What some of the drivers for more sustainable packaging at Dell? Are they internal? External?
They’ve been both internal and external. Part of Dell’s DNA is a direct relationship with our customers. This is really where we’ve received much of our direction and much of our feedback. What we heard loudly and clearly from our customers is they wanted more sustainable packaging. When we looked at the responses we received from them, there were three areas of focus. They said, “We want the packaging to be smaller, we want more sustainable content, and third, can you help us make it easier to recycle or dispose of the packaging in a responsible manner?” Those three things were really the foundation of our 3Cs program, for Cube, Content, and Curb.
Internally, CEO Michael Dell is highly interested in sustainable and green packaging. The employee base here is also very motivated. We have an employee green team, if you will, that includes probably several hundred people. They have a number of projects around the company. So it is something that has been driven both from the outside, from our customers, and also supported very strongly internally.
Looking at your Web site, it is clear that Dell bases its sustainability efforts on a life-cycle approach. Do you have specific data on how much of your footprint can be attributed to packaging?
No, we don’t, at this time. We are trying to develop some models through Energy Star and [Sustainable Packaging Coalition] COMPASS tools. They are not complete. When we look at the overall LCA and carbon footprint of our products, the largest consideration is probably energy consumption. Packaging most likely makes up a pretty small portion of that.
Can you talk about why packaging—even though it is a small part of the product footprint—is such a focus at Dell?
Packaging tends to be a very emotional issue for many people, and for good reason. With almost any product, the packaging is the first item associated with the product that’s discarded. So, for example, if you buy a Dell computer, there are a few people who keep the packaging, but most actually discard it. That experience of whether it can go into the recycle bin or into compost or has to go into the trashcan really starts to influence people’s perceptions. Packaging is something everybody shares. You open your refrigerator, it’s full of packaging. So it’s very ubiquitous in the lives of most people, and when they make that linkage to the environment—things like landfills, plastic in oceans, litter on the side of the highways, etc.—packaging plays a very strong role there.
When you look at your packaging suppliers, what standards or tools do you use to evaluate what they are doing with their own sustainability initiatives?
We do several things within worldwide procurement. We have a process that looks at our suppliers’ sustainability efforts not only in terms of environmental factors, but also workers’ conditions, water usage, and others. So our procurement team evaluates our suppliers very comprehensively. Then in our quarterly business reviews, they are also evaluated on those criteria as well.
If you review them and find them wanting, do you provide them with the opportunity to strengthen those areas that are weak?
Yes, we do. A focus of any good relationship is the ability to provide honest and direct feedback, and I would say our suppliers take that to heart and work to improve it.
Regarding your use of bamboo and mushroom packaging, can you talk about what compelled you to look outside of traditional packaging materials for your products?
What really got us interested in bamboo was when we came up with the 3Cs program; that was really the architecture for our efforts. As we started looking at materials that were green, we wanted something that was 1.) cost-effective and 2.) beneficial from the front end of the supply chain. Our main focus was on Notebook computers at the time; that was our largest growing business. Most of those were actually manufactured in China. So we wanted a China-based packaging material.
Growing up in the Finger Lakes of Upstate New York, I had a farm background. I was familiar with many different agricultural products. As we started to look at different fibers, bamboo came up. It’s an ancient material with a lot of applications, but never really for packaging. So were aware of the tensile strength of bamboo. It’s similar to steel, which we thought might make it perfect for protecting our high-tech products. As we started to experiment with it, it became very clear that it was very similar to molded paper pulp. The sourcing was very attractive, as was the pricing. We spent about a year developing that. I think the first product we released with bamboo packaging was a Mini 10 laptop. The customer response was overwhelmingly positive. Actually we were kind of surprised by how interested customers were in this. So that really encouraged us to look at other materials, such as the mushroom packaging.
In order to get the amount of bamboo materials that you needed for your packaging, did you have to get involved in creating a new supply chain?
Yes, we did. We worked with our supplier, Unisource, on this. The first consideration was procurement of Forest Stewardship Council-certified bamboo, which was not prevalent in China when we started. It is much more available now because of our efforts. We were highly concerned about the fact that the bamboo is a primary food source for pandas, although we use a type of bamboo that pandas do not eat. We are also far from their habitat. But we really wanted to assure customers that they weren’t doing anything to impact pandas in their habitat.
