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Raz Godelnik headshot

Why Whole Foods is Not a Sustainable Business

By Raz Godelnik

These are good days for Whole Foods Market. Business is good, sales and profits are up, the stock is rising and one article even called it a Buffett stock (i.e. it meets Buffett criteria for quality investment), and its CEO John Mackey hasn’t done anything eccentric or odd in a very long time. What’s the secret of Whole Foods?

An article on Motley Fool argued that these results are connected to the fact that Whole Foods' mission is “making its business really matter, in far more ways than the traditional bottom line.”

In other words, Whole Foods has become an impressive example to the business case of sustainability. But is it true? I decided to check out if both parts of the equation are there: does Whole Foods stock provide better returns and is the company sustainable? The results were definitely interesting.

First, let’s look at the numbers. I have to admit until I checked the figures I had no idea how well Whole Foods’ stock (Nasdaq: WFM) is doing. So far this year the WFM is up by 17.7 percent and if you compare it to Wal-Mart, Tesco, Costco or Sainsbury’s, you find that Whole Foods outperforms all of them. It also outperforms the Nasdaq and S&P 500 indices. I thought this might be a coincidence so I looked for 1-year and 5-year performances. I was surprised to get the same result – Whole Foods’ stock outperformed all the other stocks and indices in both cases, generating 40 percent return in the last year and 80 percent return in the last five years.

The stock price is not the only evidence of Whole Foods’ strong performance. You can look at its sales, profits and ratios such as return on equity to see how well the company is doing. When it comes to its return on equity, for example, the company generated a return on equity of 13 percent, or 11 percent on average over the past five years. That's not unheard of, but as Motley Fool explains, it's fairly impressive for a grocer and for the fact that the company carries almost no debt.

Now let’s see if this strong performance can be connected to a strong sustainability framework. In other words, is Whole Foods a sustainable business? The Motley Fool’s article claimed that “its mission goes far beyond profits, straight into passion and purpose,” and that “relationships like the one Whole Foods has with EARTH University make it a different kind of retailer.“ But is it good enough to be considered a sustainable retailer?

The case of Whole Foods is not a simple one. On one hand the company has a green mission, impressive core values such as satisfying and delighting its customers or caring about its communities and environment, and a long list of examples to its efforts to “make green choices since we opened our first store.” It even has a very detailed page entitled ‘sustainability and our future’ on its website, where the company explains how it views this issue, which I believe can be summarized in this sentence: “At Whole Foods Market, we are starting to implement this new vision of the future by changing the way we think about the relationships between our food supply, the environment, and our bodies.”

Yet something is missing. Actually, couple of things. First, there are no goals. You have many statements like “we respect our environment and recycle, reuse, and reduce our waste wherever and whenever we can,” but I couldn’t find what the company’s goals are when it comes to recycling, reusing or reducing its waste. There is no sustainability report, so you don’t really know how well the company implements its values and don’t have any benchmarks or references. There is no climate change policy and actually I doubt if you can find the words ‘global warming’ or ‘climate change’ on Whole Foods’ website, which might not be that surprising given Mackey’s position on climate change.

To be fair, for the last three years, Whole Foods has been reporting on its carbon emissions to the Carbon Disclosure Project (its disclosure rating is 61).

Finally, it has no strategic sustainability plan, like M&S’ Plan A, Unilever’s sustainable living plan, or even Wal-Mart’s sustainability program. Nada.

I went further and looked at the Corporate Knights’ Global 100 list of the most sustainable companies in the world – Whole Foods is not there. On the other hand on Newsweek’s green rankings the company is ranked no. 106 on the list. Finally, if you look at CSRHub’s CSR ratings, you will see that Whole Foods receives average or a bit above average grades – its overall rating is 50, while the average rating for the companies in the CSRHub database is 48.

My conclusion is that in terms of sustainability, or to be accurate, strategic sustainability, Whole Foods is an average company at best. I think it would be actually fair to describe its current (strategic) sustainability stage as somewhere on the low-mid development level. It means that right now it doesn’t seem that Whole Foods is an example for the business case of sustainability. Yet, the good news for investors who do believe in the business value of sustainability is that there’s a lot of potential here if and when Whole Foods decides to move forward to the next level of sustainability.


Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.

Raz Godelnik headshot

Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.

Read more stories by Raz Godelnik