Looking for CSR? Watching the Superbowl!

[Editor's Note: Best Buy won BCLC's Corporate Stewardship Award on Nov. 30, 2010, for various leadership factors including its electronics recycling program.]

If you want to stay abreast of CSR trends, tune in to Super Bowl commercials.  Last year’s engaged you in cause marketing:  Pepsi and Coke launched a new round of their “cola wars” over who could activate more consumers—via ads, websites, and you-tube—to contribute to society.  In our opinion, Pepsi won. 

The message of this year’s game is that green is gold:  not only did the Green Bay Packers win but you could too.  The electronics retailer Best Buy will “buy back” your TV (or laptop, phone, washing machine, e.g., “stuff”), either refurbish it for resale or recycle it, and give you a gift card to buy a new one.

Now this sounds like a winner for Best Buy and its customers.  But, here’s the hitch, it’s not a real big money-maker for the retailer. So, why is Best Buy in the reuse and recycle business? 

It’s the Customer, Stupid

In the middle of the past decade, Best Buy made a strategic decision to focus on its customers.  Retail stores were redesigned to be more consumer-friendly and employees were trained in not only the latest technologies but also in customer relations.  A Geek Squad was created to help customers with installation and operations. 

This “changed the game” for customer service in big box retail.  A leading competitor, Circuit City, went the other route by slashing staff training and eliminating longer-tenure and higher paid staff.  This left customers to more or less fend for themselves.  They did and Circuit City went out of business.

What are retail customers’ concerns about stuff?  Employees across the company were picking up a common customer concern: After making a new purchase, they ask “what do I do with my old stuff?” 

The prevailing model for electronics has been for customers to “box up” their products and peripherals, and then return them to manufacturers.  For big stuff, like appliances, the main option has been to pay a retailer to haul them away after a new purchase or to take them to a local dump.

Within the U.S., however, the majority of states, including Best Buy’s home state of Minnesota, have passed laws prohibiting the disposal of electronics and appliances in landfills or through incineration. So customers have “lots of problems” recycling their goods and worry that they’ll be sent off to China, Bangladesh, or somewhere else to be disassembled dangerously by child labor with what’s leftover dumped into local rivers. 

Reuse or Recycle

According to Hamlin Metzger, a CSR specialist at Best Buy, the retailer had “lots of talk” with employees, government agencies, public relations, retail operations, transport, and other folks on the ins-and-outs of adopting a recycling program. 

The move to in-store recycling would require reverse logistics.  Best Buy’s stores were designed to have goods come in the back as inventory and go out the front via sales.  With recycling, goods would have to come in the front and out the back for disposal.  This would require redesign of floor space and logistics. 

The recycling program began with a “soft launch” in February 2009, with the idea that Best Buy would study the process and “work out the kinks” over the next year.  Soon, however, there was buzz among customers and in the media:  “When is it coming to our market?” This led to the decision to go nationwide after only a few months. 

To date, Best Buy reports it has diverted 1.4 million units, or nearly 140 million pounds, from the waste stream with its recycling program.  It set an aggressive goal of 1 billion pounds by 2015.  On the financial side, the program, as a stand-alone venture, costs the company money. 

But it has increased in-store traffic (Best Buy recycles goods purchased from its own stores and elsewhere) and enhanced customer loyalty. 

Trade-Ins and Buy-Backs

In the latter half of 2009, Best Buy launched a trade-in program.  Bring your used stuff into the store, negotiate an offer, get a gift card to buy new stuff, and Best Buy will sell your used goods on eBay or through its own website (or else recycle it).

Best Buy went a step further at the 2011 Super Bowl by offering to “future proof” your purchase.  An advert featuring crooners young (Justin Bieber) and old (Ozzy Osbourne) reminded how consumers also worry about purchases that might soon be outdated.  To counter this, how about leasing, say a 3D TV,  then bring it back after one, two, or more years to get the new, new thing  (4D!), all bundled in a contract with defined time period and % payback options.   But pay attention: this Best Buy deal costs you up to $70—payable in advance!

Does it work for customers?  Early results are very strong.  Will it work—financially?  Too early to tell. 

Lessons on Market Leadership through Sustainability 

The two of us, Best Buy execs, and those several other companies talked over this case at a conference on “organizing for sustainability” sponsored by the Center for Effective Organizations of the University of Southern California.  Five lessons were highlighted about taking market leadership through sustainability.

Lead with Values not Economics.  There was, according to the team at Best Buy, “precious little certainty on the economics” of these programs at the start.  Instead, management took a “jump into the abyss.”  But this is characteristic of innovators and market leaders.  They don’t wait for a business case to be proved; they move forward based on logic and faith in the idea.  For Best Buy, this was all about customer centricity. 

Listen to your Employees.  Best Buy’s differentiator is not particularly its prices, but rather its employees’ product knowledge and customer care.  The big push for reuse and recycling we were told came from the company’s employees.  Best Buy today has a Green Council made up of U.S. employees who contribute ideas and convey information about Best Buy’s sustainability programs to their peers.  Many stores have their own green teams. 

Deliver on your Promises.   To fulfill its promise to customers, Best Buy had to enlist recyclers in several states and set up machinery to verify that they would handle disposal according to state and national environmental laws.  NGOs alerted the company to the problems with electronic recyclers shipping components overseas to non-OECD countries where environmental laws are absent or enforcement is lax.  Accordingly, Best Buy made contracts with its recyclers to ensure that used products or components were not shipped overseas.  It audits the recyclers, and their downstream partners, over a two year cycle.  It is also working with them to adopt ISO 1400 EMS standards. 

Bring the Industry along.  These “end of life” programs put Best Buy at the forefront of product stewardship.  But how about the supply chain?  Manufacturers and retailers are together working to get a “closed loop” in electronics and appliances where machines are designed for easy disassembly and recycling.  Best Buy has joined Walmart, as well as Dell, HP, Toshiba, and others in a working group of the Sustainability Consortia to advance sustainability along the full electronics value chain.   

Toward sustainable consumption.  Finally, there are concerns expressed that the recycling and buyback programs will simply promote the purchase of more and more stuff and yield unsustainable consumption.  This is of course an issue in almost every retail value chain with different implications in OECD and non-OECD nations.  Thus Best Buy and others are beginning to talk seriously about sustainable consumption. 

This opens new frontiers in consumer engagement.  What would happen if retailers did talk openly with customers about sustainable consumption? Can they get customers to recycle more (only 3-5% of electronics/appliances are recycled today)?  How about more transparency in “green labeling?”  What about advising customers to buy less? 

We can’t wait to see what Super Bowl XLVI offers up on these matters.