Sustainability Efforts Mean Big Environmental Impact at Wal-Mart

by Todd Traub  on Monday, Jul. 2, 2012 12:00 am  

Wal-Mart’s push for environmental sustainability, initiated by then-CEO Lee Scott in 2005, has ranged from small improvements in packaging to ambitious experimentation with building materials and even hybrid-fuel delivery trucks.

If nothing else, Wal-Mart’s sustainability efforts have made it easier to open toys.

In 2005 Wal-Mart launched its sustainability program, designed to encourage corporate environmental responsibility. In attempting to take leadership on the issue and drive the global conversation, Wal-Mart established three broad goals: to be supplied 100 percent by renewable energy, create zero waste and to sell products that sustain people and the environment.

Wal-Mart has annually described its progress toward those goals in what have become known as Global Responsibility reports, and while the company has received a number of awards for its initiatives, which have grown to include diversity efforts, it has also drawn criticism and earned mixed reviews.

To be sure, there have been tangible achievements. At Wal-Mart’s recent 2012 Global Sustainability Milestone Meeting, CEO Mike Duke mentioned the example of toy packaging.

“All those metal wires,” Duke said. “And why does it have to have so many metal wires to tie the toys to the package?”

Duke praised the Wal-Mart team that found a way to alter the packaging and eliminate the wasteful wires. It may have been a small change, he said, but he noted that such changes add up when factored into the massive sales of a company that in fiscal 2012 rang up $447 billion in revenue.

“It kept 1 billion feet of wire from going to the landfills, which was enough to wrap around the Earth nearly eight times,” Duke said. “This changed the whole toy industry of how packaging was done. ... With Wal-Mart little things add up to big things.”

And the sustainability efforts have certainly accomplished more than eliminating a few wires here and there.

In its 2012 Global Responsibility report, Wal-Mart touted achievements in 2011 that included reducing waste by 80 percent, expanding locally grown produce sold, the Women’s Economic Empowerment Initiative, U.S. customer savings of $1 billion on fresh fruits and vegetables, a new “Great for You” icon to help identify healthy food options, using 1.1 billion kilowatt-hours of renewable energy, an integrated sustainability index, response to natural disasters, expansion of the global direct farm program, and an increase of diversity and inclusion for women and minorities.

“We’re now seen as a leader on sustainability,” Chairman Rob Walton told the meeting via video hookup from Brazil. “But with that recognition come higher expectations. And that’s how it should be. We’ve set bold goals for ourselves. And government leaders, NGOs and customers are watching our progress.”

But not everyone likes what they’ve seen. A recent article in Mother Jones criticized Wal-Mart for falling short on a number of its announced sustainability goals, including solid waste elimination from U.S. stores, energy efficiency increases in Chinese factories, greenhouse gas reduction at stores and distribution centers worldwide, and labor and environmental law compliance from Chinese suppliers.

“And even where Wal-mart has made its goals, questions linger,” the Mother Jones article said. “Wal-mart concedes that the use of murky subcontractors is widespread in China, Africa, the Middle East, and Bangladesh. They won’t provide details about how they have achieved their goals, whether suppliers were asked or compelled to share factory information, and whether any suppliers lost orders or were fired for unsatisfactory responses.”

Rajan Kamalanathan, Wal-Mart vice president for ethical sourcing, said Wal-Mart tries to hold suppliers accountable through a system of third-party audits conducted by auditors who undergo frequent training by the Global Social Compliance Programme.

Suppliers, factories and workers are provided a helpline or email to confidentially report concerns, and violations are handled in a collaborative manner with, as a last resort, out-of-compliance suppliers being denied access to Wal-Mart shelves.

The company’s leadership acknowledges many goals are difficult to achieve but pledged to keep trying.

“It does take diligence. It does take hard work,” Duke said. “I’d rather set a stretch goal that really is one that’s out there that we have to work hard to achieve.”

“As we celebrate this 50th anniversary of Wal-Mart and think about all the opportunities we have in the next 50 years, I want to ask you to redouble your efforts,” Rob Walton said in his video remarks.

The Katrina Effect

Wal-Mart’s sustainability program began in 2005 under former CEO Lee Scott. Duke said the inspiration came at least partly from Wal-Mart’s response to Hurricane Katrina, which struck New Orleans that year.

“We saw that scale, being a big company, can really work for good,” Duke said. “We saw that our size and our scale was able to benefit thousands of customers and thousands of our associates. It was really inspiring. And I think it really hit Lee also. … I really believe that led on to the discussions about the longer term impact that Wal-Mart could have.”

In 2009 Wal-Mart set out to establish a Sustainability Index by which to evaluate the sustainability of suppliers and their products. The index has three components: alignment with industry stakeholders about the best scientific metrics and information on product and category sustainability through the Sustainability Consortium, integrating that work into Wal-Mart’s core businesses, and using the information to engage customers.

The Sustainability Consortium is a diverse organization of global participants working toward world sustainability through improved products, services and consumption.

Part of the challenge has been to inspire consumers.

In an April webcast, Wal-Mart Director of Sust ainability Jeff Rice, UL Environment Vice President Libby Bernick and Lenovo Senior Engineer Mary Jacques addressed the challenge of raising consumer environmental consciousness and getting customers to actually buy what they say they want when it comes to green products.

Often, while environmentally friendly products sound good, they aren’t in demand, and too often it is the company pushing green products on customers instead of the other way around.

Rice said Wal-Mart is developing measurements and working with the Sustainability Consortium to set standards and get buy-in from companies. Wal-Mart is also planning a customer campaign, Rice said.

“We’re not just doing this because of consumer pressure,” he said. “Frankly, we’re not getting enough consumer pressure.”

And what do Wal-Mart’s sustainability efforts mean to the consumer? In what ways will their impact be felt?

Like the example of wires in toy packaging, the impact will likely be felt by customers in a number of small ways that add up to large-scale sustainability benefits. As suppliers are being asked to examine the carbon life cycle of products from manufacturing to recycling, customers can expect to see changes in inventory and redesigns in packaging.

20th Century Fox Home Entertainment has cut greenhouse gas emissions by removing the plastic knob in the center of its CD cases. Labels on clothing have been changed to allow for cold water washing, thus saving electricity.

Wal-Mart has already made its truck fleet more efficient, and anything that takes costs out of the supply chain allows the company to continue to pass savings on to consumers and maintain the famous competitively low prices.

“At Wal-Mart, we know that being an efficient and profitable business and being a good steward of the environment are goals that can work together,” Kamalanathan said in an April 19 Q&A with ISEAL Alliance, the global association for social and environmental standards. “Sustainability is about reducing waste in the supply chain and in our operations. As Wal-Mart becomes more efficient and environmentally friendly, we’re also seeing that those same efforts are reducing our costs and allowing us to pass those savings on to our customers.

“Through the work that our operations team has done to improve the efficiency of our fleet and reduce the waste that comes out of a Wal-Mart store, they’ve returned, just in the last year alone, nearly $1 billion — $800 million — back to the business for something that is also good for communities in which we live and the planet we all share.”

 

 

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