Walmart Has One of The World’s Most Sustainable Supply Chains? Really?

There are various lists that include the world’s most sustainable companies: Corporate Knights, the Climate Performance Leadership Index, and others.  Walmart does not make those lists.  None of them.

Walmart is doing more in sustainability, particularly in the supply chain area, than they are given credit for.  In contrast, there seems to be some sort of halo effect surrounding one of Walmart’s biggest competitors, Amazon.  Amazon is not known for treating their warehouse workers kindly, and they don’t even have a sustainability report.

Supply chain sustainability is focused on the extent to which procurement, manufacturing, and logistics people in a company can directly and powerfully impact sustainability targets.

In practice, this would mean more of a focus on greenhouse gas (GHG), water conservation, reducing waste streams, and responsible sourcing than on other sustainability goals.  For example, in selecting leaders for the Climate Performance Leadership Index, that organization includes criteria such as tax paid as a percentage of EBITDA, the ratio of CEO pay to average worker pay, and  a measure of whether corporate pension plans are underfunded. The supply chain function has minimal ability to influence those types of goals.  A supply chain sustainability index would ignore them.

I’m going to highlight Walmart’s initiatives in lowering greenhouse gas (GHG) emissions, reducing their waste stream, and sourcing sustainable products.  But they have supply chain related goals in other areas as well.

A reading of Walmart’s sustainability report shows they have specific GHG goals; to drive the production of procurement of 7 billion kilowatt hours (kWh) of renewable energy globally by Dec. 31, 2020. One critical is metric tons of CO2 emitted per one million dollars in revenues.  Their numbers have gone down for six years in a row.  This is not only a sustainability initiative, Walmart believes if they hit their targets they could reduce their energy bill by an estimated $1 billion by 2020.  However, in one part of the report they mentioned that these projects often have a payback period of four years.  This means they are paying a price to hit their sustainability goals as most big corporations have a plethora of projects that can pay off in two years or less.

Walmart Sustainability Report

The Walmart Sustainability Report

Walmart has always been highly efficient in the use of their truck fleet.  But in 2005, they set a goal of reducing their fuel footprint by doubling fleet efficiency by the end of 2015. Through 2014, they achieved an 84.2 percent improvement in fleet efficiency over the 2005 baseline. This was achieved through better routing and truck loading; driver training focused on minimizing idle time and progressive shifting; and by focusing on their equipment, for example, improved truck aerodynamics fuel-efficient tires, and increased purchase of compressed natural gas powered trucks.

When it comes to the waste stream, they have not done as well.  Their total annual waste generated from operations in the U.S. has decreased by 3.3 percent, compared to our 2010 baseline.  Walmart has very aggressive goals, in the U.S. they have committed to reaching zero waste to landfill by 2025 for their own operations.  But sustainability professionals much prefer to see less grandiose short and medium term goals, than aggressive long term goals that make for good publicity but which may never be achieved.

One area where the clout of a big company like Walmart truly ripples up and down the supply chain is in the area of sourcing more sustainable products.  In 2007, Procter & Gamble (P&G) agreed to start selling smaller, more concentrated bottles of detergent.  This was good for fleet efficiency, good for the store (more shelf space for products), and reduced landfill waste.  In 2014, at Walmart’s Sustainability Product Expo, P&G announced they had invented technology to use recyclable material on laundry bottles.  There is little doubt Walmart’s initiative contributed to P&G’s innovations, which are not trivial.  It required P&G to innovate on how to convert waste into usable materials. It also required working at the local level with towns and cities to give consumers more consistent and reliable ways to recycle their detergent bottles.  These kinds of initiatives have allowed Walmart to reduce packaging by 5 percent compared to their 2008 baseline.

The pressure for Walmart’s suppliers to have to provide sustainable products based upon efficient supply chains is gradually ratcheting up year by year.  Walmart expanded its Sustainability Index scorecard – a way of ranking suppliers on sustainability – to include to more than 700 categories. They claim these sustainability Index scorecards are being used in key merchandising and sourcing processes, and point to the fact that they have set goals across U.S. merchandising teams to drive accountability.  Perhaps the most current urgency in in the area of sustainable chemicals, making sure the products they source that include chemicals, have chemicals that are not hazardous to humans or the environment.

So if you look at Walmart’s targets and accomplishments to date, you might find other companies have aspired to more, and achieved more, in terms of developing a sustainable supply chain.

But a huge company that achieves more moderate goals can more positively affect the world than a smaller company.  Big companies’ efforts, particularly if they extend out to sustainable procurement, have a way of rippling up and down the extended value chain in a manner that smaller companies can’t hope to match.  That is why Walmart would be on my list of the companies with the world’s most sustainable supply chains.