Wal-Mart Uses Clout to Push Environmental Goals

Posted by Josette Dunn on 18th August 2010

Wal-Mart Stores Inc. is trying to do for the environment what it has done for consumers. Wal-Mart is notorious for pushing suppliers to drive down prices if they want to display their products on the shelves of the world’s largest retailer. With $408 billion in revenue and a net income of $14.3 billion for the fiscal year that ended in January, Wal-Mart is the largest company in the world ranked by revenue.

Green Earth

Now Wal-Mart is using its clout to clean up the environment.

Wal-Mart “has more power than the [Environmental Protection Agency],” said Nelson Lichtenstein, author of “The Retail Revolution: How Wal-Mart Created a Brave New World of Business.” “All the EPA can do is level some fines, but it can’t take the contract away from some firm.”

Since 2005, Wal-Mart has been chipping away at its three ambitious environmental goals: to be supplied 100 percent by renewable energy, to create zero waste and to sell products that sustain resources and the environment.

Wal-Mart has already had some successes:

* In 2009, it reduced its plastic bag waste globally by about 66.5 million pounds, which is about 4.8 billion bags, according to Wal-Mart’s 45-page 2010 Sustainability Progress Report released in April.

* In 2009, it opened four more high-efficiency stores, bringing the total to 13, which operate 25 to 30 percent more efficiently than stores built just five years ago.

* Wal-Mart has achieved a 60 percent increase in its truck fleet efficiency since 2005.

Wal-Mart is continuing to put pressure on its suppliers to be greener. In February, it announced a goal to reduce 20 million metric tons of greenhouse gas emissions from its global supply chain by the end of 2015, which would be comparable to removing more than 3.8 million cars from the road for a year, according to a February Wal-Mart news release.

“When I became CEO last year, I said that we would ‘broaden and accelerate’ our commitment to sustainability at Wal-Mart,” Mike Duke said in the progress report. “By that, I meant we would make sustainability a priority throughout our entire company and we would act with a sense of urgency. … Even during the economic crisis, our company does not slow down on sustainability or even just stay the course; we redouble and strengthen our efforts.”

Wal-Mart wouldn’t release the dollar figure it has saved as a result of its energy initiatives, said spokesman Kory Lundberg. But, he said, the company is saving money on energy and that savings is being passed along to its customers.

Wal-Mart’s impact on the environment could be as big as its success in keeping prices low, Charles Fishman, author of “The Wal-Mart Effect,” said last week.

“Wal-Mart over 40 years has reset the marketplace for a whole set of consumer products in terms of what we expect … [them] to cost,” he said. “If Wal-Mart uses the same level of energy and focus and persistence … they could turn out to be one of the most important forces for environmental change and sustainability in the country.”
Critics Counter

Some critics, though, said Wal-Mart’s business model was causing environmental problems.

Its customers have to drive too far to get to a Wal-Mart, which contributed to an increase of about 50 percent in the number of vehicle miles American households drove to shop since 1990, said Stacy Mitchell, senior researcher at the Institute for Local Self-Reliance, a Minneapolis nonprofit that has worked with communities to counter the negative effects of big-box retailers.

She also said Wal-Mart uses acres of land for new stores when empty buildings could be renovated and used.

Mitchell accused Wal-Mart of being unwilling to address changes in its core business model but, instead, demanding that suppliers make the changes.

“It’s perfectly happy to address environmental impacts that don’t touch its core business model and that are things that suppliers or other companies will have to deal with,” she said.

Wal-Mart disagreed with the assessment.  “We’re not perfect and we don’t claim to be, but we are part of the solution from an environmental standpoint,” said Don Moseley, director of sustainable facilities for Wal-Mart.

Laundry Detergent

Wal-Mart has already left its mark on the consumer landscape with its goal of reducing packaging by 5 percent by 2013.

In September 2007, then-CEO Lee Scott announced Wal-Mart would sell only concentrated liquid laundry detergent in its U.S. and Canada stores. At that time, liquid laundry detergent’s main ingredient was water.

“Well, you’ve got water in your house; you don’t need to spend money to deliver the water,” said Fishman, the author.

But when laundry detergent producers tried to sell concentrated liquid laundry detergent, consumers rejected it, Fishman said.

“It was smaller [and] it was a little strange,” he said. “The fact that Wal-Mart gave everybody cover to do it all at the same time changed the game.”

In May 2008–less than a year after making the announcement–Wal-Mart announced that it had achieved its goal and would sell only concentrated detergent from that point forward.

Wal-Mart said that by switching the detergent more than 400 million gallons of water, more than 125 million pounds of cardboard and more than 95 million pounds of plastic resin would be saved by 2011. Now concentrated detergent is sold at all retailers, so “the potential savings in natural resources throughout the entire retail industry could be four times greater,” Wal-Mart said in a news release.

Wal-Mart also made a push to sell more compact fluorescent light bulbs. By the end of 2007, Wal-Mart aimed to have sold 100 million CFLs; in fact, it had sold 137 million by the end of that year. Wal-Mart has sold more than 350 million CFL bulbs through January, saving users $13 billion over the life of the bulbs, Wal-Mart said.

Hamburger Helper

“Hamburger Helper has become the poster child around Bentonville,” said Matt Kistler, senior vice president for sustainability at Wal-Mart, according to a Jan. 28, 2008, article in the Supermarket News. “It illustrates some true product innovation that has led to an even greater packaging reduction.”

In 2005, General Mills, which makes Hamburger Helper, started looking at ways to improve its products, spokeswoman Kirstie Foster said in an e-mail statement to Arkansas Business.

The company reduced the number of shapes Hamburger Helper offered in its different varieties from 20 to 10, she wrote.

“The shapes we now use are of a size and consistency that can ‘nest’ better in the packaging, allowing the noodles to be packed more densely into the box,” Foster wrote.

The result? Hamburger Helper reduced its package size by 20 percent while keeping the same amount of product, she said. It estimated that the company saved 890,000 pounds per year in paper fiber used and eliminated 500 trucks on the road annually.  Wal-Mart praised the move.

To meet Wal-Mart’s green initiatives, some suppliers have turned to consulting firms, such as Cleargreen Advisors of Bolder, Colo., which was formed in 2009 to help Wal-Mart vendors, said Catherine Greener, the aptly named co-founder.

“Having a sustainability strategy is probably good business, because waste is expensive and waste is risky,” she said. “So why not eliminate it?”

Cleargreen Advisors’ other founder, Marc Major, said Wal-Mart’s push for sustainable products was a way for companies to re-examine their merchandise and make them greener.  But he said some of his clients don’t believe Wal-Mart is serious in moving toward its green goals.

“The reality is this … sustainability-demand expectation from the market is not going away,” Major said. “And if you can learn how to play in this new field, you’re going to be way ahead of your competitors.”

Wal-Mart spokesman Lundberg said the company wanted its sup-pliers to think about ways to make their products more environmentally friendly, even if sometimes that can’t be achieved.

“But we wanted to ask the question and see what would happen,” he said.

Supplier Fears

Major said some suppliers fear that they might be locked out of Wal-Mart’s stores if they don’t make the suggested environmental improvements.

“Wal-Mart has never phrased it that way,” he said. “If you read between the lines, then you can certainly conclude that. It’s a soft-handed approach.”

Lundberg said Wal-Mart wanted to work with its suppliers to make their products more environmentally friendly.

“If you guys produce this better product, you know you’ve got a market in Wal-Mart for it,” he said. “So don’t be afraid and go out and innovate and look for ways to make higher quality, lower-cost products and we’ll partner with you on that effort.”