Walmart: A Green Leader

By Susan Caminiti In a video posted on Walmart’s Website (see below), CEO Mike Duke discusses the company’s progress with measuring sustainability and how Walmart will work with others to create the index. <object id='flashMovie' width='400' height='336' classid='clsid:d27cdb6e-ae6d-11cf-96b8-444553540000'> <param name='movie' value='http://walmartstores.com/video/flash/MediaRoomPlayer.swf?xmlpath=http%3a%2f%2fwalmartstores.com%2fVideo%2fStreamXml.aspx%3fid%3d1375%26embed%3dtrue'></param><param name='allowFullScreen' value='true'></param> <param name='allowScriptAccess' value='always'></param> <embed src='http://walmartstores.com/video/flash/MediaRoomPlayer.swf?xmlpath=http%3a%2f%2fwalmartstores.com%2fVideo%2fStreamXml.aspx%3fid%3d1375%26embed%3dtrue' type='application/x-shockwave-flash' width='400' height='336' allowscriptaccess='always' allowfullscreen='true'></embed></object> To get a glimpse into the commitment and leverage that <a href="http://www.nyse.com/about/listed/wmt.html" target="_blank">Wal-Mart Stores Inc.</a> (WMT) brings to bear on the issue of sustainability and the green movement, it helps to start with something as mundane as laundry detergent. In 2007 the company mandated that every brand of liquid detergent carried in its Walmart and Sam’s Club stores across the U.S. be in concentrated form. For the laundry-challenged among us, the concentrated formula simply means it takes less detergent to wash the same amount of clothes. So what used to come in a 100-ounce bottle now requires only a 32-ounce bottle. But for Walmart, says Matt Kistler, senior vice president of sustainability, concentrated liquid laundry detergent was a litmus test. “It allowed us to challenge our suppliers,” which include consumer goods giants such as <a href="http://www.nyse.com/about/listed/pg.html" target="_blank">The Procter & Gamble Co.</a> (PG) and <a href="http://www.nyse.com/about/listed/ul.html" target="_blank">Unilever PLC</a> (UL), he explains. “We started to ask them, What can you do differently with your packaging to make it smaller? How can you change the way you make your products so that it’s good for the bottom line and good for the environment?” The smaller bottles are produced using less plastic resin, Kistler says, and the amount of cardboard needed to make the boxes those bottles are shipped in is also reduced. Kistler, who worked at <a href="http://www.nyse.com/about/listed/kft.html" target="_blank">Kraft Foods Inc.</a> (KFT) before joining Walmart in 2003, says other big suppliers are making changes too. The retailer’s top-tier consumer packaged goods vendors in the U.S. and abroad, about 100 suppliers in all, are now working on reducing or even eliminating packaging across a variety of products, including groceries, personal-care products and household items. “I don’t want to say we’re the sole reason,” Kistler adds modestly, “but I would say we’ve been a bit of a force behind the packaging innovation movement.” <BLOCKQUOTE> The world’s largest retailer plans to help customers understand the meaning of sustainability by developing eco-labels for every product it carries.</BLOCKQUOTE> To say that Walmart is “a bit of a force” in any aspect of retailing is a little like saying a tsunami is a bit of a wave. The company says it is the world’s largest retailer, with 2008 revenues of about $400 billion; the reported combined revenues for the same period from <a href="http://www.nyse.com/about/listed/kft.html" target="_blank">Dillard’s Inc.</a> (DDS), <a href="http://www.nyse.com/about/listed/jcp.html" target="_blank">J.C. Penney Co. Inc.</a> (JCP), <a href="http://www.nyse.com/about/listed/kss.html" target="_blank">Kohl’s Corp.</a> (KSS), <a href="http://www.nyse.com/about/listed/m.html" target="_blank">Macy’s Inc.</a> (M), <a href="http://www.nyse.com/about/listed/jwn.html" target="_blank">Nordstrom Inc.</a> (JWN), Sears Holdings Corp. and <a href="http://www.nyse.com/about/listed/tgt.html" target="_blank">Target Corp.</a> (TGT) are less than half that. Walmart operates 8,159 stores under 55 different names in 15 countries and employs more than 2 million people — or “associates,” in Walmart parlance — worldwide, according to the company. As it puts sustainability programs in place, observers say, its sheer size and leverage will compel suppliers — and competitors — to step up their own green efforts or risk being left behind. <BLOCKQUOTE> <h2>MORE ON WALMART</h2> <a href="walmartconsortium" target="_self" class="actionlink">Sustainability Consortium</a> <a href="walmartsurvey" target="_self" class="actionlink">15 Questions</a> </BLOCKQUOTE> “When Walmart mandated that its suppliers switch to concentrated laundry detergent, it forced everyone in the industry to embrace it,” says Neil Stern, senior partner at McMillanDoolittle LLP, a Chicago-based retail consulting firm, and co-author of Greentailing and Other Revolutions in Retail. “Because of their size and clout, they’re able to focus on sustainability issues with their suppliers, and it winds up actually meaning something.” Indeed, Walmart estimates that since the move to selling only concentrated detergents in its stores two years ago, it has saved more than 80 million pounds of plastic resin, preserved more than 430 million gallons of water and reduced the need for cardboard by about 125 million pounds. When it was unveiled by former CEO Lee Scott in 2005, Walmart’s