Wal-Mart Looks at Suppliers’ Greenhouse Gasses

Discussion
Sep 25, 2007

By Tom Ryan

Wal-Mart Stores Inc. on Monday announced it is partnering with the climate group, Carbon Disclosure Project, to measure the amount of energy used to create products throughout its supply chain.

The retailer will launch the examination of supplier energy efficiency with 25 to 30 companies that collectively supply seven products: DVDs, toothpaste, soap, milk, beer, vacuum cleaners and soda. These categories were chosen because they were “ordinary products that customers commonly use.”

After recording the measurements, Wal-Mart would then initiate a pilot program with a group of suppliers to look for ways to make the process of creating those products more energy-efficient. Carbon Disclosure Project, a group of institutional investors that pushes companies to disclose their greenhouse gas emissions on the theory that those emissions are financially relevant, will translate the energy consumption information from Wal-Mart suppliers into greenhouse gas emission numbers.

“This is an important first step toward reaching our goal of removing non-renewable energy from the products Wal-Mart sells,” said John Fleming, EVP and chief merchandising officer of Wal-Mart Stores division. “This is an opportunity to spur innovation and efficiency throughout our supply chain that will not only help protect the environment but save people money at the same time.”

Wal-Mart has said it is aiming to cut packaging waste at its stores by 25 percent within three years, double the fuel efficiency of its truck fleet within 10 years and eventually operate entirely on renewable energy. Moves such as the packaging cuts involve changes by suppliers.

According the Wall Street Journal, a sense is growing among U.S. business leaders that the federal government will likely regulate greenhouse gas emissions over the next few years. That would give companies like Wal-Mart an additional financial incentive to curb emissions, including looking to work with lower-emitting suppliers.

Dave Tovar, a Wal-Mart spokesman, told the Journal that the retailer hasn’t decided whether it will use the information to pick some particularly energy-efficient suppliers over others. “We’ll determine that later on,” he said.

Discussion Questions: What do you think are the implications of Wal-Mart’s move to measure the energy consumption of its suppliers? Will this galvanize the movement to cut carbon emissions across retail? What message is Wal-Mart sending to suppliers?

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14 Comments on "Wal-Mart Looks at Suppliers’ Greenhouse Gasses"


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Edward Herrera
Guest
Edward Herrera
14 years 8 months ago

I agree 100% the environment and quality of the earth must be maintained and or improved. The use of less raw materials and better energy efficiency in and of itself is good, but the real fear is Wal-Mart dictating how American retailers and suppliers will move forward into the next decade. Having that much power, even if the direction is correct, appears dangerous to me. I believe the Wal-Mart initiative of better efficiency at all costs for retailers and its suppliers may have sent jobs overseas and enslaved those that remained.

I believe such initiatives must be thought through on many levels before someone says “just do it.”

I also understand that committees can cause such important initiatives to go unrealized but I believe this is a 50/50 proposition at best.

Kirk Scott
Guest
Kirk Scott
14 years 8 months ago

I applaud Wal-Mart’s efforts in attacking an important issue. However, my in-going assumption based on their actions in the past is that this is driven entirely by the need to perpetuate the perception that Wal-Mart cares. In reality, my fear is that they will put tremendous pressure on U.S. based companies who will be penalized for not taking the significant cost hits associated with reducing their carbon footprint, while totally ignoring the Chinese manufacturers of low-cost private label products made exclusively for Wal-Mart. Just go to China and look at the factories pumping tons of coal and wood smoke into the air as they produce the lowest possible cost products for Wal-Mart. That’s where the effort needs to begin and where Wal-Mart can make the biggest difference in reducing greenhouse gases, assuming that’s what they actually want to do.

Janet Dorenkott
Guest
Janet Dorenkott
14 years 8 months ago
I think this move by Wal-Mart is great. There will always be conspiracy theorists that look for the negative in other’s actions. Wal-Mart is leading the way and being a good example. If they can help the environment by offering energy efficient ideas to manufacturers of common household items, I applaud their efforts. I agree with KT that they need to do what they can to impose energy efficiency requirements on those manufacturers producing items in China and other countries as well. I also question the comment that this will save consumers money. Energy efficiency has historically been a large financial burden for US based manufacturers. As a result, that cost gets passed on to the consumers. So I don’t believe that anyone will save any money with this new program. It will cost more. That is one of the reasons manufacturers have moved over seas. It is not only labor they save money on, but cheap facilities that lack environmentally sound practices. If Wal-Mart could do something about those manufacturing facilities, they would be… Read more »
Camille P. Schuster, Ph.D.
Guest
14 years 8 months ago

Doing something is definitely preferable to doing nothing. Measurement will identify a baseline number. The real test will be what steps are taken to reduce the numbers.

James Tenser
Guest
14 years 8 months ago
This is a remarkable development that deserves close inspection by the cynics and contrarians. In most respects, I count myself among them, but when it comes to Wal-Mart’s ongoing series of “green” initiatives, I think I am a believer. Not that I buy into corporate altruism. The system isn’t rigged that way. But I do believe that people of conscience and vision populate companies in about the same proportions as the population at large. I also believe very strongly in the principle of enlightened self-interest, which is the main driver of what we call corporate social responsibility (CSR). Wal-Mart has apparently realized the implications of its unprecedented position of power in the world, which stems from its huge scale and interconnectivity. Along nearly every dimension of its business, the consequences of any operational decision are multiplied by this scale, and the cascade of resultant impacts can move markets, shape public opinion, and even influence governments. Wal-Mart has grown so large that its ability to sustain its rate of growth is now questionable. So when Wal-Mart… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 8 months ago
Two separate issues are commingled here, with the inevitable confusion that always results in such discussions. The first issue is the laudable and do-able conservation of the energy requirements of Wal-Mart suppliers. Go get ’em, WM, and more power (or less power) to you! The second issue is politically-correct silliness to anyone who has really done their homework on the alarmist topic of global warming (this requires becoming familiar with the real science involved, and seeing the political “consensus” from sources like the U.N.’s IPCC reports for what it really is and isn’t). It’s about mankind attempting the impossible: To reduce its contributions to GHGs (greenhouse gases) in a meaningful way by eliminating as much CO2 emissions as possible. Since 70% of GHGs is water vapor and only about 3% of the remaining 30% is estimated to be anthropogenic (man-made), that calculates to 0.9% (.009) that man can possibly influence. Our share of that here in the U.S. is a little less than a third, or about 0.25%. Total and complete elimination of these gases… Read more »
MARK DECKARD
Guest
MARK DECKARD
14 years 8 months ago

