Some of Walmart's "greening" Decisions

From the pages of Supply Chain Management Review

The Greening of Wal-Mart's Supply Chain

By Erica L. Plambeck -- 7/1/2007

Table of Contents

Looking Outside the "Bentonville Bubble"

Implementing New Supply Chain Strategies

1. Identifying Goals, Metrics, and New Technologies

2. Certifying Environmentally Sustainable Products

3. Providing Network Partner Assistance to Suppliers

4. Committing to Larger Volumes of Environmentally Sustainable Products

5. Cutting out the Middleman

6. Consolidating Direct Suppliers

7. Restructuring the Buyer Role

8. Licensing Environmental Innovations

Three Traps to Avoid

Some of Wal-Mart's "Greening" Decisions

In October 2005, in an auditorium filled to capacity, Wal-Mart President and CEO Lee Scott made the company's first speech to be broadcast to 1.6 million employees in all 6,000-plus stores worldwide--and shared with its 60,000-plus suppliers. Scott announced that Wal-Mart was launching a sweeping business sustainability strategy to dramatically reduce the company's impact on the global environment and thus become "the most competitive and innovative company in the world." He argued that "being a good steward of the environment and being profitable are not mutually exclusive. They are one and the same." Scott also committed Wal-Mart to three aspirational goals: "To be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain our resources and the environment."

To meet those goals, Wal-Mart would seek to transform its supply chain, in cooperation with suppliers and environmental nonprofit organizations. Gwen Rutta, Director of Corporate Partnerships at Environmental Defense, was excited about working with Wal-Mart: "We've come to believe through experience that you really can create environmental progress by leveraging corporate purchasing power," she said. "And who's got more purchasing power than Wal-Mart?"

Indeed, Lee Scott's cooperative business sustainability strategy would go much farther than the retail giant's earlier green initiatives. In the past, Wal-Mart had dealt with environmental issues defensively, rather than cooperatively, proactively, and as profit opportunities. In 1989, in response to letters from customers about environmental concerns, the company had launched a campaign to convince its suppliers to provide environmentally safe products in recyclable or biodegradable packaging. The large-scale effort met with some skepticism from commentators who believed that it was intended to generate benefits for Wal-Mart at its suppliers' expense.

Nevertheless, the company did earn some "goodwill among environmentalists [as] the first major retailer to speak out in favor of the environment in 1989."When vendors claimed they had made environmental improvements to products, Wal-Mart began promoting the products with green-colored shelf tags (without measuring or monitoring the improvements themselves). At one point, the company sold as many as 300 products with green tags. But not all the headlines were positive. One large supplier was exposed for stretching its claim to offer environmentally friendly paper towels, and Wal-Mart and the supplier were heavily criticized. By the early 1990s, the green tag program disappeared altogether, and environmental issues seemed to slip off the company's list of strategic priorities.

Lee Scott, along with Andrew Ruben and Tyler Elm, vice president and senior director of corporate strategy and business sustainability, respectively, recognized that in contrast to those early campaigns, their new sustainability strategy would need to be deeply embedded in Wal-Mart's operations and supply chain management to meet the ambitious goals set in 2005. Elm put it this way: "We recognized early on that we had to look at the entire value chain. If we had focused on just our own operations, we would have limited ourselves to 10 percent of our effect on the environment and eliminated 90 percent of the opportunity that's out there."

Looking Outside the "Bentonville Bubble"

In 2005, with that recognition in mind, Ruben hired Blu Skye Sustainability Consulting to help identify the categories of Wal-Mart's products and processes that had the greatest environmental impact. The Wal-Mart/Blu Skye team multiplied sales data with environmental impact factors from the Union of Concerned Scientists, and identified 14 focal areas, bundled into three broad categories: renewable energy; zero waste; and sustainable products. For each focal area, an executive sponsor (primarily at the executive vice president level) and a network captain (typically a senior vice president) took charge of building a sustainable value network of Wal-Mart employees and representatives from government, academia, environmental nonprofits, suppliers, and other stakeholders. The goal was to reduce environmental impacts and derive profit from that positive change. Network captains were typically senior managers from Sam's Club or Wal-Mart who were considered to be among the company's top performers. Whereas Wal-Mart had previously been notorious for being internally and operationally focused, the network captains were charged to look outside "the Bentonville Bubble" for strategic input and asked to start "pulling ideas from everywhere," even from critics.

Environmental groups joined the networks with some trepidation. As a Financial Times article put it, "For membership-based environmental groups, such as the Sierra Club, and others that seek to work in coalition with student and labor campaigners, engaging with the biggest villain on the block presents risks of losing support and funds." However, many such organizations decided that the advantages of being able to help influence Wal-Mart's environmental performance outweighed any negative repercussions from the association. Seeking the opportunity to drive positive environmental change on a massive scale, nonprofits and nongovernmental organizations (NGOs) such as Environmental Defense stationed employees in the company's Bentonville, Ark. headquarters to work within the networks. However,