sustainability initiative aimed to accomplish three things, Kistler says: ensure that the company is supplied with 100 percent renewable energy, that it creates zero waste and that its stores around the globe sell sustainable products. To accomplish this last goal, current CEO Mike Duke in July announced an ambitious plan to help develop a worldwide sustainability index. For consumers, the index would provide some sort of label or tag with simple, easy-to-understand information about just how eco-friendly a product really is. So far the creation of the index has been seen by sustainability experts and suppliers as admirable — and quite complex. “A fantastic idea but incredibly difficult to execute,” is how Stern characterizes it. Yet the consensus seems to be that “if anyone can pull this index off successfully, it’s Walmart,” adds Stern. “They have the leverage and the credibility.” Such talk is music to the ears of Walmart CFO Thomas Schoewe. “Our culture is the most important differentiator we have,” he says. “When we embrace a goal, we will make it happen.” <PAGEBREAK> <div class="articleImg" style="width: 382px"><img src="/statics/Q10_Top_Stories_Walmart_trees1__382x280_TS.jpg" alt="" />John Manno</div> Walmart’s creation of the sustainability index comes at a time when a growing number of consumers want to know that the products they buy and use are made in ways that cause minimal harm to the environment. And the financial crisis that walloped shoppers over the past year hasn’t dampened those concerns. According to Stern, a McMillanDoolittle survey of 1,600 consumers in November 2008 showed that despite the economic downturn, green continues to grow in importance to consumers. In fact, when asked to comment on retailers that recycle or operate their stores in a way that saves energy, eight out of 10 shoppers said it was “very important” or “important.” <BLOCKQUOTE> Eight out of 10 shoppers said that it was “very  important” or “important” that retailers recycle or operate their stores in ways that save energy. </BLOCKQUOTE> Equally clear is that consumers don’t expect eco-friendly goods to cost more. When asked how much more they would be willing to pay for green products, 70 percent said either nothing or just 5 percent, according to Stern. “It falls squarely on the backs of suppliers to figure out how to make products sustainable and affordable,” he says. “Consumers want green products, but they’re not going to pay more to get them.” For giant Walmart suppliers such as P&G, the message is unmistakable. “The consumer is boss, so if sustainability is important to the consumer, it’s important to us,” says Len Sauers, P&G’s vice president of global sustainability. “The vast majority of consumers want to do the right thing environmentally, but they’re not willing to accept a tradeoff in performance or value. So our focus is on ‘no tradeoff’ innovations that allow us to do that.” Before it presented suppliers with the challenge of the sustainability index, Walmart looked inward, says Kistler. “We began looking at our own buildings to see the things we could do differently and our own fleet of trucks to see the changes we could make,” he says. Adds CFO Schoewe: “We hold ourselves every bit as responsible to sustainability as we do our suppliers.” The reason for that is simple, he explains. “Taking waste out of our system — in other words, being more sustainable in how we do things — reinforces the company’s business model: everyday low prices,” he says. “And to have everyday low prices, you need everyday low costs.” <BLOCKQUOTE> <h2>MORE ON WALMART</h2> <a href="walmartconsortium" target="_self" class="actionlink">Sustainability Consortium</a> <a href="walmartsurvey" target="_self" class="actionlink">15 Questions</a> </BLOCKQUOTE> The company reports that it is committed to selling locally grown produce, since it cuts down on the distance the food has to travel between farm and store. It also says it aims to cut back its plastic-shopping-bag waste by an average of 33 percent per store worldwide by 2013. And the retailer says it is mandating that manufacturers of the flat-screen TVs it carries make them 30 percent more energy efficient by 2010. To help meet its goal of being supplied entirely by renewable energy, the company says it is changing the way new Walmart and Sam’s Club stores are lit. More than 95 percent of newly constructed buildings now have a daylight-harvesting system, the retailer says. By installing more efficient lighting, such as computer-controlled daylight sensors, electronic dimmers and skylights, Walmart reports, it takes advantage of natural daylight. Such a strategy can mean a reduction of up to 75 percent of the electric-lighting energy used in a store during the daytime, the company says — saving enough energy in a year to power 73 single-family homes. New Walmart and Sam’s Club stores will also have exposed concrete floors, according to the company, eliminating the need for most chemical cleaners, wax strippers and propane-powered buffing machines. <BLOCKQUOTE> “If we want sales to grow 5 percent annually, we’d  like profits to grow 6 percent or more,” says  Schoewe. “Sustainability is one way to achieve that.” </BLOCKQUOTE> “Once everyone in the company understood the mission,” says Schoewe, “we knew they would find ways to make sustainability a reality in their particular area. This isn’t a program with a