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Walmart Ramps Up Sustainability Effort, 'Invites' Suppliers to Join

Wal-Mart Stores Inc. doesn't do things on a small scale. So when it moved to expand its global sustainability effort, the retailing giant acted true to form.

Walmart Ramps Up Sustainability Effort, 'Invites' Suppliers to Join

At the end of April, Walmart hosted a three-day Sustainability Product Expo at its headquarters in Bentonville, Ark. The first-time event drew more than 3,000 participants, including chief executive officers from more than a dozen global companies. Together they account for some $100bn in sales at the company’s stores.

By the time the expo wrapped up, Walmart had extracted pledges from major suppliers to boost the sustainability of a wide range of products and raw materials, most notably beef and palm oil. They also promised sharp cutbacks in water, energy and greenhouse gas emissions. Some examples:

General Mills will expand by two and a half times the amount of acreage enrolled in the Field to Market initiative of the Alliance for Sustainable Agriculture.

Kellogg Co. will work with Walmart to help small rice growers adopt sustainable practices, with the aim of increasing by 25 percent the adoption of Climate Smart Agriculture practices.

PepsiCo will extend its Sustainable Farming Initiative to 500,000 acres of North American farmland by 2016.

Monsanto will introduce new plant varieties and hybrids through advanced breeding and biotechnology, while helping farmers cut GHG emissions on at least 1 million acres by 2020.

Procter & Gamble has promised a 25-percent reduction in water per dose of its liquid laundry detergent.

Manuel Gomez, Walmart’s vice president of sustainability, says the expo was an extension of a previous company event that focused exclusively on optimizing packaging. “We wanted to make it much bigger and broader,” he said. The new one featured some 150 booths, workshops and meetings with key suppliers and non-governmental organizations, covering every facet of sustainability.

Yet another outcome was the formation of a $100m closed-loop fund to help companies and municipalities come up with more effective methods of recycling. The goal is to increase the recycled content of products on Walmart shelves and elsewhere, Gomez says.

At the core of the retailer’s engagement with suppliers is an index launched in 2009 by the Sustainability Consortium, a group of manufacturers, retailers, public interest groups and government agencies. Covering more than 700 product categories, the index “allows for very precise information on opportunities for major categories and suppliers, and a common language to identify them,” says Gomez.

The index is not to be confused with the Carbon Disclosure Project, of which Walmart is also a member, and which focuses mainly on carbon emissions. (CDP was a presence at the expo.) The consortium also tackles water usage, farming techniques and other elements of the larger sustainability picture. It’s also distinct from the Sustainable Apparel Coalition, whose Higg Index measures the environmental and social impact of apparel and footwear production. (One has to wonder about the point at which so many independent initiatives create the potential for confusion and overlapping efforts. Good intentions don’t preclude bureaucracy.)

For Walmart, the idea beyond those joint efforts is to avoid saddling suppliers with multiple standards, depending on which retailer they’re serving. “We’re trying to make the index one single umbrella,” Gomez says. Walmart and its partners designed the index as an open platform that can be used by all retailers and consumer products goods companies.

Smaller suppliers can participate too, in a manner that’s suited to their size. One of the ideas behind the expo was to give those players access to the efforts of bigger companies.

“That’s where the value of the sustainability index lies,” says Gomez. “It allows each supplier to independently identify the bigger opportunities and be able to work on them.” What it doesn’t do is burden smaller suppliers with an expensive mandate that places them at a disadvantage to their larger competition. At least for now.

Sustainability comes at a cost – or so says conventional wisdom. Walmart, which bases its whole business model on undercutting the competition, isn’t buying into that notion.

“We see many examples where making a product more sustainable actually reduces cost, which can be transferred to the customer in the form of lower prices,” says Gomez. “We don’t think there has to be a tradeoff between [sustainability] improvement and cost.”

Savings can be realized through cutting back on the materials used in packaging and distribution. In any event, says Gomez, Walmart’s philosophy isn’t to convince consumers to pay more for an environmentally responsible product. “The biggest opportunity is to go backwards and improve the product that our customers already prefer.”

The retailer’s sustainability effort is focused inward as well. A company-wide energy strategy, launched last year, aims to produce or procure 7 billion kilowatt-hours of renewable energy annually by Dec. 31, 2020. That’s also the deadline for a 20-percent reduction in energy intensity per square foot within its buildings.

The toughest goal going forward is engaging more suppliers, says Gomez. For now, the retailer is using a carrot instead of a stick, inviting vendors voluntarily to take part in such efforts as the Sustainability Expo.

Down the line, however, Walmart could start making such involvement a condition for getting its business. For all the talk of partnership surrounding the issue, the powerful retailer is no stranger to mandates. Sustainability, says Gomez, “is starting to become part of the discussions between our buyers and suppliers.” Time to get on board.

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