Is Walmart doing enough when it comes to sustainability?
Nowadays it seems as though every management team out there is desperately trying to prove to environmentally conscious customers that their business is ecologically friendly. As the largest retailer in North America, does Walmart’s claim of sustainability in its annual Global Responsibility Report really live up to its self-proclaimed billing?
Climate change’s impact on Walmart’s business model
As the issues of climate change exacerbate, Walmart will have to face major challenges in order to sustain its business model. As rising temperatures threaten the supply of key commodities in the agricultural sector, Walmart will be severely challenged to maintain its grocery business. This is a material threat as Walmart’s grocery segment represents 56% of the company’s net sales as of FY 2016 . Some of the selected major items in Walmart’s Grocery segment include: meat, produce, natural & organics, dairy, etc. – categories that will clearly be impacted by the reduced agricultural output. As temperatures rise, crop yields in US Midwest and Southern regions will be at significant risk without farming innovation. Some of these areas could see a decline in yield of more than 10% over the next 5 to 25 years in corn, wheat, soy and cotton . Further compounding the issue is the threat of water availability. Agriculture takes up far more of the world’s water supply than any other industry with 70% of global freshwater usage . Water scarcity results in further reduced agricultural output and increased input costs.
The coupled impact of reduced agriculture yield and decreased worldwide water supply will drive up prices of crops and related industries such as meat and dairy. This will force companies like Walmart to face unpredictable supply of agriculture/produce products as well as increased costs from key suppliers. It will be very difficult for Walmart to maintain its strategy of “everyday low price” and will either have to cut into profit margins or pass the increased commodity prices along to the consumer.
Walmart and sustainability
In 2005, after facing increasing external pressure, Walmart’s then-CEO Lee Scott launched the company’s sustainability program, pledging to shift to 100% renewable power and become a leader on sustainability . In order to address these issues of increasing commodity costs, as per its Global Responsibility Report, Walmart is implementing the following initiatives to address the sustainability of its global supply chain in figure 1 :
It is difficult to see any real benefits or opportunities for Walmart to take advantage of when it comes to the issue of sustainability. Although it is possible for Walmart to generate some positive public relations buzz by appearing to lead in sustainability efforts amongst its peers, it would likely have to come at the detriment of the company’s business model and profitability. Furthermore, one can be skeptical of the retail giant’s true commitment to these virtues as it relates to profit (i.e. will they really follow through buying produce from organic/sustainable growers at the expense of margin).
According to the Institute for Local Self Reliance (ILSR), Walmart has fallen short of its sustainability claims in key areas. Despite a decade years of promoting its renewable energy initiatives, in 2016, Walmart derived only 25% of the electricity it used from its renewable power purchases and solar power projects . Meanwhile some of Walmart’s competitors such as Kohl’s and Whole Foods have already fully converted to renewable power. And although Walmart claims that it has significantly reduced carbon emissions by 20 million metric tons in 2015, its figures of greenhouse gas emissions exclude the pollution generated by its massive shipping operations . With that said, Walmart should receive some credit for the initiatives it has followed through with. For instance, Walmart has made significant progress in its zero-waste initiative by successfully diverting from landfills 82% of materials previously considered waste from Walmart US, and Walmart also achieved its goal of doubling its US fleet efficiency by 2015 resulting in $1 billion in annual savings and avoiding 650,000 metric tons of C02 .
Walmart probably can do more to help the environment and better position itself in a world of climate related rising costs, but it should receive some credit for setting goals to build a sustainable model. But what Walmart should do is remain vigilant in its quest to become sustainable (it should try to be 100% supplied by renewable energy by 2022) and continue to use its power as a global leader to support the reduction of emissions in its product supply chain. As a global business leader, Walmart can have a huge impact and should therefore be held to high standards of sustainability.
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 Walmart. FY 2016 Annual Report, p 8. [http://d1lge852tjjqow.cloudfront.net/CIK-0000104169/46c5c2e3-666c-4865-b437-eb351ae5dbfe.pdf], accessed November 2016.
 Riskybusiness.org, “National Report: The Economic Risks of Climate Change in the United States,” [http://riskybusiness.org/report/national/], accessed November 2016.
 UNEP, “GEO-5 for Business: Impacts of a Changing Environment on the Corporate Sector,” [http://web.unep.org/geo/sites/unep.org.geo/files/documents/geo5_for_business.pdf], accessed November 2016.
 Stacy Mitchell, “The Truth Behind Walmart’s Green Claims,” The Huffington Post Blog, April 1, 2014, [http://www.huffingtonpost.com/stacy-mitchell/walmart-climate-change_b_5063035.html], accessed November 2016.
 Walmart, FY 2016 Global Responsibility Report, p. 12, [http://corporate.walmart.com/2016grr], accessed November 2016.
 Institute for Local Self-Reliance, “Top 10 Ways Walmart Fails on Sustainability,” [http://ilsr.org/wp-content/uploads/2012/04/topten-walmartsustainability.pdf], accessed November 2016.
 Stacy Mitchell and Walter Wuthmann, “Walmart Spews a Huge Amount of Climate Pollution with Its Shipping, but Doesn’t Report Any of It,” Institute for Local Self-Reliance Blog, June 3, 2015, [https://ilsr.org/walmart-shipping-climate-pollution/], accessed November 2016.
 Walmart, FY 2016 Global Responsibility Report, p. 59, [http://cdn.corporate.walmart.com/9c/73/3f9abcef444397f2c771e081e095/2016-global-responsibility-report.pdf], accessed November 2016.