In a recent issue of kbbreview, we named the environment as the number one issue currently facing the industry. Over the last few years, one company that has transformed its views and procedures in this area is Welsh kitchen and bedroom specialist Sigma 3.

In 2002, all the waste produced by the company was going directly into landfill. Today, despite an increase in production of almost 100%, the company recycles 90% of its waste. It also looks to use raw materials as efficiently as possible, in particular wood mfc, paper, cardboard, and organic solvents. Only recently, it also consigned the plastic bag to the recycling bin in favour of reusable cotton carrier bags.

All wood, paper and cardboard the company uses is from sustainably managed forests and all wood based products are recycled. So too are the vast majority of plastics. Mfc used as a major component in the construction of its kitchen furniture is manufactured using environmentally friendly alternatives to imported hardwoods. The main raw material is roundwood timber, purchased and primarily sourced from renewable UK forests, managed on a sustainable yield basis.

We caught up with Sigma’s md (manufacturing) Gerald Jones who explained the thinking behind the company’s environmental strategy and gave us his impressions of the current retail climate.

Q&A

Q. What prompted you to re-think your environmental strategy?

A. Back in 2001 we noticed the landfill tax was going through the roof, and environmental issues in general were causing concern. Initially we got in touch with a company called Groundwork, who deal with environmental management systems. They were offering grants on certain equipment, in particular bailers and that’s how the ball got rolling. We were generating a lot of cardboard waste and all of it was going into landfill. We applied for the grant but were told we had to have an environmental management system. This took us a few months to achieve and we were then qualified for a bailer. At that time we were producing seven skips of general waste a week; after we’d finished the project we’d reduced that to one skip every three weeks.

Q. So for all your green morals, isn’t it just a case of saving yourself money?

A. We are saving money but only because there’s legislation that says we have to. We’re talking about landfill tax - a government tax that’s incentivising people to become aware of their responsibilities to the environment.

Q. Are more companies beginning to realise the advantages of a clear environmental strategy?

A. Some people will embrace environmental issues openly and others aren’t bothered about it. That comes down to personal values within the organisation - whether or not the people running them feel they’re of relevance to their marketing campaign. If not, why shout about them?

It’s also closely linked to other disciplines in your organisation - housekeeping methods and finance for example. If you don’t have those disciplines you’ll never succeed with an envirommental policy either. To get people to throw cardboard and plastic in specific locations as a routine takes an understanding and a culture. If you don’t have that you wont succeed. I would say a lot of companies in our industry don’t have those cultures and will struggle to do this sort of thing. It all comes down to time management.

Q. Are you surprised more companies haven’t tried to change their ways?

A. A lot of companies will have to. There’s a PR side to this too, but it will always come down to whether it makes business sense. That’s what matters. If other companies aren’t following this environmental tack they’ll pay for it; that’s government policy I’m afraid.

Q. Is the government doing enough?

A. No, they just seem to be leaving people to their own devices. They’re taxing us, but where we go from there is up to us. It’s typical. Another good example is the WEEE regulations, you had no option but to take it, but there was no publicity about it.

Q. Does your stance make a difference to consumers?

A. It’s our experience in the retail sector that increasingly people do care. There’s no doubt that more people are asking about the sustainability of products and their origins. That’s been more prevalent over the last three years. Its like recycling at home - nobody was bothered but once you start it becomes the norm and that’s when markets will open. Originally, it was always our intention to have solid wood doors but customers now expect the centre panel to be veneered because it’s environmentally friendly, and accept it rather than see it as a quality issue.

Q. How big an issue for you is the rising cost of raw materials?

A. It’s one of our biggest issues; it’s a huge problem. We’re sandwiched in a cost fight. Our business is closely linked to the housing market and new builds in particular. As a consequence we’re under pressure from our customer base to reduce costs. However, from the raw material side we’re seeing unprecedented cost increases. It’s an intolerable position to be honest. We’re seeing close to double figure increases. Chipboard has seen a 22% increase in the last two years. We’re also seeing levies put on us for steel for handles etc. All our doors are made from wood or man made timber, and the price is rising on a totally unprecedented scale.

Q. What kind of pressure does this exert on the company?

A. The market is tightening considerably so our sales prices can’t be increased. In fact some in the commercial sector are having to be decreased. Some of our homebuilders are saying that because they’ve had to drop the cost of housing by 10% because of slowing sales they’re asking their suppliers for a 5% reduction in cost. It’s not a good position to be in. As well as that, their sales are down so we’re faced with a 5% reduction in cost on lower volumes.

Q. So is overall business suffering?

A. As a company, Sigma 3 expects to do about £18.5m turnover this year. We’re continuing our growth strategy, but our year ends in June and the tail end will be tight.

On the basis of current performance we’ll come in at about 10% growth for the year.

Q. How is the high street looking at the moment?

A. Afraid is the best word for that. There’s a lot of trepidation and we’re finding it difficult to tie people down. A kitchen is a big ticket purchase and people are wary of taking the plunge at the moment. There’s no doubt that the beginning of the year has been disappointing.

Q. How can you change your retail strategy to tackle the problem?

A. It all comes down to the age old volume against price scenario and that’s something for the boardroom that we’re looking into.

Q. Do you intend to grow your retail network or improve the quality of the ones you have?

A. All the above. The intention is to continue with improvements in our showrooms and further expand. I believe there is no is no other way. The kitchen market is still big enough to allow us to attack and gain a bigger market share. Even if the market shrinks there’s still plenty of it to go at.

Q. How much of a threat are the sheds to the mid-market?

A. The sheds are always trying to up their game. What’s clear, if you take the example of MFI, is that they want to attack the mid market and up the value of their products. MFI need to make some money I would suggest and they will do what they need to do to achieve that. It’s up to us to ensure we have enough space between us and them at all times. And that’s something that I’m looking to ensure takes place.

Q. Do you see any mid-market retailers being forced out of business in the current retail climate?

A. It’s inevitable yes. But that’s going to be caused more as a result of the economy slowing down than the pressure from the sheds. The problem you’ll have with independent retailers will be cash flow on market slowdown. You’ll have a situation where the larger players will survive but I don’t think the sheds will be the reason why any independents will close.

Q. How would you describe the general mood of the market?

A. Very varied. The high end is still moving and the low end is now tightening considerably. I think it’s down to the financial markets and rising interest rates. Consumers are holding on to their money.

I honestly believe the press, and particularly the TV media have a lot to answer for. The economy is still expected to rise 2% but the media try to talk us into a recession. There’s no doubt there are struggles with mortgage repayments and a reluctance to make big ticket decisions.