Green Leader
Green Business
By William Sarni   
Friday, 21 December 2007
Wal-Mart, Green business
Wal-Mart’s sustainability program has significant implications for its customers, employees and suppliers around the world

Who would have thought even five years ago that Wal-Mart, the world's largest corporation, would turn into the Pied Piper of sustainable business? The retail giant's sustainability program has quickly evolved from "just another corporate green initiative" to a high-impact, industry-wide movement with significant implications for its employees, customers and suppliers around the world.

Critics initially dismissed Wal-Mart's green makeover, saying, "This is a fad" or "This won't last." Yet despite a recent slowdown in its expansion rate, the company has continued to aggressively pursue its sustainability goals. Why? Because Wal-Mart executives have proven beyond a doubt that sustainability is good for top-line growth and the bottom line.

Several weeks ago, I attended Wal-Mart's "Live Better Sustainability Summit," where President and CEO Lee Scott spoke at length about the company's commitment to sustainability. What struck me was this: Far from capitalizing on a newfangled trend, Wal-Mart's sustainability initiative, in fact, perfectly aligns with the company's long-held strategy, vision and values. Here's how the greening of Wal-Mart, from stores to suppliers, represents both a blast from the past and a strategic way forward for the world's largest corporation - and why you should be paying close attention.


Sam Walton's Rules of Engagement
Wal-Mart founder Sam Walton operated by three guiding principles that still provide valuable insight into the company's culture and why going green makes sense. The principles are:

  •  Respect the individual
  •  Service to the customers
  •  Strive for excellence

Putting these three principles into practice will always motivate a company to be timely and cutting-edge, because it means the company is paying attention to what the customer wants and acting upon that need in the best way possible. It requires a company to be in an active state, not a reactive or stationary state. It requires a company to be on its toes. (And Wal-Mart is certainly on its toes: Once a week, Scott makes an unannounced visit to a store location in any of the 14 countries in which the company operates, to observe for himself how Wal-Mart's core principles are being executed and lived.)

Sustainable business practices are a sign of engagement with and respect for customers and employees alike. When consumers asked for low-cost green products and organic foods, Wal-Mart began stocking them. And the Wal-Mart associates I met at the Live Better Sustainability Summit were genuinely excited about participating in the company's Personal Sustainability Practice (PSP) program, which encourages employees to make one or two lifestyle changes that have a positive impact on society. Using sustainability to improve the well-being of its associates and the communities in which Wal-Mart operates is simply a new approach to the company's core values.


Measuring and Managing Upstream
Like any successful business, Wal-Mart is always thinking strategically about ways to reduce operating costs. The company is now focused on reducing energy, water, and material costs, and mapping out key goals and performance metrics for its stores and suppliers to reduce the environmental footprint of their operations.

Wal-Mart's sustainability goals are:

  •  To be supplied 100 percent by renewable energy
  •  Existing stores are to be 25 percent more efficient in seven years
  •  New stores are to be 30 percent more efficient in four years
  •  To create zero waste
  •  To have a 25 percent reduction in solid waste in three years
  •  All private brand packaging will improved in two years
  •  To sell products that sustain resources and the environment
  •  To have 20 percent of its supply base aligned in three years
  •  Design and support a Green Company program in China


Wal-Mart is also innovating in-store design Pilot stores in Colorado and Texas that incorporate a range of green building and alternative energy practices. These measures both reduce operating expenses and also seem to be improving the customer experience. The company is finding that a retail environment that features natural lighting and green building materials results in a more enjoyable experience than, say, shopping in a warehouse environment.

Yet, despite significant success in reducing its own environmental footprint, Wal-Mart understands that its largest impact comes from the more than 60,000 businesses that supply it with products and services. Due to its extraordinary size and clout, the company has been able to implement sustainability policies for suppliers that amount to de facto global environmental regulations designed to change behavior and resource-use patterns.

In addition to its environmental benefits, convincing suppliers to reduce energy use, carbon footprints and packaging materials helps lower product costs and eliminate inefficiencies from the company's supply chain. By passing along savings from various sustainability initiatives to Wal-Mart, suppliers are playing an increasingly important role in helping the company to reduce prices and guarantee its "low cost every day" customer policy.

Wal-Mart's Sustainable Value Networks (SVNs) are designed to identify and implement solutions to reduce the environmental footprint of the Wal-Mart global operation and suppliers. SVNs established by Wal-Mart are:

  •  Renewable energy network
  •  Waste reduction network
  •  Sustainable product network

If you happen to work for one of the tens of thousands of companies in Wal-Mart's supply chain, then you surely have a sense of the changes you need to make in your business operations in order to keep Wal-Mart as your valued customer.

Building a Better Brand
Driving intangible value, another key element of any long-term corporate strategy, is a complementary benefit of Wal-Mart's sustainability efforts. Wal-Mart is steadily building its intangible value by effectively engaging with employees, non-governmental organizations (NGOs), government and communities. Here are just two examples:

  •  Employees - Here we must go back to Wal-Mart's impressive PSP program for associates. Success stories include associates who have quit smoking, walk to work, etc. Why is this important for Wal-Mart? Because improving the quality of life and health of employees, in addition to being a generally good thing, also reduces absenteeism, increases employee satisfaction and morale, and lowers employee turnover.
  •  NGOs - In September, Wal-Mart teamed with the Carbon Disclosure Project to measure and manage the amount of energy its product suppliers use in manufacturing. Two months later, the company partnered with the Clinton Climate Initiative (CCI) in an effort to reduce the cost of sustainable technologies. This practice of public-private partnerships is becoming increasingly common as more organizations recognize the benefits of co-branding.

Lee Scott says he is a proponent of the ability of business, labor, the private sector and local government to work together to activate positive changes that governments may not be able to mandate due to political constraints. Why? In announcing the CCI partnership, he remarked that "by combining our resources, we can help drive innovation, create new technology markets and ultimately reduce this country's dependence on foreign oil." This kind of talk is great for the company's image, which has taken some hits over the years. In fact, a recent study by the research firm Covalence found that sustainability initiatives by market leaders like Wal-Mart and Marks & Spencer boosted the ethical reputation of the entire retail sector in 2007.


The Bottom Line
In an August 2006 interview with PBS's Charlie Rose, Scott got to the root of Wal-Mart's sustainability drive, saying, "We as a company have to develop the skills to operate in a more complex world." Wal-Mart recognizes that the rules of business are changing. Key drivers such as greater stakeholder engagement, increased demands for transparency, resource constraints (energy and water, for example), and the trend toward responsible investing all represent new risks and opportunities for business.

Alignment with company strategy and values has always been a key aspect of capturing and building value from any new initiative. Wal-Mart is leading the green pack by making a clear connection between sustainability, its core company values and building competitive advantage. If Wal-Mart -- the largest corporation on the planet -- is making this connection, shouldn't you?

William Sarni is a founder and CEO of DOMANI Sustainability Consulting LLC, with 30 years of environmental consulting experience. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
 
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