Walmart: Living better by saving…

Walmart has shown impressive action toward sustainability by recommitting themselves to their sustainability strategy in spite the recent economic slowdown.  Actions already include energy retrofits to refrigerated display cases in over 500 stores, a 57% waste diversion rate from their U.S. operations, building partnerships to work towards the creation of a Sustainability Index and helped form the Sustainability Consortium to develop metrics for measuring the environmental impacts of consumer products across their life cycle: asking their 100,000 global suppliers to voluntarily divulge key data about their environmental and social practices.  The Natural Step attended Walmart’s Green Business Summit in Vancouver days before the Olympics and were impressed by the commitment of Walmart Canada CEO David Cheesewright: “If you’re not willing to do something different and do it first, then you’re not leading.” 

Walmart’s efforts are already providing huge dividends and seem to be well aligned with their current business model.

But will their trajectory actually lead to sustainability?  Sustainability is both a road and a destination so while we applaud Walmart’s commitment and early actions, we are asking three basic questions that we ask of all of our partners.  In our experience, the answers to them define a lot about the capacity of an organization’s overall sustainability efforts.  We see Walmart’s situation in this way:

What is Walmart’s definition of sustainability?

(1) Use only renewable energy.  (2) Create zero waste.  (3) Sell “sustainable products.”

With this definition, Walmart sees sustainability as a key driver for helping them fulfill their core business mission: “Saving people money so they can live better.”  These two visions are, indeed, closely aligned. 

Converting to renewable energy sources will help Walmart better weather the coming storms of peak oil and climate change in the coming decades.  Pursuing this goal reduces their exposure to energy price fluctuations, allows them to get a head start on reducing their CO2 footprint ahead of government cap-and-trade schemes and generates high-profile projects for the company to showcase.  This transition will save Walmart, and their customers, money. 

Eliminating waste is a no-brainer.  This goal closely aligns with the cost-cutting and efficient operations that all companies strive for.  On their “Sustainability 2.0” DVD, Chairman of the Executive Committee Lee Scott sums it up perfectly - “Everything we throw away, we’ve paid for. We’ve paid for the cardboard, we paid for the pallets, and we paid for the inner packaging. Walmart paid for all that.  The customers paid for all of that.  I think it makes all the sense in the world to create zero waste.”  Eliminating waste saves Walmart, and their customers, money.

Selling better products helps Walmart reduce their environmental and social impacts while improving quality. By simply asking their 100,000 suppliers to simply answer 15 questions about their own operations, Walmart has made huge waves of interest in sustainability around the world.  It also provides them a platform from which to address much of the criticism they have received on Wall Street and in the general public. The bottom line?  Improving their image and buying better products will save Walmart, and their customers, money.

Walmart’s core business mission is indeed aligned with their understanding of sustainability. 

But do these three goals represent the whole story?

What is Walmart’s gap to reaching their sustainability goals?

The better question may be: is Walmart able to see just how wide their gap is?  By any measure, it is huge.  They have admitted that they have lots of work to do to close the gaps they have identified.

But taken from the whole-systems perspective of the Natural Step Framework, Walmart’s definition of sustainability falls short. Their approach does not cover all areas of risk that threaten them, and it could even possibly obscure other sources of innovation, efficiency, and above all, savings, available to the company.  Their truncated definition of sustainability could actually be one of the things that will keep them from achieving their future goals. 

Walmart’s sustainability approach has particular shortcomings when seen through the whole systems lens of The Natural Step Framework.

First, it does not address some of the major sustainability challenges that we face.  For instance, there are no questions in Walmart’s 15 Questions for Suppliers of the large increase of toxic chemicals and heavy metals within our communities that emanate from many the products they sell and production methods used to create them.  These toxics threaten human and ecological health, and are a major source of risk to all of us.  By not assessing the whole picture, Walmart is leaving itself open to the possibility of future regulation and market risk.  Early steps are being taken, but are far from being integrated into Walmart’s supply chain.

Second, Walmart draws a clear line between “environmental sustainability” and “social sustainability.”  As the example of toxics demonstrates, there is really no difference between these two elements.  They are inexorably intertwined.  While both aspects of sustainability are addressed within their reporting, Walmart’s three main goals do not encompass social sustainability issues, relegating them to a secondary status.  Until they delve further into this aspect of their work, Walmart will not provide themselves with the ability to reap the bottom line benefits that could be created through the ongoing reduction of personnel costs and an increase in employee productivity and customer loyalty.

Finally, Walmart’s current analysis does not let them even imagine the larger picture: what are the flaws in Walmart’s core business model (selling more and more goods over time to meet growth projections)?  While Walmart has created ambitious sustainability goals, they have not embraced a concrete, holistic definition of sustainability that allows them the real strategic benefit of becoming a very different organization.

How will Walmart close their sustainability gap?

Walmart has taken first steps and critically important ones at that.  They have made a commitment, and have already begun to reap the benefits of much of the ‘low hanging fruit’ that is available to them.  Furthermore, they have engaged stakeholders through the Sustainability Consortium and by working with their 100,000 suppliers.  >See their 2009 Global Sustainability Report

But what will happen when they run out of the ‘easy’ wins?  Will they be willing to look at the big picture revisit their gap assessment and redefine goals?  Will Walmart be leading?

And to achieve their core mission of helping “people live better,” will Walmart be willing to save more than just money?

That question, helping people lead more fulfilling lives with less stuff, and how we move to more sustainable consumption patterns, faces everyone. Some leaders in business are starting to take it seriously (see World Economic Forum debate www.weforum.org/globalagenda2010 - Sustainable Consumption) But can change on that scale happen thoroughly and quickly enough?

Time, and the narrowing funnel of resources and ecosystem services felt through the worldwide retail market, will soon tell.