We were also concerned about how we mechanically pulped the bamboo and reused the water. We spent a lot of time looking at that. Then in our molding operations, much of our bamboo packaging is sun-dried, so we try to take advantage of that as well. We actually walked the bamboo supply chain and there is a video of it called, ‘Bamboo: A breath of fresh packaging.’
Where are you now with your bamboo initiative? How many of your products are using this, and how much traditional packaging has this eliminated?
Approximately 70% of all of our Notebooks now ship in bamboo. It’s now more or less the default for our Notebook packaging. Where we are not using it, maybe due to certain aesthetics or size or protection issues, we will see that number continue to increase in the coming years. How much material have we displaced in terms of our foams? That is a good question. I have not actually calculated that in terms of volume number.
Were you using expanded polystyrene before?
We have used some EPS. We have also used a lot of expanded polyethylene. We do have some high-density polyethylene made from recycled milk jugs and detergent bottles in that mix as well. We use that in some specific applications.
Has there been any problem in acquiring the bamboo material?
The bamboo is a great solution for China. It’s an indigenous material, but it’s not widely available elsewhere where we have manufacturing operations.
I know that one of the selling points of mushroom-based packaging supplier Ecovative is that its solution can use agricultural byproducts from different areas. Is that something you are looking at?
Yes, it is. That was one of the key reasons why we were interested in it. When we talk about agricultural waste, this really gets into the classification of what I call ultra rapid-renewable materials. Something like bamboo is classified as rapid renewable. It grows and is mature for harvest in about three to five years. With something like the mushroom-based packaging, because you are using an agricultural waste—we are using cotton hulls sourced out of West Texas—in many areas, you can get one to two crops per year. That makes it a very attractive type of technology. So yes, we have our eye on that.
Where are you at on that project? Are you still in trials?
Yes, we are. We just concluded trials with one of our customers, who I will describe as a Fortune 50 company. The trials have been quite extensive. We are testing the entire supply chain. It’s a little bit surprising; there are a number of different entities involved, not only the primary purchaser, but also the facility services providers, as well as composting companies. We actually have a number of very good learnings, most of which focus on communication. People naturally question, ‘What is it? ‘How do I handle it?’ This is really where the communication comes in.
It’s been a long pilot, but I think given how things turned out, it’s been very necessary work. What we have learned will help us as we do more and more mushroom packaging.
If you determine this is a packaging material that’s going to work for a lot of your products, will Ecovative be able to supply the amount of material you need?
Well, that’s a great question on scaling. Ecovative is still a small company, but they are growing. They have signed a franchising agreement with Sealed Air to build facilities. So that’s a route to scaling. When we looked at it from a cost perspective, our procurement team did a like-to-like analysis. We compared the price of the foams we use coming out of a dedicated factory with what we thought the price of mushroom packaging would be at a dedicated factory similar in scale. The pricing actually turned out to be very competitive. This was back when gas was $2 a gallon; it was about a year ago or so. So it was on that basis that we decided to proceed.
The mushroom-based packaging we use right now has come out of a very small facility. It’s not at scale, and it’s not what I would call at price parity at this point. But the product that we are using it for is a Multipack of servers. These products are $20,000 to $25,000. So a few dollars difference on the packaging at this level really doesn’t have significant impact, but certainly at scale, that would be something that we are concerned about and have addressed. Hopefully, we will see more and more mushroom packaging.
You provided a perfect segue into the next question. I was going to ask you a little bit about Multipack packaging. The idea behind this, as I understand it, is you are packing say 10 servers in one package versus sending them all out separately.
That’s right. We actually borrowed the idea for the Multipack from the beer industry! The idea for it came after an install several years ago. We were with the customer talking about the packaging over beers, and we looked at the beer packaging and said, ‘Can we borrow something from the food and beverage industry?’ That’s literally how it came about.
But it did create an issue for our manufacturing operations, not really from the physical infrastructure, but from the IT infrastructure, in terms of how packing slips were created and invoicing was done. This was because all the IT logic was set up around shipments of individual boxes, not multiple chassis in one shipping container. So there was a lot of reprogramming that had to be done.
Who did you work with to develop the Multipack package?
We worked with Austin Foam Plastics, Inc.
Do you have a standard size, or are there multiple sizes to hold multiple components?
We have multiple sizes, and the package used depends on whether the product being packaged is a server product, such as a 1U or 2U server, or it’s a desktop.
This is corrugated, correct?
