A recent report for Supply Chain Brain noted that retailers and customers “are increasingly prioritizing environmental responsibility, emphasizing a shared dedication to sustainability in returns.” 

And recycling as a sustainability practice is one of the five R’s of reverse logistics. This though, often refers to making sure that products are packaged in recyclable materials and that their components are as recyclable as possible. 

There’s another way to recycle that doesn’t seem to get enough attention in logistics departments, let alone C-suites: in-kind donation.  

These are non-cash philanthropic contributions in the form of a variety of merchandise, and can include toiletries, housewares, health, toys, crafts and beauty products. For many nonprofit organizations, they constitute an essential resource for achieving their mission. 

Walgreen Co. began more than 20 years ago donating excess inventory, out-of-season and discontinued merchandise, and other items that are no longer eligible for sale — before sustainability, landfill diversion, and waste avoidance became key ESG goals for businesses.

The company has partnered with a number of nonprofits over the years, starting with Feeding America and 545 Walgreens stores in the Woodland, California, area. Donation boxes, which came to be called Green Boxes, were placed in stores where team members could place donatable items, which were then picked up on a bimonthly basis by the nonprofit. The Green Box program has now expanded to 11 distribution centers nationwide.  

As with a lot of major retailers, in-kind donation and waste avoidance are now measured monthly and represented in the company’s annual ESG report. In 2023, fully 62% of Walgreen’s corporate philanthropy was classified as donations in-kind. 

Why? Because donating in-kind is good for the planet, good for the bottom line, and good from a public relations perspective. 

The planet: Finding new homes for merchandise means keeping it out of landfills and ineffective recycling programs. Even if the everyday shopper has no use for certain merchandise, there are areas where it’s still needed. For example, one of our in-kind donation partners, NAEIR, distributes donations to qualified 501(c)(3) nonprofits and teachers around the country. Even when the stores are no longer stocking back-to-school items, there are teachers somewhere who need classroom supplies for their students.  

The bottom line: Donated inventory is tracked and tax receipts are obtained from nonprofit partners. Section 170(e)(3) of the Internal Revenue Code states that when Regular C corporations donate inventory to qualified nonprofits, they can receive a tax deduction equal to the cost of the inventory donated, plus half the difference between the cost and fair market-selling price, not to exceed twice the cost. 

The public’s perception: Walgreen’s prides itself on creating healthy communities by donating, for example, vitamins and vaccines. It also improves public perception of the company when non-perishable food can be sent to an anti-hunger organization and PPE can end up in schools. 

It was excess PPE, in fact, that expanded Walgreen’s partnership with NAEIR, one of the country’s largest and oldest in-kind donation nonprofits, which is based In Galesburg, Illinois. After the pandemic, retail customers didn’t want or need gloves, masks, and hand sanitizer and, thanks to hiccups in the supply chain, the company still had a lot in inventory. 

As kids were returning to schools, though, there was still a great need for PPE, and NAEIR helped in distributing the inventory to where it was needed, avoiding landfills and hazardous waste disposal. 

In-kind donation is also a form of engagement for employees, especially those in distribution centers, who are always grateful and excited to be part of something that gives back to their communities. Some may wonder, “What difference does one box of pencils make?” but when you multiply that across thousands of stores and dozens of distribution centers, the impact is huge. 

Sustainability is top-of-mind for members of the Reverse Logistics Association (RLA), and Walgreen’s has received inquiries from other large retailers about how the in-kind donation programs work. Partnerships are critical to their success. 

When considering implementing or expanding an in-kind donation program, look for partners that: 

• Will accept mixed lots. Distribution center employees load the boxes and provide a manifest, but there is typically a mix of SKUs. NAEIR, for example, is one organization that does the sorting.
• Will come to you. Just since January, NAEIR has picked up 21 truckloads of merchandise from distribution centers around the country, from Connecticut to Ohio to Texas.
• Has a broad network of nonprofits. If one in-kind donation organization can’t use something, it’s good to have them point you to other potential recipients.
• Provides a complete accounting of donations and their eventual destination. You must ensure items are going to qualified nonprofits in order to take advantage of tax benefits. 

A multichannel reverse logistics strategy avoids a one-way trip to the landfill. Donating in-kind will remain an important channel for Walgreen’s  — and create a satisfying feeling for employees who are able to support the community.

Visit www.NAEIR.org to learn more about donating merchandise. 

Desi Paoli-Pupillo is senior manager, reverse logistics supply chain at Walgreen Co.