From Shelves to Sustainability: Kroger’s Business Response to Climate Change

Nathan Domeck, Colton Bragdon, Chris Franco

Climate Change and Kroger 

Climate change presents both challenges and opportunities for businesses across the globe, and grocers are no exception. With the global food system accounting for approximately 30% of all greenhouse gas emissions, it is paramount that grocers adapt to the changing environment and do their part to building a more sustainable future, while reducing the potential threats to their businesses. This blog post examines both the current and future impacts of climate change on Kroger’s business model, the company’s potential strategies for mitigating these impacts, its’ current methods of measuring and reporting carbon performance, and additional recommended actions to increase the company’s sustainability. 

Business Model Impacts 

The biggest threat Climate Change poses to Kroger is disrupting its supply chain. Extreme weather events such as droughts, floods, and hurricanes can reduce crop yields and lead to a significant increase in food prices if this emerging risk isn’t mitigated. To combat this Kroger needs to have a flexible sourcing strategy and acquire their food products from a variety of sources to maintain continuity of supply and limit price fluctuations passed down to their customers. Extreme weather events can also inhibit the delivery of goods to Kroger’s distribution centers and stores, leading to lost sales and higher operational costs due to the need to utilize alternate transportation routes. 

More directly, increasing temperatures can raise operational costs because up to 60% of grocer’s energy consumption can be attributed to heating and cooling systems. Grocers will have to make a choice between accepting larger energy bills and lower profits or increased capital investments to operationalize more efficient systems. Lastly, stricter government regulations can lead to increased compliance costs. Potential areas of increased compliance include changes in packaging and grocery bags, waste management regulations, and sustainable sourcing requirements. 

Limiting Adverse Effects 

To limit the adverse effects of climate change and reduce Kroger’s carbon footprint, Kroger has committed to reducing absolute Scope 1 and 2 GHG emissions by 30% from 2018 levels by 2030. Currently, Kroger produces Scope 1 emissions due to natural gas use for heating, mobile fuel consumption from their logistics fleets and lastly, fugitive emissions from refrigeration systems. Their Scope 2 emissions come from consuming electricity in their stores, and other operating facilities. To reduce their emissions, Kroger has implemented the following solutions: 

• Implement facility energy management: use energy efficiency measures like LED retrofits and covering open cases with glass doors to reduce energy usage. Energy monitoring is also used to quickly identify and remediate anomalies in energy consumption trends. 
• Solar power: Kroger utilizes solar panels to power 15 facilities. 
• Renewable energy purchase: Purchase green power directly from utility providers. 
• Fleet efficiency & electrification: move from fossil-fuel based vehicles to electric vehicles for their logistics fleets. 
• Reductions of refrigerant emissions: Kroger stores use leading leak detection processes and technology to reduce emissions from refrigeration. 
• Transition to lower-GWP refrigerant types: Many of their manufacturing plants and distribution centers have transitioned to lower GWP refrigerants. 

Implementing these solutions has resulted in a 15.2% reduction of GHG emissions, allowing them to achieve over half their targeted reduction just 4 years into their 12-year timeline. Kroger also has multiple sustainability initiatives that are not directly related to GHG emissions but are very important for businesses to consider as we look to pass on a healthy planet to future generations. These initiatives include reductions in product packaging from suppliers, responsible seafood sourcing and committing to no deforestation. 

Leveraging Opportunities 

Climate Change isn’t expected to create any new opportunities in the grocer industry, as it is only expected to create a more challenging operating environment. Therefore, Kroger’s opportunities will revolve around being more successful in this new environment. Kroger’s brands already make them one of America’s largest grocery stores, and they should look to leverage that size to create a more resilient and sustainable supply chain that will give them a competitive advantage in the future. As the regulatory environment matures and impacts of Climate Change become more tangible, it will be important for Kroger to have a more resilient supply chain and good relationships with suppliers who can operate in the new environment. To leverage these opportunities, Kroger could help suppliers transition to climate friendly ways of producing and build in redundancies to their supply chain to mitigate the impacts of future weather events. 

Measuring, Reporting, and Rating Carbon Performance 

While particulars on Kroger’s GHG measurement and reporting don’t seem to be as public as we would like, Kroger notes their measurement and reporting of GHG emissions is governed by the Sustainability Accounting Standards Board Food Retailers and Distributors Standard. Their management approach and reporting also aligns with the Task Force on Climate-related Financial Disclosures. There doesn’t appear to be any ratings of Kroger’s business currently, but they do list that their GHG reduction targets are aligned with the Science Based Targets initiative, despite the fact they have not joined.  

Additional Actions & Conclusion  

All in all, Kroger seems most focused on reducing waste throughout their value chain rather than any GHG targets. While it’s good to see a large grocer like Kroger having a public stance in favor of climate action, it feels like this is mostly lip service as they have little in the way of tangible reporting. A company like Kroger has so much leverage in the supply chain of American’s food that they really should be able to make commitments. These commitments could look like only purchasing eclectic vehicles for the ever growing last-mile delivery services grocery stores are getting involved in or putting solar panels on their stores to provide enough electricity to cover refrigeration costs. They could commit financial resources to help their suppliers transition to climate-friendly production practices and ensure a specified amount of their purchases are from sustainable suppliers. They could even help their customers make more sustainable choices by providing information on which products are more sustainable than others and how customers can reduce their food waste in simple ways.