Wal-Mart Strives For Sustainability

Excerpts from:
"Wal-Mart grows ‘green' strategies"
September 25, 2006 -- By Mindy Fetterman, USA Today

BENTONVILLE, Ark. — Andrew Ruben, vice president of strategic planning for the world's biggest retailer, leans across the table and pleads passionately for consumers to embrace the compact fluorescent light bulb. Though a CFL bulb costs more, it uses 75% less energy and lasts 10 times longer than a regular bulb.

“Tell everyone to buy this light bulb!” he says, his voice trembling a bit. “If we could get every American to change a single light bulb, we'd be doing the world a world of good.”

What's sparking Ruben's fervor is a new mission at Wal-Mart: Embrace the Earth.

The $312.4 billion retailing giant has launched an aggressive program to encourage “sustainability” of the world's fisheries, forests and farmlands, to slash energy use and reduce waste, to push its 60,000 suppliers to produce goods that don't harm the environment, and to urge consumers to buy green. Last Monday, for the first time, Wal-Mart reported on its carbon dioxide emissions — the “greenhouse gases” that cause global warming. It said it emits 20.8 million tons worldwide, an amount greater than what's released by an auto company but much less than that released by a major utility company.

“We asked ourselves: If we had known 10 years ago what challenges we would face today, what would we have done different?” says CEO Lee Scott. “What struck us was: This world is much more fragile than any of us would have thought years ago.”

Already, Wal-Mart has become the world's largest buyer of organic cotton. It introduced “fair trade” coffee at its Sam's Clubs. It began selling some organic foods in the spring and will introduce others this fall. And it is pushing suppliers to use smaller packages to cut waste.

Critics such as WakeUpWalMart call the efforts “green-washing.” They say the efforts are an attempt to polish a corporate image tarnished by controversies over low pay and limited health care benefits for its employees and “anti-big-box” feelings in some towns.

But many environmentalists are ecstatic. Wal-Mart is a very big rock to throw into the pro-environment pond, and its ripples, they say, will be felt across the globe.

“Wal-Mart is a huge player, and they have enormous clout,” says Scott Burns of the World Wildlife Fund, which has 10 employees working with Wal-Mart on several projects, including sustainability of fisheries. “They're sending a very powerful signal that already is having effects on the way people produce products for them.”

Wal-Mart says it will:

•Slash gasoline use by its trucking fleet, one of the largest in the USA, and use more hybrid trucks to increase efficiency by 25% over the next three years and double it within 10 years. That will save $310 million a year by 2015, the company says.

•Buy 100% of its wild-caught salmon and frozen fish for the North American market only from fisheries that are certified as “sustainable” by the non-profit Marine Stewardship Council within three to five years. That designation means areas of the ocean aren't fished in ways that destroy fish populations.

•Cut energy use at its more than 7,000 stores worldwide by 30% and cut greenhouse-gas emissions at existing stores by 20% in seven years. Wal-Mart is the largest private electricity user in the USA.

•Reduce solid waste from U.S. stores by 25% within three years.

The company, second-largest in revenue in the world behind ExxonMobil, has vowed to invest $500 million a year in energy-saving technologies.

It has built test lab stores in Aurora, Colo., and McKinney, Texas, where it is experimenting with everything from wind power to permeable asphalt that lets rainwater seep through parking lots to help refill groundwater aquifers. It wants to build stores that produce 30% fewer greenhouse emissions in the next four years.
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Wal-Mart isn't pushing sustainability solely out of the goodness of its heart. It has realized that it can make money by selling products that are environmentally friendly. It can make millions selling recycled trash and save hundreds of millions by cutting transportation costs.

It even is actively supporting the idea of a system for companies to “trade” carbon dioxide credits. Wal-Mart believes it can earn lots of credits by saving energy, and it can sell them for millions of dollars to companies that can't. All of those savings will go into keeping prices on its products low, it says.

Wal-Mart also says it is worried about having enough products, primarily fish and other foods, to sell to consumers in the future. “We set out to do (sustainability) as an obligation, a good-works effort,” says Scott. “But we discovered the truth: The real reason to do this is for the business itself.”

Wal-Mart has formed 14 sustainable value networks made up of employees, suppliers and environmentalists. The groups get together regularly in person or on conference calls to brainstorm how products that don't hurt the environment can be made or bought.

The networks work with Wal-Mart's buyers and suppliers, and the suppliers of its suppliers, to push change all the way down the business chain. “We've never worked this way before,” says Matt Kistler, vice president of product and packaging innovation.

