Walmart, I hate to love you!

One of the most polemic businesses in the world, Walmart is loved by consumers with limited budget, hated and feared by small business and seen as indispensable by many industries that sell almost their entire inventory to the company. Now, Walmart is engaging is environment-friendly initiatives. Are you skeptical about it?

Think twice

I’m sure many of you have the same perception about Walmart: a place where one can buy my almost everything at a low price yet a ruthless greedy company known for its polemic practices.

However, think twice. Walmart might not be the first company that acted on climate change, but it was definitely the one that had the most impact on the whole retail industry. Back in 1990, the company pushed its suppliers to eliminate the paperboard box that used to packed deodorants [1]. It added nothing to the customer experience and, therefore, was an unnecessary cost: it occupied shelf space, increased shipping fuel costs and costed money to produce. The impact was immediate: not only suppliers eliminate the unuseful box for Walmart, but they also did so to the entire industry. Result: millions of trees were not cut down, billions of deodorant boxes didn’t end up in landfills. Thanks to who? Yep, Walmart!


Beyond deodorants

In 2008, Walmart’s CEO and President Lee Scott, delivered a famous speech addressing his personal commitment for shaping “the company of the future” [2], taking the opportunity to explore some of the company milestones on sustainability. Back in 2005, Walmart embraced environmental practices as a way to improve the company bottom line and reputation [3].

Walmart committed to several long-term goals such as running its operations solely on renewable energy, creating zero waste and selling products that sustain the earth’s resources and environment [3].

True, you can argue that Walmart’s honest motivations weren’t our planet well-being, but the shareholders’ money: the sustainability efforts have saved millions of dollars to the company. However, it also forced suppliers like General Electric and Procter & Gamble to transform their own business practices [4]. Walmart push for fluorescent bulbs (use up to 75% less electricity than incandescent bulbs) resulted in more than 100 million units sold only in 2007. For GE, selling a bulb that lasts longer means fewer sold. But which company will dare to lose Walmart as a customer? GE had no other alternative other than increase production of fluorescent bulbs [5]. And this created a snowball effect that culminated in more Americans adopting incandescent bulbs, reducing overall emissions.

Procter & Gamble was Walmart next target: it announced an initiative to cut the bottle size of liquid laundry detergent by reducing in 25% its amount of water. The result: concentrated liquid laundry detergent saved more than 400 million gallons of water, 95 million pounds of plastic resin, 125 million pounds of cardboard and 520,000 gallons of diesel fuel over three years [6].

Walmart seemed to have nailed the concept: the herculean company pushed prescription drugs manufacturers to reduce in 50% its products packaging and increased its fleet fuel efficiency by 25% changing the design of its trucks and optimizing how trailers are loaded and filled [7].

 

 

Walmart, I know you can do better

Fact is, Walmart started with the right foot: 26% of its electricity is supplied by renewable energy, 38% in plastic bag waste reduction (this actually represents 10 billion bags annual reduction!) and pressure to suppliers to adopt an increasing amount of recycled content, both in products and packaging [8][9].

Impressive, no? Well, not really. The company deserves recognition for its initiatives, but let’s add a little of context. Other companies have done better, using even more renewable energy for its operations. Google, for example, uses renewable energy to power 37% of its operations. For its zero waste goal, Walmart is facing one of its main challenges: waste recycling costs the company money to dispose, manage and sort. For some material streams, however, it is simply cheaper to toss it. Walmart must engage in finding cost-effective recycling solutions, in especial to hard-to-recycle materials. The company appetite to pay extra to do the right thing should outset its short-term financial goals. This, indeed, is the real challenge the company is facing: how far its commitment to be being sustainable is reachable when the always low prices is the company untouchable karma?

Finally, for the waste reduction commitment, Walmart ought to do more than just pushing suppliers to be more eco-friendly [10]. Walmart should better communicate sustainable products to its customers as well as employ a more intense promotion campaign on greener products to stimulate buyers’ consumption/awareness. The company did launch a web page to identify products from sustainable companies [10], however with a limited scope and a questionable company selection criterion: selection based on overall Walmart’s Sustainability Index in each of several product categories, rather than on the products themselves.

(Word Count: 758)

 

References:

[1] Fishman, C. “The Wal-Mart Effect”, Penguin Books (2006)

[2] Remarks as Prepared for Lee Scott CEO and President of Wal-Mart Stores, Inc., “The Company of the Future” (2008). http://graphics8.nytimes.com/packages/pdf/business/HLSLeadership.pdf

[3] “Is Wal-Mart going green?” (2005). http://www.nbcnews.com/id/9815727/#.WBqQ0-ErKRs

[4] Rosenbloom, S. and Barbaro M. (2009). “Green-Light Specials, Now at Wal-Mart”. http://www.nytimes.com/2009/01/25/business/25walmart.html

[5] Herz E. and Moore M. “How Wal-Mart promoted more-efficient light bulbs” (2014). https://www.washingtonpost.com/business/how-wal-mart-promoted-more-efficient-light-bulbs/2014/07/02/fc0edefa-0067-11e4-b8ff-89afd3fad6bd_story.html

[6] Ziobrio, P. (2014). “How Wal-Mart May Give Detergent Overdosing – And Sales – A Boost”. http://blogs.wsj.com/corporate-intelligence/2014/04/30/how-wal-mart-may-give-detergent-overdosing-and-sales-a-boost/

[7] Makower, J. (2015). “Walmart sustainability at 10: An assessment”. https://www.greenbiz.com/article/walmart-sustainability-10-assessment

[8] “Wal-Mart’s Green Initiative: Status Report” (2014). http://www.wsj.com/articles/SB10001424052702304432604579473453226974252

[9] Walmart, “Sustainability”. http://corporate.walmart.com/global-responsibility/sustainability/ (accessed November, 2016)

[10] Walmart, “Twenty First Century Leadership”. http://news.walmart.com/executive-viewpoints/twenty-first-century-leadership (accessed November, 2016)

 

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5 thoughts on “Walmart, I hate to love you!

