Last year, Rebecca Henderson’s, Reimagining Capitalism in a World on Fire, was on the short list for Financial Times and McKinsey Business Book of the Year Award. The premise of the book by this Harvard business professor is that capitalism is making our society increasing unstable as the middle class’s income is being reduced while the wealthy are becoming ever richer. More ominously, humanity is on a path toward destroying the planet. To solve these problems, she argues, business needs to play a proactive role.
One of the companies she holds up as a positive example of a big company addressing environmental, social, and governance (ESG) issues is Walmart. That is probably surprising to a lot of people. A few years ago, for example, my oldest child explained to me that Walmart was a malignant force. I, on the other hand, touted their ESG performance.
Walmart has been on an ESG journey since 2005. “But then,” according to the book, “something unexpected happened. Walmart found that saving energy was making the company a great deal of money.”
That is not surprising to me. I’ve long argued that implementing a transportation management system (TMS) is a great way to save money while going green. Walmart has used a variety of different TMS solutions over the years. At Retail Industry Leaders Association’s (RILA) conference in 2020, a Walmart executive talked about how they were now standardizing on a TMS solution from Blue Yonder. At Blue Yonder’s virtual forum this April, the senior vice president of supply chain, spoke of how Walmart was using a variety of supply chain solutions from Blue Yonder. At this conference, the executive also spoke about ongoing efforts to improve their transportation capabilities.
But while I have made the argument that implementing TMS was a no-brainer – saving money and reducing emissions – the author was able to quantify the savings! By 2017, Walmart had met its goal of doubling the transportation’s fleets efficiency. This led to savings of more than a billion dollars a year in transportation costs. That was around four percent of their net income in that year! The author’s calculations were that the retail behemoth received at least a 13 percent rate of return on capital – “at a time when many retail companies scramble to make 5 or 6 percent.”
Ms. Henderson sums up the Walmart case study by saying, “Walmart’s breakthrough came from focusing on the everyday operational details of the business – from a profoundly different perspective.”
The journey toward saving money while reducing emissions from transportation is, however, getting more difficult for retailers. The convenience of ecommerce can lead consumers to order just one or two items for delivery to their home, instead of saving fuel by going to the store and filling a cart. This is the next transportation obstacle that Walmart, and other retailers, need to hurdle.