do with their plastic bags? • How consumption is different between stores • A vg. number of bags used by a customer per week • Willingness to accept a charge for plastic bags • Availability of cloth/reusable bags • .Do they own one • What was the motivation behind getting a reusable bag • How often do you use it
Questions: Age:
• 0-20 • 21-30 • 31-40 • 41-50 • 51-60 • 61+
A verage Annual Family Income: • $0 - $20,000 • $20,00 1 - $40 ,000 • $40 ,00 1 - $80,000 • $80,001 - $120,000 • $120,001 +
Where do you normally shop? • Walmart • Whole Foods • Safeway • Other (please specify)
How many times per week do you go shopping at the store you checked above?
• 1 • 2 • 3+
On average how many plastic bags do you take each week from the store to help you carry your purchases?
• 0-5 • 6-10 • 11-15 • 16-20 • 21-25 • 26+
What do you do with your plastic bags once you are home? • Throw them in the trash • • •
Use them as trash bags and then throw them away Recycle them at store locations Bring the bags back when I go shopping again and reuse them
In Ireland a 15 cent charge on plastic bags reduced the number of plastic bags used by 90%
How much would you be willing to pay per plastic bag? • Nothing- would not pay • 1-2 pennies • 3-5 pennies • 6 + pennies
If stores started charging for plastic bags, what would you do? • Pay the small charge for each bag I use • Buy reusable bags and stop using plastic bags • Stop using bags • Bring my own bags from home • None of the above (please specify)
Do you own a reusable bag that you use when you go shopping? • Yes • No
If yes please answer the following questions, if no, please check I do not own a reusable bag
How many reusable bag(s) do you own?
• 1 • 2 • 3 • 4 • 5+ • I do not own a reusable bag
What do you use your reusable bags for?
• • • • • •
Grocery purchases Appliance purchases Furniture purchases Home improvement purchases All of the above I do not own a reusable bag
Please enter your email address for a chance to win a $50.00 shopping car
Email:
Appendix 3
Walmart Interview Leeland Smith
Purpose: The purpose of the interviews is to better understand the operating strategy that each of the four case-study companies is implementing to deal with plastic bags. The interview will seek to provide insight into what the strategy is, how it is being implemented, and why the specific goals were chosen. Additionally the interview will explain how the plastic bag strategy fits into the overall sustainability mission of the company.
Questions:
1.) What is your role at Walmart and what are the responsibilities associated with that
role?
2.) When did Walmart first set sustainability goals?
a. What was the reason?
b. What were a few of the targets?
3.) How has the goal to incorporate better more sustainable practices affected
Walmart's ability to be competitive?
4.) How have sustainability goals and strategies at Walmart evolved over time?
5.) What are Walmart's top sustainability priorities today?
a. What is the time frame Walmart is using to achieve its goals?
6.) As part of being a more sustainable company Walmart has chosen to include
plastic bags in its goals. What was the motivation for including plastic bags in
Walmart's sustainability goals?
a. What role does the Environmental Defense Fund play with respect to
Walmart's plastic bag strategies? (consulting, marketing, label or brand
sharing)
7.) What is the average number of plastic bags consumed by Walmart customers per
week! year?
a. How do you track consumption rates? (store, state, region)
8.) Does the rate of consumption change based on area (more affluent/ less affluent
or population size)?
a. Which store has the highest plastic bag consumption rate, which has the
lowest?
9.) Walmart has a plastic bag recycling program, how successful has it been?
a. How do you measure success?
b. Do recycling rates differ by store or region (population, affluency)
c. Have you considered giving customers a store credit if they recycle their
bags?
10.) Where do Walmart's plastic bags come from?
a. Does it depend on the region?
11.) How much does Walmart spend on plastic bags each year?
12.) How thick are Walmart's plastic bags?
13.) Walmart has subsidiaries in Europe (Asda, UK) where plastic bag reduction is a
larger issue, how do you balance running store that must meet these issues with
US stores that do not yet have the same pressures?
a. Asda has a "bag by request" system, how successful has this program
been?
b. Could Walmart stores in the US use a similar system?
14.) Have you learned anything from the European branches that will help you in the
US market interms of reducing plastic bag consumption?
11.) Would Walmart be willing to charge for plastic bags?
12.) Do you think charging for plastic bags would make Walmart less competitive?
13.) Given the goal of a 1/3 cut in plastic bags by 2013, what strategies is Walmart
pursuing to achieve this goal?
a. What, if any, are the marketing strategies?
b. How will you deal with the customer relations side?
14.)Will Walmart ever be plastic bag free?
a. What would replace plastic?
b. Would Walmart offer paper?
15.) How successful have Walmart's reusable bags been?
a. Would Walmart consider giving a credit to people who used reusable
bags?
16.) Are there different strategies for different areas based on the fact that
consumption rates for plastic bags are different?
17.) Where do you think the retail industry is heading with respect to plastic bags?
18.) How do you convince competitors to address this problem?
a. Do you think there should be plastic bag legislation requiring all retailers
to meet standards?
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