The company is mapping whole product lines to find out where the environment is hurt along the way and how to stop that. “When you hear your words coming out of their mouths, it's amazing,” says Suzanne Apple of the World Wildlife Fund. “These are issues we've been working on for years.”
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When you buy strawberries from a Wal-Mart today, they come in packages made not from plastic but from biodegradable corn. Same with Paul Newman's organic salad dressing. And this holiday season, those Sam's Club gift cards you may put in your family's stockings will be made from corn-based PLA (poly lactic acid), too.

If you're selling to Wal-Mart, you'd better be thinking about smaller packaging, less packaging and recyclable packaging. Wal-Mart said Friday that it will start “grading” suppliers on how well they do. Less, in this case, is more.

When it cut excess packaging on its private-label line of toys, Kid Connection, the company estimates it saved $2.4 million a year in shipping costs, 3,800 trees and 1 million barrels of oil.

“A 2% reduction in a package's size is worth millions and millions of dollars,” says Kistler, vice president of packaging innovation. “You can get more in a container, more in a boat, more in a truck. The numbers are just amazing.”

Downsizing a product's package is tricky, though. Products are sold on store shelves by volume. Bigger packages get more shelf space and can catch consumers' eyes better.

That was the problem when Wal-Mart started pushing Unilever to downsize its laundry detergents. It was reluctant to lose shelf space.

To compensate, Wal-Mart made All Small & Mighty, Unilever's concentrated detergent that comes in a bottle two-thirds the size of a regular jug of detergent, a “VPI.” That's in-house code for a “volume-producing item.” It got heavy promotion and top space on the end of aisles with lots of signs. It's been a huge success, Wal-Mart says.

The single biggest energy success that Wal-Mart has discovered so far is inside a newly designed refrigerator case. It's LED lights. “Fluorescent lights don't like the cold. LED loves the cold,” says Don Mosley, senior engineering manager of special projects who helped design the energy-efficient mechanical systems Wal-Mart is testing at the lab stores in Colorado and Texas.

Wal-Mart spent about $30 million to develop the refrigerator LED lighting system with General Electric and Royal Philips Electronics. LED (light-emitting diode) lights use semiconductor chips to create energy and emit light. LEDs have been used on digital clocks and cellphone screens but never for such a big item.

“This application will change the grocery industry,” says Charles Zimmerman, vice president of new format development. “One-third of our energy costs come from lighting, and the LED cuts 50% of the cost of lighting.”

Wal-Mart began using LED lights in its giant, red Wal-Mart signs about two years ago. The life of the lights is much longer, even though they cost more. “It's important that our signs say Wal-Mart and not al-Mart,” laughs Mosley.

The compact fluorescent light bulbs from GE that Wal-Mart is pushing for consumers to buy are beginning to catch on, says Michael Petras, vice president of lighting for GE. “The cost is good, it comes on quicker, the colors are better.”

GE sold $75 million of the energy-saving bulbs in 2005. Sales across the industry are up 20%, while sales of traditional incandescent bulbs have fallen 7%.

Wal-Mart has been doing “sunlight harvesting” through skylights at 2,000 of its stores for about 10 years. For much of the day, the only electric lights used in a store are along the inside outer walls. The rest of the floor is lit by skylights.

Now it's testing wind power in the Colorado store. So far, it's been a failure. “It might be our familiarity with the equipment,” admits Mosley. “When they break, they break pretty good before we realize it.” The company hasn't abandoned wind power yet but isn't blown away by it, either.

WakeUpWalMart, a union-funded group that criticizes Wal-Mart's wages and health care benefits, doesn't believe Wal-Mart is sincere. It says Wal-Mart is just trying to get some good public relations in light of all the lawsuits against the company, including claims of discrimination against female employees and forcing employees to work “off the clock.” Wal-Mart also is being investigated for problems with hazardous waste disposal.

“We don't know whether Wal-Mart's environmental changes are real or a Machiavellian attempt to green-wash a declining public image,” says Chris Kofinis, communications director. “But its long record of irresponsible behavior forces one to be skeptical.”

The charges don't bother Wal-Mart. “I don't respond to that criticism,” says CEO Scott. “We know what our goals are. We think we can have an extraordinary impact on the environment.”

Some environmentalists who are in the company's corner are reserving judgment. Fred Krupp, president of Environmental Defense, says Wal-Mart is “off to a promising start” but will be judged by “the results of its efforts.”

Still, Environmental Defense in July opened its first satellite office near a U.S. corporate headquarters — in Bentonville.

“Wal-Mart has as much or more potential than any other company to change the way the world does business,” says Krupp. “And we intend to be right there.”