I believe Wal-Mart is properly using its clout with suppliers to influence change.

There are many, many opportunities for vendors to reduce the environmental impact simply by continuing the more than decade-old program of packaging reduction, and use of recyclable materials and smarter ways of sourcing and producing goods.

The massive volume of products that flow through the Wal-Mart system end up in homes and businesses. Most of the packaging immediately flows to landfills and recycling centers and ultimately, over a period of days, weeks, months or years, the remnants of the products end up there too.

When suppliers make changes for the Wal-Mart account, they’ll likely make the change throughout their lines for products that flow to other retailers as well, then the ripple effect has done its work.

Applause for Wal-Mart for driving the kind of change that no other entity can, in an area that makes sense, no matter what side of the global warming debate one may support. In the end, we all live downstream….

Jerry Gelsomino
Guest
14 years 8 months ago

As David Livingston says, maybe Wal-Mart is doing this for show, but even if so, if they keep at it a while, think of the positive reversal it will make on the efficient energy usage trend.

Anna Murray
Guest
Anna Murray
14 years 8 months ago

I agree with the folks who are congratulating Wal-Mart. This is the kind of action that help moves “green” causes forward. A move like this by Wal-Mart is perhaps even more effective than legislation.

We hear from a number of our clients–in all segments of business–concern about green issues, how they impact business, profitability, corporate citizenship. In other words, “Is Wal-Mart’s action a good business move?” I think there is an opportunity for publishers to get online and answer some of these questions.

Bernice Hurst
Guest
14 years 8 months ago
Much as I would love to believe that Wal-Mart is taking steps in the right direction, there are too many question marks hovering in my peripheral vision to make that entirely possible. Cost is the biggest feature. Who is paying for this? If suppliers have to cover the costs of reducing their carbon emissions, will Wal-Mart help them or just squeeze the margins harder? Or pass the extra costs onto the consumer? Of those three–supplier, Wal-Mart, consumer–I think we all know who is sitting on the biggest pot of gold. And there are not promises as to whether or not Wal-Mart will continue to buy from the suppliers who complete the exercise. Another big question, for me, is how the calculations will be made and what will be included? As we have seen when looking at the relative costs of buying local vs importing (by sea), things are not always what they seem. Are they going to look at the emissions of all the suppliers’ suppliers, particularly those that manufacture the packaging? And what about… Read more »
Bill Robinson
Guest
Bill Robinson
14 years 8 months ago

This is a turning point. Smart use of energy and materials is just a good business practice. If Wal-Mart is doing this for show, I like the show.

This Wal-Mart move also exemplifies the tremendous leverage mass merchants have over their suppliers. I’m concerned that this leverage is not entirely a good thing because it is not shared with the the retail industry as a whole. It’s just the bigs.

Yet little guys regularly take advantage of the Wal-Mart supply chain innovations over the years: source marking, UPC, pallet labeling, carton labeling, cross dock, just-in-time, and vendor portals. As an industry, retailers have to work hard to keeping leveling the playing field.

Don Delzell
Guest
Don Delzell
14 years 8 months ago
The tendency is to look at programs and announcements like this through the jaded glass of cynicism and skepticism. And perhaps those are the appropriate lenses. However, they may not be. Lacking evidence to the contrary, I am choosing to interpret WM’s announcement and program entirely on its apparent merits. Although some of my colleagues argue that global warming is a myth, and that greenhouse gases cannot be proven as detrimental to the environment, I do not share that point of view. From the perspective of “servant leadership” this program appears to be in line with protecting and serving WM’s constituency…which after all, is the entire planet. A company as large and as integral to the U.S. (and perhaps the world) economy is an entity all of us would really like to have acting from the principles of service. Is the program sufficient? Hard to tell. At the very least, it is a step in the right direction. WM has the market power to create compliance or the appearance of cooperation from key suppliers. What… Read more »
David Livingston
Guest
14 years 8 months ago

I really think Wal-Mart couldn’t care less and they are just doing this for show. They want to look like a leader in this area. We will probably see other retailers copycat the same idea for fear of looking bad. This is similar to when Whole Foods dropped unprofitable live lobster tanks in their stores but rather than say it was because it was a money loser, they did it because it was cruel to lobsters. For Wal-Mart, by shifting the focus onto their suppliers, it simply shifts the finger pointing to their suppliers as well. Overall this is a nice move by Wal-Mart but I’m sure their critics will see through this for what it is.

Mark Lilien
Guest
14 years 8 months ago

Socially responsible investing has grown tremendously. It’s estimated at $2.3 trillion in the U.S., according to Calvert. Wal-Mart stock is $44 today and was over $50 five years ago. If the company could position itself as a good choice for socially responsible investors, only a small portion of that $2.3 trillion could help its stock price measurably. Sustainability is part of socially responsible investing.

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