Wal-Mart supports costly US healthcare reform

On 1 July, Wal-Mart wrote a letter to President Obama and Congress in support of a healthcare bill that includes an employer mandate. This mandate, opposed almost universally by businesses, requires employers to provide meaningful coverage for their workers or contribute to a public fund covering the uninsured. For any large company to support such a scheme would come as a surprise, but for Wal-Mart, known infamously for its hard-line stance on employee benefits, to lend support comes as a shocker.

Speculation is now rife over exactly why Wal-Mart would make such a u-turn. Skeptics suggest that it is simply a strategic move to block competitionit would certainly be one of the best-placed companies to comply with such legislation. Optimists suggest that it is, on the other hand, consistent with the company's support of an intelligent universal solution that it maintained all along. A few others suggest that the intentions don't really matter at all.

I personally am an optimist. And having studied Wal-Mart's evolution in environmental stewardship I would like to advance my own speculation about Wal-Mart's intentions. If it is correct, it is an enormous moment in history.

H Lee Scott, the CEO of Wal-Mart until January 2009 has commented extensively about his experience with climate change and the environment from a commercial perspective. He describes his initial attention to sustainability as a defensive one (when he began, environmental criticism of Wal-Mart was at its peak). But, to his surprise, environmental actions brought similar economic ones. Although the link between economic and environmental benefits are now well known, it was what Scott describes as a "breakthrough moment" in his thinking and, when running a company that competes ruthlessly on cost leadership, this was a very big turning point in the company's history.

As a self-proclaimed perfectionist, Scott initiated one of the world's most complex and comprehensive environmental businesses initiatives and pioneered eco-efficiency actions. Importantly, his early successes allowed Scott to take a leap of faith and define environmental benefits on their own terms, without a necessarily financial justification. His thinking, he explained, was that reducing environmental impacts would help the bottom line, he wasn't sure exactly how and when, and it was difficult or impossible to prove in accounting terms, but environmentalism in Wal-Mart was okay to pursue in its own right. The result is well documented and today almost any discussion of eco-efficiency will include a reference to Wal-Mart.

Very quickly, the financial benefits of sustainability were realized. Prior to the recession, skyrocketing prices for waste, water, and energy provided ever-increasing dividends for the environmentally efficient company. And as the recession hit, Wal-Mart's obsession with efficiency gave it the cost-leadership position that allowed it to extraordinarily outperform its rivals.

There are a few take-away lessons to this abridged story. But one of the most important ones may be that financial 'leaps of faith' are necessary at some points to become an environmental leader. Scott believed that Wal-Mart would benefit enormously from its environmental programme but was unable to prove it in advance to accountants and shareholders. At the time, in fact, he received a lot of slack from institutional shareholders. Yet he pushed ahead and was able ultimately to stake out real competitive and commercial benefits from environmental sustainability.

Perhaps leaders at Wal-Mart believe that social sustainability will bring similar benefits. They have always seen employee benefits as a threat to their cost-leadership position, but again maybe they imagine that a defensive strategy can be turned into an offensive one. Perhaps the innovative company is willing, once again, to take a leap of faith, and stake out an early claim on social sustainability with the belief that in the coming years it will provide the competitive advantage that environmental sustainability did.