As consumers become increasingly conscientious about supporting businesses that prioritize social and environmental responsibility, the ethics of retailers like Aldi are under the microscope. With over 2,000 stores across 36 states and an ambitious growth plan, Aldi U.S. is on track to become the third largest grocery retailer by store count in the coming years. But is Aldi‘s low-cost business model based on corner-cutting or ethical compromises? Let‘s investigate.
Aldi‘s Commitment To Sustainability
Aldi has set some of the most aggressive corporate sustainability targets in the grocery retail industry, and importantly, the company is following through with major investments to achieve them. Aldi‘s sustainability initiatives span renewable energy, energy efficiency, waste reduction, and natural resource conservation.
Through a $1.9 billion capital investment plan, Aldi is transforming its stores into green, energy-efficient buildings. The company has installed solar panels at 111 U.S. stores and 12 distribution centers as of 2020, with a total solar capacity of 106 megawatts – more than Walmart, Publix, Food Lion and Target combined. LED lighting upgrades at over 1,500 stores have cut energy consumption for lighting by over 50%.
These investments have enabled Aldi to dramatically shrink its carbon footprint in recent years:
- 26% reduction in operational greenhouse gas emissions from 2017 to 2019, even as store count grew 20%
- On track to reduce emissions per square meter of sales floor 26% by 2025 (vs. 2016 baseline)
"The level of renewable energy Aldi has deployed across its stores and distribution centers is truly remarkable for a company of its size in the grocery industry," said John Hoekstra, VP of Sustainability at Schneider Electric. "Aldi is raising the bar for green supermarkets."
Aldi has also found innovative ways to integrate sustainability and waste reduction into its core cost-saving operating model. For example:
- Aldi stores are 20-30% smaller on average than competitors, requiring less energy and land
- Selling fewer products in more efficient packaging reduces overall packaging waste
- Displaying products in their original cardboard shipping boxes is more efficient and eliminates the need for aisle shelving
- Reusable plastic crates for fresh produce reduce waste and transportation emissions
- Charging for bags has kept around 15 billion single-use plastic bags out of landfills
On the waste front, in 2019 Aldi composted 116 million pounds of food waste and donated 29 million pounds of surplus food, reducing waste and carbon emissions while supporting local communities. The company‘s food waste reduction programs and analytics have been recognized with a 2020 Progressive Grocer Impact Award.
Still, Aldi‘s Achilles heel on sustainability is its plastic packaging waste. The company lags behind competitors like Kroger that have made bold commitments to phase out single-use plastics. Aldi‘s plastic packaging initiatives are limited to making 100% of packaging reusable, recyclable, or compostable by 2025 and reducing packaging material by 15%, while still keeping most products wrapped in plastic.
John Hocevar, Greenpeace‘s Ocean Campaigns Director, says Aldi needs to go further: "Retailers must prioritize reducing single-use plastics by embracing reuse and refill systems, not just switching to other throwaway materials. Aldi‘s focus on recyclability is insufficient."
Worker Welfare: Leading On Wages And Benefits
As the fourth largest U.S. retailer by revenue, Aldi stands out for investing in its employees while maintaining low prices. With an average starting pay of $12.70 per hour ($15 in many markets) as of 2020, Aldi offers entry-level compensation well above the federal minimum wage of $7.25.
Aldi‘s $15 average starting wage also outpaces most competitors in retail and grocery:
| Retailer | Average Starting Wage |
|---|---|
| Walmart | $11 |
| Kroger | $10 |
| Amazon | $15 |
| Costco* | $16.50 |
| Target | $15 |
| Best Buy | $15 |
| Aldi | $15 |
In addition, all Aldi employees averaging over 25 hours per week receive a full benefits package including health insurance, dental coverage, vision insurance, retirement plans, and paid time off. This level of benefits is rarely offered to part-time workers in the retail industry.
By investing in its workforce, Aldi aims to attract talent, reduce turnover, and maximize productivity in its stores, which are very leanly staffed compared to competitors. Aldi has been recognized as an employer of choice, certified as a Forbes Best Employer for New Grads and a National Top Workplace.
"Aldi is proof that companies can provide good, family-sustaining jobs while still succeeding in a low-margin industry," said David Cooper, Senior Analyst at the Economic Policy Institute. "Aldi‘s higher wages and benefits help create a more stable and productive workforce and show that all retailers have room to raise pay."
However, while Aldi store employees report high levels of engagement thanks to competitive pay, benefits, and growth opportunities, the company‘s labor model is not without downsides. With fewer staff per store than most supermarkets, Aldi employees are under intense pressure to work extremely efficiently.
