Walmart CEO Mike Duke’s commitment to sustainability has been publicly challenged by green business pioneers like Jeffrey Hollender, founder of Seventh Generation. Mr. Duke and his leadership team took that question head on in an April 18, 2012 meeting conducted before Walmart’s corporate management team and broadcast to Walmart associates. Duke launched the meeting with a video presentation by Walmart Chairman Rob Walton who flatly stated that Walmart must continue “…driving change across our footprint.” He challenged the company to “scale up and speed up” the integration of sustainability into Walmart’s productivity loop.
Duke and his management team then outlined what they have done and what they plan to achieve. Their focus was on scale and acceleration. What scale means to Walmart is represented by their success selling energy efficient compact fluorescent lights (CFLs). From 2005 through 2010 Walmart has sold 460 million CFL lightbulbs that have saved their customers $15 billion in utility costs eliminating emissions equivalent to 25 million cars. How Walmart presented this feat is as important as the accomplishment itself. Walmart seeks to implement sustainability on a scale that matches their retail industry leadership – while speaking to their core business focus of saving their customers money.
Unique in my experience with corporate sustainability commitments, CEO Duke introduced his CFO Charles Holley to talk about the business case for sustainability. The focus of Holley’s message is that Walmart is making money adopting sustainability into their operations. He pointed to their earnings of $231 million in “recycling income” from diverting 80 percent of their waste from landfill and selling materials within this waste stream to earn a profit level equal to that achieved by 50 of their supercenters.
In an exclusive interview, I spoke to Andrea Thomas, Walmart’s Senior Vice President of Sustainability. She outlined how Walmart is evolving an enterprise-scale business process for incorporating sustainability into Walmart’s operations and product offerings. The key to understanding Walmart’s sustainability commitment is to recognize they are engaging in what Geoffrey Moore in his recent book Escape Velocity defines as “The Arc of Execution” within “Complex Systems Enterprises.” What this means is that a lot work goes into turning an aircraft carrier. The sequence of steps for turning a business like Walmart are:
1) Ask Questions
This first step starts with the now infamous “15 questions” tied to greenhouse gas emissions that Walmart asked of their 1500 largest suppliers during a specially-called meeting about four years ago. It began the process of seeking answers to what Walmart and their suppliers did not know.
2) Project Innovation
Walmart’s efforts currently stand here in their maturation process toward realizing Duke’s stated goal for making sustainability “part of our DNA.” Thomas captured this project innovation stage with an example of how Walmart is helping its consumers save money doing their laundry. She explained that Walmart is piloting sustainability across nine product categories in search of “hot spots” that offer the potential for scaleable results. One example is the laundry detergents category. Walmart realized that customers would save money and energy by washing their clothes in cold water. So, Walmart enhanced the labeling of clothing to highlight those that are fine to wash with cold water. Accordingly, in the laundry detergent section of stores they increased their offering of cold water detergents. The combined results were increased sales of cold water washable clothing and increased sales of cold water detergents.
3) Accelerating Tools
This is the stage Walmart is now entering. They have collected data and identified best practices for moving from hot spots to results that reduce company operating costs and lower costs for their customers. This is what Moore defines as “creating a playbook.” It is the organizational learning for accelerating deployment of best practices. One such Walmart deployment tool is called a Sustainability Index Scorecard. This is the playbook used by Walmart’s merchandise buyers in finding and evaluating what to buy and who to buy from.
4) Optimization Tipping Point
During 2012, Walmart is expanding the application of Sustainability Index Scorecards from nine product categories to 100 product categories. All product categories are to have a Sustainability Index Scorecard by 2013. This is the tipping point toward realizing Walmart’s sustainability goal of making every product sold by Walmart more sustainable. This focus on the entire product line rather than a category defined as “green products” is Walmart’s strategy for more quickly gaining a scale that delivers bigger and more meaningful impacts.
5) Organizational Alignment
The final step is aligning people, performance and rewards. If an army marches on its stomach, then a company’s associates march on incentives and recognition. Walmart is implementing this enabling step by linking work associates’ compensation to sustainability performance. A strong example is Walmart’s shift in buyer compensation. Buyers are the heart of any retail operation. They are responsible for finding products that sell at attractive margins and are supplied by manufacturers who create solutions and not problems. Walmart is now tying a buyer’s compensation to their Sustainability Index Scorecard performance. This is as telling a commitment that a retailer can make. Walmart is also extending this incentive system to their suppliers.
Is Walmart Committed To Sustainability?
Walmart’s business model is driving down costs to drive down prices. This will not change. What is changing is how Walmart is incorporating sustainability into this business model in pursuit of a scale in sustainability’s adoption by consumers and suppliers that can only be defined as global.
Bill Roth is the founder of Earth 2017. His book, The Secret Green Sauce, profiles case studies of business best practices for making money going green. In 2011 he served as the coach for the U.S. Hispanic Chamber of Commerce Foundation’s Green Builds Business program funded by Walmart that enabled hundreds of business owners to design their project for making money and a difference.