Yes, it is a corrugated box. The chassis are slotted down in the box, and then depending on the weight, for some of the 2U servers that utilize the mushroom packaging, it includes an integrated base made of corrugated cardboard. This alternative system can replace traditional pallets.
The Multipack really makes a difference for some of our customers. We had a very large municipal customer who wanted a more efficient packaging solution. We used the Multipack for a desktop order that reduced their number of boxes by 82%. It also eliminated the use of pallets. When they packed up the old desktops, they didn’t have to have other boxing. They could put it right back in the Multipack. They took that box then with the old system to Goodwill. Then Goodwill recycled those computers, and they were able to reuse some of those boxes. It’s interesting how these supply chains evolve!
How have these initiatives impacted your company financially?
They’ve been very positive for us in two ways, both bottom line and top line. With the bamboo packaging and some of our other initiatives, we have saved more than $20 million dollars just due to the use of greener packaging. Our guideline here is we have to have cost parity or less. So we adhered to that, and we’ve definitely saved money. It also affects us on the top line because we do have customers for whom the sustainability of the packaging is an issue, and it comes into play in their evaluation. It’s certainly not the largest factor, but it is a factor, and sometimes it can tip a buying decision.
What has been the response from your customers?
It is overwhelmingly positive. I received a note this week from the IT director of a well-known entertainment company. He took time out of his busy day to spend fifteen minutes writing us a note saying he noticed on some small form-factor desktops that he purchased from us that the packaging had changed from foam to a molded paper pulp. He wrote us to thank us for that and told us how he was going to recycle those cushions. So yes, it really does impact people. Our view is, what can we do to make it easier for the customer to be green?
In Dell’s 2012 Corporate Responsibility Report, you personally talk about finding solutions from nature. Can you elaborate on this bit and talk about how nature has inspired you in your work at Dell?
Sure! I grew up working on farms, and I’ve always been close to nature as a result of that. That type of respect for the environment has played a very large role for me. I want to be able to pass on—as I think most people do—an environment that is in better condition than what I found it in. That certainly has been an inspiration. I have used that knowledge from agriculture and my engineering background as we have looked at different materials and fibers and their properties. They make a lot of sense for packaging. Packaging for a long time has relied on—and still relies on—natural wood fibers for corrugate. But I think there are alternatives that are slowly being developed.
As you look out into the world at other individuals or companies, or other initiatives around sustainability, who are some of the people or things that really have inspired you?
One of the companies that has inspired us in terms of packaging is Puma. Some of the things they have done with their dissolvable bags and shoe packaging have been very interesting. So that's been an influence on us.
We also pay attention to the general tenor of what some of the NGOs might be focusing on. We talk to them from time to time to get their opinions on certain materials. So that’s definitely an influence.
We are also out there scanning at various conferences and trade shows. There are many small companies. This is how we came across Ecovative, as a matter of fact. There is tremendous amount of entrepreneurial energy out there where people are coming up with new materials. That goes back to Dell’s DNA as well. Michael Dell started Dell in his dorm room, and at Ecovative, Eben Bayer and Gavin McIntyre founded their company in their dorm room at Rensselaer Polytechnic Institute. So there are a lot of similarities between the two companies, even though there is a vast difference in size. Those similarities are what will help us at Dell work very well with some of these smaller up-and-coming companies. That’s where some of the inspiration and initiatives come from.
In the cosmetics industry, a group has been formed to share best practices around sustainable packaging. Is there any kind of initiative in the technology world around packaging in particular where you can share some of these ideas? Or is it very competitive?
I’m proud of Dell in this regard. We have actually been encouraged to share some of what we’ve done. So we have spoken with people in the cosmetics, sporting goods, and consumer goods industries about some of the things we’ve done. I’ve not had any of our direct competitors in the technology industry call us up and ask for advice! But, that may occur someday within the technology industry.
In closing, what do you see as some of the challenges that will face Dell and other technology companies as you pursue sustainability in the future.
I see people globally becoming more and more concerned about sustainability and a cleaner environment. This is particularly true in China. The challenge for us at Dell is how do we develop programs that address the needs of a growing population? When you look at population forecasts, I think there are 7 billion people now, and by 2025, the forecast is for 8 billion. That’s an additional 1 billion people. That is like adding another India or China. So how do we help create a brighter future for the people of tomorrow? I think packaging plays a role in that. So our challenge is developing the right types of programs that focus on the recyclability and compostability of our products, while also keeping costs down so we can power the possible of what people want to do in the future.