Small Changes Pay Big Dividends for Hormel

May 27, 2014

Hormel Food Corp recently released its 2013 corporate social responsibility (CSR) report.

Food processors generally step gingerly around terms like “environmental responsibility” and “sustainability,” lest they be labeled tree huggers by tree hackers. Better to call energy savings an efficiency project than a social responsibility exercise.

Publicly traded food companies, on the other hand, aren’t bashful about touting their sustainability programs. And behind the energy savings and materials-reduction successes lye significant financial savings.

The latest evidence can be found in Hormel Food Corp’s recently released 2013 corporate social responsibility (CSR) report. It’s a broad-ranging document, covering sodium-reduction goals, worker-safety injury rates, greenhouse gas emissions and other programs, but the centerpiece focuses on reductions in energy, water, solid waste and packaging materials. Continuous improvement is the name of the game, and Hormel reset its goals in 2012. Two years into Sustainability 2.0, Hormel is halfway toward the benchmarks it established for the year 2020.

“The meaning of sustainability was fuzzy when we started in 2006,” says Thomas E. Raymond, director-environmental sustainability. ”It’s evolved into a very specific science.” For those with a disdain for Mother Earth, call it process optimization.

Hormel’s CSR highlights projects initiated at its 40 manufacturing facilities, where operations and engineering teams nominate initiatives for the company’s Best of the Best competition, a kind of corporate best practices program. Topping the list for 2013 is an ammonia refrigeration modification at the headquarters plant in Austin, Minn., that saved about $250,000 in electricity costs, reports Raymond. Capital costs were modest: two condensers that had reached the end of their service life were replaced with somewhat larger nits, and $6,000 was spent in new valves and piping that allowed the system to run at a lower discharge pressure. As a result, electrical consumption by compressor motors dropped 2.9 million kWh.

Simply considering the energy efficiency of replacement equipment is credited with reducing electricity consumption at the corporation’s Jennie-O turkey plant in Wilmar, Minn., by 162,000 kWh annually, with another 3,000 mmBtu reduction in gas consumption. Another Jennie-O facility in Faribault, Minn., accounted for more than 14 percent of a corporate-wide reduction of 154 million gallons of water use by installing new spray nozzles in the line. Water availability isn’t an issue at any Hormel plants, but “our goal is to stay ahead of the curve. We view it as a very expensive commodity,” particularly when the cost of heating and disposing of waste water is factored in, says Raymond.

Solid waste reduction is the least glamorous area of environmental improvement, and organizations routinely underestimate the ease of improvement and the dollar savings possible. Two years into the nine-year goal, Hormel already is 81 percent of the way there. The key is changing people’s behavior. “We have plants where it’s wall to wall engagement,” he says, citing the success of a plant in Sparta, Wis., where solid-waste bins were removed after one year because nothing was going to landfill. “Now we’re asking if we can turn this into a revenue source,” adds Raymond.

There’s no need to wonder: diverting waste can be extremely profitable. One of the best at it is Sierra Nevada Brewing Co., the Chico, Calif., craft beer company. SNBC is big by craft brewing standards, but as food companies go, the brewery is middling size. Less than 1 percent of SNBC’s waste goes to landfill, and diversion of 40,000 tons a year saves about $5 million. True, California tipping fees are high, but the company also generates $875,000 a year from the sale of recyclable materials—plastic, paperboard, anything with commercial value. Two staffers run the recycling program, along with their other duties. She’s 30 years from retirement, but sustainability director Cheri Chastain jokes she pays her own salary for the rest of her working life each year.

Packaging-material reductions of 4.72 million lbs. provided a financial windfall that far exceeded expectations. More than a quarter of the cuts were realized by scrapping a proprietary transport container in favor of a standard tote bin. Another 800,000 lbs. was trimmed by shrinking the width of a line of packaged deli meats by less than 1.5 inches.

Rail transportation is becoming an increasingly attractive alternative to truck transport. Hormel’s logistics specialists scheduled 5,600 shipments on intermodal rail, cutting truck transport 7.4 million miles for a savings of 760,000 gallons of diesel fuel.