  1. Thanks for the post, very interesting read! During the IKEA case, we talked a lot about how companies goal on financial returns can be aligned with environmental sustainability, as cutting cost and ensuring high quality standards are critical for the long-term development of companies. Walmart is in the traditional retail industry which plays volume game with low margin (i.e. 2015 net margin is >3%). Also given its dominant market share in the US retail industry, it is hard to further increase market share. Thus, the most viable solution is to cut cost, and it seems that Walmart is doing an excellent job at leveraging its bargaining power to the upstream suppliers to promote product innovation on environment protections. Regarding on whether the company should do more, I do believe in the market economy that if there are enough incentives for the companies, they will go ahead and implement those changes. To me, the proposed solutions to Walmart need to really address the core issue that the company is facing, which to me is cost-cutting.

  2. The question of how Walmart should message its sustainability efforts to consumers is interesting. How does Walmart view the risk of consumers thinking of a sustainable product as either higher cost or lower quality, and how is this challenge different for a mass channel retailer like Walmart vs a mid-tier or premium brand. Given the sophistication of their business, I imagine that they have done considerable consumer research to test and optimize their messaging and have decided not to broadly promote their efforts. Another potential driver for this relative inaction is that more self-publicity could draw incremental scrutiny from environmental activists (or even regulators) which would not be in the best interest of their bottom line.

  3. Given the size of the business I would argue that Kohls and Whole Foods are not an accurate comparison. In fact Walmart is the largest purchaser of solar energy and a top partner of the EPA programs on renewable energy.
    See below links:

    “Walmart once again took the top spot among America’s businesses in the electric generation capacity of its solar investments and number of solar projects. The big box retailer, based in Bentonville, Ark., boasts a robust 142 megawatts (MW) of solar photovoltaic (PV) capacity and has completed 348 installations”.

    Source: http://www.seia.org/research-resources/solar-means-business-2015-top-us-corporate-solar-users
    Source: http://corporate.walmart.com/_news_/news-archive/2012/01/31/walmart-no-2-on-epas-top-20-retail-list-of-green-power-purchases-in-two-biggest-states

    Interestingly Walmart has led perhaps the most on its waste reduction efforts and has diverted 82% of its waste from landfills.
    They have donated huge amounts of food that would have been thrown away to Feeding America and worked with the industry to drive innovation.

    “Together with Sodexho and Feeding America, Walmart has been working with ReFED, a collaboration of more than 30 business, nonprofit and government leaders, that are committed to cutting U.S. food waste by as much as half by 2030.”

    Source: http://www.greenretaildecisions.com/news/2016/03/23/walmart-expands-waste-reduction-program

    With its leadership, scale, and experience implementing sustainability initiatives throughout its global operations I agree Walmart can do more. The past several years have been a lull in announcing new goals. This past weekend however, Walmart recently announced updated goals for sustainability.

    “Specifically, the world’s largest retailer is committing to, by 2025:
    – achieve zero waste to landfill in Canada, Japan, U.K and the U.S.
    – be powered by 50 percent renewable energy sources under a plan designed to achieve science-based targets
    – double sales of locally grown produce
    – expand sustainable sourcing to cover 20 key commodities, including bananas, grapes, coffee and tea
    – use 100 percent recyclable packaging for all private-label brands”
    Source: https://www.greenbiz.com/article/inside-walmarts-2025-sustainability-goals

    These goals are more specific and measurable than their original aspirational goals in 2005. The company from its first 10 years of sustainability programs now is more focused on where the major impact are in its supply chains and where it is positioned to move the needle.
    One could argue that they are too narrow, however I hope this focus causes them to make significant and deep changes especially in the product categories they mentioned. In the past their approach to rate all products it sold caused a massive scientific exercise which resulted in disappointing end results in terms of on shelf customer communication (sustainability index)

    We should continue to expect high standards from this company even as their leadership team changes and it competes to catch up online.
    Millennials care more than previous generations about these standards and thus to stay relevant Walmart must continue to evolve and lead in this arena.

  4. Great post – the influence that Walmart has in the marketplace is truly remarkable. It’s really interesting to see that despite the success they’ve had upstream in the value chain, that they’ve done relatively little to influence consumer behavior. Since many of these products shift consumer’s value savings from today to tomorrow (e.g., LED light bulbs) – I wonder if increased consumer education will translate to a louder voice from Walmart in the future, and if they take a prominent role in educating consumers.

  5. Great title. They have been very influential in the working with their suppliers. I tend to think that the suppliers find the improvements to be better for them as well, so they make the changes. For companies to continue to have influence, they will need to continue to have win/win ideas that improve all parties involved.

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