Feb 092010
 
Walmart and sustainability

galaygoby

Wal-Mart established in 1962 by Sam Walton has become one of the biggest companies in the American market, being responsible for almost 2% of its GDP.  Having business in 15 countries – including Brazil – over 8,400 stores and more than 2 million employees, it is also one of the biggest companies in the world. In 2009, its global revenue (including the Sam’s Club brand) reached US$401 billion and net profits of US$13.4 billion.

To reach its goals, though, Wal-Mart has sacrificed its reputation and demonstrated attitudes that opposed good corporate citizenship. By forcing suppliers to lower prices, squeezing employees’ wages and benefits and not allowing their union, Wal-mart got involved in a series of problems with government and society, and consequently hurt not only its reputation but also its business value.

To its founder, the only stakeholder seemed to be the consumer: “… from the consumer point of view, you want everything: a big variety of quality products, the smallest price possible, guaranteed satisfaction, … you love when the store exceeds your expectations and hate when the store is inconvenient, difficult or pretends that you are invisible.”

Wal-mart’s business model brought growth and earnings, but also several problems, especially in the United States:

  • Since 2004, it faces a lawsuit for work discrimination from 1.6 million of its female employees. In the USA there are more than 75 lawsuits against the company due to its labor practices – losses may cost over US$640 million
  • Lost over 200 disputes with local communities while seeking license to operate its stores
  • In several states, the company must, due to court’s determination, invest at least 8% of its payroll in health insurance for employees
  • In 2009 got involved in a scandal due to child labor found in one of its fruit suppliers in the United States

Even so, Wal-mart defines itself as leading company in sustainability, corporate philanthropy and labor opportunity. In 2009 was elected, again, as Fortune’s Most Admired Company.

Things changed with Hurricane Katrina’s tragedy in 2005, when Wal-Mart, together with other companies with significant logistics power, were able to supply water and food to New Orleans population, much sooner than the American government. Moved by what had happened, Lee Scott, CEO and president of Wal-Mart, decided to adopt sustainability as a new business model, and at the company website, stated that sustainability represented “the biggest opportunity for the next generation” . Certainly also contributed for this change of course, pressure from various shareholders (among them the United Methodist Board of Pension and Health Benefit) for Wal-Mart publish a Sustainability Report, all the negative media and the losses accumulated by lawsuits, specially in the USA.

Today, Wal-mart focus on sustainability to redeem its reputation and image. Some of its initiatives are:

  • Published a Sustainability Evolution Report (2007/2008) and in 2009 its first Global Sustainability Report
  • Created an initiative for the development of the Sustainability Index (to be finalized in 2013), with 3 steps:
    1. Requested that 100,000 suppliers answered a survey on sustainability (deadline out/2009)
    2. Sponsored the creation of a consortium with schools, other retailers, suppliers, NGO representatives and government for the development of a worldwide database analyzing the life cycle of various products (from raw material to discard)
    3. It is working to make these data available as a sustainability index which will enable consumers to decide what to consume in a more sustainable way. In 2009, was to launch an initial test for electronics, food and cleaning products.

 supermarket sustainable

  • Created a Sustainable Value Network, composed of company’s leaders, suppliers, academia, government and the not-for-profit sector; to analyze, design solutions and integrate sustainability in day-to-day business. This network incorporates initiatives regarding: energy, green construction, logistics, waste, packaging, wood and paper, agriculture and fishing, textiles, jewelry, among others
  • Defined targets, and took responsibility in making public the most sustainable solutions for the:
    • Adoption of renewable energy at stores and fleet
    • Waste reduction (target: zero waste)
    • Packages reduction
  • Is seeking to expand its offer of sustainable products (organic products, fair trade, fluorescent lights, etc) in its stores
  • Made available a video with successful ideas and cases to stimulate sustainability à http://walmartstores.com/Sustainability/8844.aspx

If the current efforts and initiatives are enough to erase the marks from the past it is still unknown. But by becoming more responsible for people and for the environment, Wal-Mart, doubtlessly, aligns itself with the quest for the sustainable development.

Translated by Patricia Ostwald.
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Sobre a autora:

Sueli Chiozzotto é formada em engenharia de produção pela Escola Politécnica da USP, tem MBA pela Universidade da California em Berkeley e é sócia da MGM Partners, onde desenvolve projetos nas áreas de sustentabilidade, responsabilidade e investimentos sociais para empresas, fundações e ONGs.

  2 Responses to “Wal-Mart: villain or hero in sustainability?”

  1. It is hard to believe that Wall Mart’s attitude change towards sustainability has nothing to do with their commercial approach. Since 1999 when the company started to compete in the European market with the purchase of ASDA in the UK it has struggled to increase it’s share, mainly due to the perception of europeans (especially germany, UK and scandinavia) that the retailers should take the lead in providing sustainable products. Their competitors in europe, such as Mark & Spencers, have been adopting sustainable practices for more than 10 years, and have gained a tremenduous market advantage by doing so. Apparently Wall Mart realised a little bit too late that sustainability practices in retailers can save a lot of money, besides being a competitive advantage. Nevertheless, I believe that no matter what their motivations are, this is a positive step, and influencial role model to other companies.

  2. Hi Mauricio,
    Thanks for sharing the Wal-Mart history in the EU. Certainly contributes to the context and help us to put things in prospective.
    Let’s hope it helped Wal-Mart to re-tune their strategy as well.
    Btw, I would love to learn more about sustainability in the EU region. What exactly Mark & Spencers and others are doing there?
    Perhaps you can write an article so we can post here (certainly with the appropriate credits). Think about it! Best, Sueli

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