beginning and an end. It’s a continuous way of improving things for our customers, associates and shareholders.” The message to this last constituency is especially critical, says Schoewe. “We’ve told shareholders we want to grow profits faster than we grow sales,” the CFO says. “If we want sales to grow 5 percent annually, then we’d like profits to grow 6 percent or more. Sustainability is one of the ways to achieve that.” <PAGEBREAK> To see that commitment in action today, look no farther than Walmart’s sprawling fleet of trucks. In the past, explains Schoewe, when drivers were on breaks, they had to idle their tractors to maintain the cabin temperature and run the communications systems. With the mandate of sustainability front and center, Walmart’s fleet maintenance crew began looking for a better way. By purchasing auxiliary power units, the retailer could control a tractor’s climate when not in use and save millions of gallons of diesel fuel every year. “Did we have to spend money on the auxiliary power units?” asks Schoewe. “Yes, we did. The environmental and financial payback from not burning all that diesel fuel was enormous. We’re still delivering the same number of units in those trucks, but the cost of running our fleet went way down, and that improved our profits.” Yet even as the green success stories continued to multiply inside Walmart, an unavoidable truth began to emerge, says Kistler. “We realized that addressing our buildings and our fleet, while important, was impacting only about 8 percent of the sustainability equation,” he says. “By far the larger part — 92 percent — was going to come from the supply chain.” <h2>The Next Phase</h2> The laundry detergent initiative in 2007 gave the retailer proof that its efforts with suppliers could make a difference, Kistler notes. But as the company’s senior management and sustainability executives looked more closely at the role its suppliers could play in the green movement, they realized packaging was just one piece of the puzzle, he says. In a July 2009 meeting at Walmart headquarters with about 1,500 employees and suppliers, CEO Duke told the crowd that “the most difficult challenge has been to measure the sustainability of our products.” The chief then laid out the groundwork for what he described as a “major new initiative that can lower costs, raise quality and bring customers the products they need to save money and live better in the 21st century.” Thus was born the sustainability index. With this undertaking, Kistler explains, Walmart is helping to create a single source of data for evaluating how green a product is. The initiative is being rolled out in three phases, the first of which is a survey of the retailer’s 100,000 suppliers around the world. The survey has 15 questions and focuses on four areas: energy and climate; material efficiency; natural resources; and people and community. The questions aren’t complicated, Kistler says, but they go a long way in helping Walmart get a sense of where all its suppliers stand on their own green initiatives. The vast majority of Walmart’s top-tier U.S. suppliers completed the survey in October; other suppliers, including those outside the U.S., will complete it in the coming months. The second phase of the index — and the most complex, say experts — is to develop a uniform method to measure sustainability and then have it make sense to suppliers, retailers and consumers. To accomplish this, says Kistler, Walmart created a sustainability consortium consisting of universities, government agencies, nongovernmental organizations, suppliers and other retailers to develop a global database of information on the life cycle of products — everything from the raw materials used to create them to the ways in which they’re disposed. Kistler says it’s too early to determine whether the sustainability index information — which probably won’t be available for consumers until 2011 at the earliest — will be shown on a product tag or label or by some other method. “Is it a color rating or a number rating? We don’t know yet,” he says, throwing open the possibility that the information could even be conveyed to consumers via an application on a smart device. Also fuzzy at this point is how Walmart will eventually hand over the governance of the index to some other entity, whether a government agency or an NGO. “That’s still to be determined,” Kistler says. What is certain, he states, is Walmart’s commitment to sustainability and the index. “Will we always want to have a seat at the table, even when this moves beyond us?” he asks. “Absolutely.” Given the gargantuan role that Walmart plays in consumer spending around the world, there’s little doubt that its seat will be at the head of the table. <BLOCKQUOTE> <h2>MORE ON WALMART</h2> <a href="walmartconsortium" target="_self" class="actionlink">Sustainability Consortium</a> <a href="walmartsurvey" target="_self" class="actionlink">15 Questions</a> </BLOCKQUOTE>

2010-01-09T15:21:08-06:00

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1Q 2010

Walmart: A Green Leader

2010-01-25T00:00:00-06:00

The mega retailer is helping its customers make eco-conscious decisions.

Walmart, sustainability,

walmart

2010-01-19

Walmart

The mega retailer is helping its customers make eco-conscious decisions.

328

Walmart: A Green Leader

2010-01-29T12:28:18-06:00

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