Some workers have described the stores as understaffed, leading to an overwhelming pace of work and stress when employees call out. "I often felt like I was doing the job of 2-3 people, and it could be really draining," said one former Aldi manager. "You‘re constantly running around trying to get everything done."
To truly be an employer of choice while operating efficiently, experts say Aldi may need to find a better balance. "No doubt Aldi is ahead of most competitors when it comes to entry-level compensation," said Zeynep Ton, professor at MIT Sloan School of Management and author of The Good Jobs Strategy. "But in providing even a few more labor hours in stores to make the workload more sustainable, Aldi has an opportunity to be even more of a retail leader in job quality."
Mixed Results On Ethical Sourcing
As a company that offers predominantly private label products, Aldi‘s practices for sourcing its exclusive brands carry extra weight. To its credit, Aldi has developed sourcing policies, supplier codes of conduct, and audit programs aimed at ensuring safe and ethical working conditions, fair compensation, and environmental responsibility across its global supply chain.
Aldi is also recognized as a leader in improving animal welfare and expanding plant-based alternatives in its product selection. The company is working towards 100% cage-free eggs, has removed artificial growth hormones from its dairy products, and banned animal testing on Aldi-exclusive products. Aldi now offers an array of vegan and vegetarian products, including meatless burgers, chickenless tenders and dairy-free ice cream.
"Aldi has been very responsive to customer demand and ahead of the curve in offering more plant-based and humanely raised options," said Josh Balk, VP of Farm Animal Protection at the Humane Society of the U.S. "We‘ve had success engaging Aldi to improve animal welfare in its supply chain."
However, investigations have uncovered issues in Aldi‘s supply chain that the company has needed to address:
- In 2017, some salmon sold in Aldi China stores was allegedly processed by North Korean workers under forced labor conditions. Aldi immediately halted the practice.
- In 2020, reports alleged that Aldi U.S. was one retailer at risk of having products made with cotton from forced labor in China‘s Xinjiang region. Aldi says it does not tolerate forced labor and is investigating.
- Also in 2020, an Oxfam report gave Aldi a 0% score for not requiring food suppliers to have grievance mechanisms or support smallholder farmers. Aldi rated below competitors like Walmart and Kroger.
Responsible sourcing experts say Aldi must stay vigilant in monitoring its suppliers and going beyond routine audits to stop labor abuses, especially as its business rapidly grows. "Companies need to map their supply chains, implement traceability systems, and partner with suppliers and local stakeholders to identify and prevent forced labor risks," said Ame Trandem, Senior Advisor at Verité. "Aldi should look at its business model holistically to ensure that its low-cost requirements don‘t inadvertently drive abuses."
To Aldi‘s credit, the company has acknowledged and responded quickly to supply chain issues as they have come to light. But to be an ethical sourcing leader, the company will need to take a more proactive approach to identifying risks and working with suppliers and industry groups to stamp out bad practices.
Conclusion
Our deep dive into Aldi‘s environmental, social, and ethical practices shows a company that is making significant strides towards sustainability and social responsibility, but still has room for improvement. On the plus side, Aldi is a true leader in retail renewable energy, energy efficiency, and green facilities. The company‘s investments in solar power, building upgrades, and waste reduction are dramatically shrinking its environmental footprint, even as it expands rapidly.
In terms of employee welfare, it‘s clear that Aldi values its workers as a competitive advantage. By offering industry-leading entry-level wages and comprehensive benefits, Aldi aims to attract talent and reduce turnover in a challenging, efficiency-driven environment. However, some employees feel that they are overworked and understaffed, indicating an opportunity for Aldi to enhance productivity and engagement by improving its labor model.
Aldi also has a proactive approach to animal welfare and plant-based eating, offering more vegan products and humanely raised options than many competitors. Yet the company has room for improvement in monitoring its global supply chain for risks like forced labor, unsustainable farming practices, and a lack of supplier accountability.
Ultimately, for Aldi to be considered a truly ethical retailer, it will need to close the loop on its remaining sustainability, labor, and sourcing gaps as it grows:
- Make bolder moves to reduce reliance on single-use plastics and excess packaging
- Increase store labor hours to ease the stress and workload on employees
- Implement supply chain traceability, risk assessment and supplier capacity-building programs
- Engage proactively with suppliers, NGOs and industry groups to resolve systemic issues
Aldi‘s success in marrying low costs with significant investments in sustainability and social responsibility shows that being an ethical retailer and business success are not mutually exclusive. If the company can tackle its shortcomings with the same rigor and ingenuity that it has applied to areas like renewable energy and employee benefits, Aldi has the potential to be the industry leader that raises the bar for the entire grocery sector.
