Walmart's Sustainability Strategy

I would be remiss in not dedicating a post to Walmart's sustainability strategy, which has had a dramatic impact on how companies interface with corporate responsibility issues.  Once demonized by many (and still by some) for its controversial labor practices, the company has re-branded itself as a pioneer in environmental sustainability.  Although not all rankings recognize its actions as sufficient for absolution (Walmart shows up on only one of the three CSR rankings I profiled in an earlier post), the company has clearly been artful in how it has responded to past criticism.

Whatever you think of Walmart's labor practices, it is hard not to be impressed by the ripple effects the company has sent through its own supply chain.   As early as 2005, the company had committed to sourcing 100% of the company's power from renewable energy, moving towards zero waste, and "selling products that sustain resources and the environment" (note that these goals are often framed as "aspirational", although a target date of 2025 has been floated for the zero waste goal).  Then, just over a year ago, the company layered on two additional goals of reducing its use of phosphates in detergents by 70% by 2011 and of reducing its packaging by 5% by 2013.  These goals have garnered significant attention for the company--- its suppliers love to send representatives to speak on panels about all the good things they are doing for this planet now that Walmart has turned up the heat.

Why these goals specifically?  I spoke with Linda-Eling Lee, a sustainability analyst at RiskMetrics Group, to hear her interpretation.  Ms. Lee points out that four of the five stated goals focus on sustainability goals that save money by increasing efficiency.  After all, switching to renewable energy reduces dependence on expensive fuel; reusing waste diminishes the need for purchasing new materials; and using less packaging decreases fuel use by making items lighter to ship from factory to store.  And with the market for energy efficient products growing, selling products that sustain resources and the environment is a no-brainer (Ms. Lee says the motivation behind the detergent goal is less clear, although she notes that it represents a natural continuation of the company's history of screening out controversial chemicals such as BPA).

So what's next for Walmart?  Pointing to the recent launch of its new product scorecard, Ms. Lee envisions the company requiring its suppliers to label products with information about carbon footprints and the resources used for each product.  While this is a relatively new idea in the U.S., it is becoming old news in Europe, where companies like Tesco have been labeling their own private label products for some time.  "It's a very cutting edge way to connect with consumers right now," points out Ms. Lee, referencing the new GoodGuide iPhone app, which allows users to look up a sustainability scorecard for different products.  And also, "I think they want that information for themselves."

Question to my readers:  What are your thoughts on Walmart's strategy?

Disclosure: The author of this post is a contractor with RiskMetrics Group.