Wal-Mart – A Case Study in Sustainability

 20 March 2014

 

This is the third in an on-going series of essays on how some well known companies are addressing Sustainability. Wal-Mart isn’t usually recognized as a Sustainability leader. However, over the last several months, there has been a barrage of reports on Green initiatives at Wal-Mart. Several of those initiatives are relevant to their suppliers and, by extension, to manufacturers in general.


The Power of Influence


Wal-Mart is #1 on the 2013 Fortune 500 listing of America’s largest companies, with sales of $469 billion. Wal-Mart operates about 11,000 stores globally and coordinates a supply chain sufficient to service them all. That means some very large number of suppliers (and their suppliers, and their suppliers, and …) value Wal-Mart’s business. Sheer scale is Wal-Mart’s thing, so what Wal-Mart does internally toward Sustainability matters. And what Wal-Mart does through influence with its suppliers matters at least as much.


It is important to keep in mind that Wal-Mart takes a pragmatic, rather than ideological approach to Sustainability. That is, Sustainability is good business that reduces costs and promotes sales. As Wal-Mart puts it:

Walmart on Sustainability

Global Responsibility Report


Wal-Mart speaks of Sustainability in the zoomed out context of that which Wal-Mart sees as their global responsibilities. Wal-Mart’s 2013 Global Responsibility Report [1]covers environmental (planet) and social (people) initiatives. Wal-Mart’s 2013 profit of almost $17 billion says the third of Sustainability’s three “p”s is in pretty good shape.


Several of Wal-Mart’s initiatives are of particular interest to manufacturers:


>> Trucking: Wal-Mart has set an objective to double their transport fleet fuel efficiency (from 2005 levels) by October 2015. They have achieved an 80% improvement through 2012. In 2005, a typical big truck rolled about 5 miles on a gallon of diesel fuel. An 80% improvement equates to about a 9 miles per gallon. Walmart WAVE truckThat’s a lot of diesel fuel and a big pile of money.


Wal-Mart is so serious about transport costs that they designed and produced a radically high tech prototype carbon fiber truck. The WAVE (Wal-Mart Advanced Vehicle Experience) is powered by a turbine / electric drive. The WAVE is 20% more aerodynamic and 4,000 pounds lighter than ordinary 53 foot rigs. Performance testing has just begun.[2]


Lower transport costs benefit everybody.


>> Waste: Wal-Mart has set an objective to eliminate waste to landfill from all locations by 2025. Through 2012, they have reduced waste to landfill by about 79% from where they started, not withstanding continuing increases in number of stores and sales per store.


Somebody pays for everything that goes to landfill. Somebody pays the freight in on it. Somebody pays to haul it to the landfill. If Wal-Mart can make big reductions in waste to landfill, why not everybody?


>> Plastic Packaging: Wal-Mart has just launched a new initiative to increase post consumer recycled content in plastic packaging by three billion pounds. Wal-Mart produces little, if any packaging. But their suppliers use plenty of packaging for the goods they ship to Wal-Mart.[3]


A three billion pound bump in post consumer recycled material demand will dramatically affect plastic recyclers and plastic packing materials producers.


>> Commitment to U.S. Manufacturing: Wal-Mart’s target market is middle class consumers. Wal-Mart is quite aware of the effect that the decline in employment in American manufacturing over the last several decades on the middle class and its purchasing power. Wal-Mart is also aware, I am sure, of the heat they have taken over selling huge numbers of imported goods.


To help address this, Wal-Mart has announced that they will purchase an additional $50 billion in American goods over next 10 years. Additionally, Wal-Mart announced a $10 million program of cash grants to support innovation in manufacturing.


Both of these actions are of obvious benefit to American manufacturers.


>> Product Toxicity: Wal-Mart recently announced an aggressive program that requires suppliers to remove potentially toxic materials from formulated consumer products sold at Wal-Mart. “Formulated consumer products” means chemically intensive products such as health and beauty aids, cosmetics, baby care products and cleaning agents.


This program requires that producers reduce, restrict and eliminate any ingredient that “meets the criteria for classification as a carcinogen, mutagen, reproductive toxin, or is persistent, bioaccumulative, and toxic; or any chemical for which there is scientific evidence of probable serious effects to human health or the environment which gives rise to an equivalent level of concern”.[4]


This sounds like a no-brainer. However, conscious product formulators are already aware of toxicity, federal (FDA) regulation and product liability. They also recognize that reformulating products can have unintended effects that the producer, the customer or Wal-Mart may not like. On the other hand, there are already toxicity regulations, such as the European Union’s REACH (Registration, Evaluation, Authorization and Restriction of Chemicals)[5]  requirements. Most Wal-Mart suppliers are already global in scope. Eventually, almost all suppliers — with or without Wal-Mart — will be.


Like it or not, this is the global direction. The sooner formulating producers embrace this, the better off they are going to be.


>> Supplier Sustainability Index: Wal-Mart now evaluates suppliers, in part, through an assessment of suppliers’ actions toward Sustainability. Assessment tools developed by The Sustainability Consortium are used to do this. The Sustainability Consortium is a public – private entity located at Arizona State University and administered jointly with the University of Arkansas. [6]

Consortium Mission Statement

Last year, a grant from the Wal-Mart Foundation funded the establishment of an office of the Consortium in China, with the inclusion of several Chinese universities.


Wal-Mart evaluates suppliers and potential suppliers through the Consortium’s Sustainability Index and the methods by which the Index is determined. Other firms are likely to follow Wal-Mart’s lead. All manufacturers should know what the Index consists of and know where their organization stacks up against the Index.


Chuck - BrittanyThoughtful comments and experience reports are always appreciated.


…  Chuck Harrington
(Chuck@JeraSustainableDevelopment.com)


P.S
: Contact me when your organization is serious about pursuing Sustainability … CH


This blog and associated website (
www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.

 

WAVE Truck photo courtesy Wal-Mart via Facebook.


[1] Most of the specific information reported here is from Wal-Mart’s 2013 Global Responsibility Report, Executive Summary; available at: http://cdn.corporate.walmart.com/ab/fe/8ce537e841419fec085c2dc0c384/2013-grr-executive-summary_130108648988039481.pdf

 

[6] For more on The Sustainability Consortium see www.sustainabilityconsortium.org