Wal-Mart's push for sustainability

Since 2004, Wal-Mart, like many other large corporations, has tried to build a greener business. As the largest company on the planet, the big-box retailer has been accused of encouraging mass consumption, contributing to suburban sprawl, and relying on long, energy-intensive supply chains.

Yet the company could eventually shed some of that stigma. 

Earlier this month, I attended the company's Sustainability Summit in Bentonville, Arkansas. The goal of the Summit was to brief the retail chain's top 400 suppliers on Wal-Mart's environmental initiative and how the company would like suppliers to contribute. 

While Wal-Mart has already begun to green its own operations, the focus was on encouraging its suppliers to follow suit by innovating and designing more sustainable products. 

Throughout the day, there was also a fair in an adjacent room where suppliers and Wal-Mart employees had an opportunity to interact with dozens of environmental NGOs, consulting firms, and innovative companies (see a full list here). 

Wal-Mart's impact
By encouraging its suppliers to make more sustainable products, Wal-Mart is addressing its biggest impact. The company estimates that only 8 percent of its environmental footprint comes from direct operations (running its stores, distribution centers, and offices). The other 92 percent is embedded in indirect sources—mainly, in the products the company sells. 

Because Wal-Mart represents such a high percentage of most of its suppliers' sales, suppliers have lots of incentive to do what the retail giant encourages them to—even if that means re-designing their wares and packaging so that they're less hazardous, use fewer resources, and create less waste. 

Take one small example: Last year, Wal-Mart committed to sell 100 million compact fluorescent light bulbs (CFLs) in 2007, through what the company saw as a win-win initiative. It would ask suppliers to slash their prices in exchange for better visibility in the store, and the promise of higher volumes. The 100-million mark was reached a few days before the October 10 Summit, and CFLs delivered 20 percent annual growth to a segment of the company that had been dormant for years. 

A changing culture
Some critics might point out that Wal-Mart is moving slowly toward becoming more environmentally responsible. But according to company leaders, this tact is deliberate.

CEO Lee Scott and other Wal-Mart executives want change at the company to be a grassroots, organic movement, where they set the general strategy and associates (the name for Wal-Mart employees) and suppliers come up with most of the solutions. 

A good illustration of this approach is the Personal Sustainability Practice (PSP) project. Introduced about six months ago, this initiative lets employees pledge to make at least one sustainability change in their personal life. Choices range from walking to work and losing weight, to recycling and buying organic produce. 

About half of the employees introduced to the concept have embraced it, and from what I could see at the summit, the "What's your PSP?" question has become a widespread icebreaker inside the company. 

Remaining hurdles
For Wal-Mart, the first reductions in packaging or savings in energy are pretty easy. As illustrated by the CFL example above, these low-hanging fruits are most often a win-win situation, increasing operational efficiency and saving money. It also seems that the company is making good progress toward instilling sustainability into its corporate culture. 

However, switching to 100 percent renewable energy sources, generating zero waste, and selling only sustainable and affordable products (Wal-Mart's long-term environmental goals) might necessitate deeper changes in the company's business model. It will probably require rethinking where products are manufactured and how they're transported. And it will likely mean rethinking the location of some stores. 

In the end, it may even lead to a different understanding of the word "value." Instead of selling customers more, cheap stuff (as it has in the past), Wal-Mart will try selling better, higher quality, more sustainable stuff. 

The fact that the company just changed its slogan from "Always low prices, always" to "Save Money. Live Better" is a sign that they are trying. The challenge now is to get their suppliers to think the same way. 

Lionel Bony is a consultant with MOVE – The Transportation Innovation Group at Rocky Mountain Institute