Wal-Mart's Earth-Friendly Policies Must Also Be People-Friendly
STANFORD GRADUATE SCHOOL OF BUSINESS—Everyone knows that Wal-Mart is a great place for getting good stuff cheap. But for buying, say, organic cotton clothes in energy-efficient stores delivered by earth-friendly trucks at a price that won't break the back of a financially struggling consumer? Yes, says company executive Lawrence Jackson.
Wal-Mart is working to create environmentally aware, socially responsible business practices and products across the entire world of its operations. The social responsibility part includes keeping products affordable to the millions of low- and middle-income consumers who form the bulk of its customer base.
Jackson, the president and CEO of Wal-Mart's global procurement division, asked his audience at an April 3 Stanford conference to consider whether the movement pushing for social and environmental responsibility in businesses is a racially and economically segregated one. Typically, he said, it is the more affluent who promote it—and who can afford to purchase its products. "I can make financial tradeoffs, like buying a more expensive hybrid car, but what about those who can't?" said the executive, bringing to bear his own perspectives as someone who had grown up in the inner city of Washington, D.C.
The reality of what Jackson called a "bifurcated" economy in the United States—one in which "haves" are separated from "have-nots"—presents a huge company like Wal-Mart, where "economies of scale" are the order of the day, with tremendous opportunities for making a positive impact on the planet, he said. Speaking to more than 200 supply chain management experts gathered at the Stanford Graduate School of Business to exchange ideas and best practices aimed at making the global supply chain more sustainable, Jackson said that Wal-Mart has made a commitment to capitalize on its efficiencies to make "green" cost less.
Wal-Mart's "big-picture goals" include eventually operating on 100 percent renewable energy, creating zero waste, and selling more products whose manufacture and packaging have a less harmful impact on natural resources and the environment. The move is part of the company's "Sustainability 360" effort, promoted by Wal-Mart President and CEO Lee Scott, who "has taken on sustainability as a passion," Jackson said.
Specifically, the company plans to make existing stores 25 percent more energy efficient in 7 years and new stores 30 percent more efficient in 4 years. Soon its fleet of trucks should run with 25 percent greater fuel efficiency, and the company can be expected to turn out 25 percent less solid waste in the next 3 years.
Selling more earth-friendly products means working cooperatively with suppliers. For a company that spends some $200 billion a year in procurement, Jackson said, helping suppliers leave a smaller environmental footprint can have a significant positive impact on waterways, air quality, and landfills.
One effort in this direction has been Wal-Mart's organic cotton project. In 2005, the company introduced an organic cotton yoga outfit to 290 Sam's Club stores, and has since expanded its organic practice to include select bath, bed, and baby products. Part of the project has included helping a large cotton supplier in Turkey transition to organic farming. From just these few efforts, he said, the company has prevented some 60,000 pounds of pesticides, herbicides, and synthetic fertilizers and other chemicals from entering the soil.
Wal-Mart also has become the largest single purchaser of 100 percent organic cotton products in the world. The company's size and purchasing power allows it to create economies of scale—which means, for example, that its stores can sell a line of organic cotton baby clothes for $9 and $12 an item, prices that fit the penny-pinching budget. "We're democratizing sustainable living," Jackson said.
On the home products front, by cooperating with suppliers such as Procter & Gamble, Wal-Mart has spearheaded the development of a concentrated laundry detergent. Before it reaches the consumer, the product has saved 478 million gallons of water and 20.7 million gallons in diesel for transport. It also has reduced the amount of plastic packaging that will eventually end up in landfills by 128 million pounds.
But Jackson remained sober about how the poor may be affected by the environmental movement, at least in the short term. Ultimately, he said, "someone sacrifices." While many wealthy Americans can afford higher priced organic goods, they are passing environmental "costs" onto others. "How do you tell people in Brazil or China that they now can't have air conditioning because it will create too much of a strain on the environment, particularly when you're driving your big car, alone, on the highway?" he asked.
"There's sometimes a collision between the needs of people living in poverty and what's good for the environment," he said. While business may be part of the solution, he concluded, government also must become involved.
Jackson was among the speakers from major companies who spoke at the conference on "Socially and Environmentally Responsible Supply Chains: Making the Business Case," which was co-sponsored by the Stanford Global Supply Chain Management Forum and the Center for Social Innovation at the Stanford Business School.
The Forum is a research institute in partnership with industry practitioners, the Stanford School of Engineering, and the Stanford Graduate School of Business that advances the theory and practice of excellence in global supply chain management. The conference marks the launch of a new Forum program of Socially and Environmentally Responsible Supply Chains. It will include collaborations with industry, nongovernmental organizations, and others; research and teaching, including the development of new cases and course content; and knowledge dissemination through conferences, journal articles, and newsletters.