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Wal-Mart Unveils Plan to Make Supply Chain Greener

Walmart Home Office
Source: Walmart
Walmart Home Office

Wal-Mart, the nation’s largest retailer, announced on Thursday that it would cut some 20 million metric tons of greenhouse gas emissions from its supply chain by the end of 2015 — the equivalent of removing more than 3.8 million cars from the road for a year.

The company plans to achieve that goal by focusing on popular product categories with the highest embedded carbon — milk, bread, meat, clothing — and by pressing its suppliers to rethink how they source, manufacture, package and transport those goods. Essentially, suppliers are being asked to examine the carbon lifecycle of their products, from the raw materials used in manufacturing all the way through to the recycling phase.

Wal-Mart’s sustainability executives will work with suppliers to help them figure out what measures to take. Any costs related to making products more energy-efficient — redesigning packaging or using a different fertilizer — will be the responsibility of each supplier, not of Wal-Mart.

Jim Stanway, who oversees Wal-Mart’s supplier initiatives involving energy, said in an interview on Thursday that suppliers would be willing to spend money if “it’s an investment where everybody’s sure it makes the supplier more profitable.”

And while the initiative may be good for the environment, it may also be good for Wal-Mart. Driving costs out of the supply chain could result in savings for Wal-Mart that can be passed along to consumers — enabling the company to uphold its reputation as a destination for rock-bottom prices.

The Carbon Challenge: A CNBC Special Report
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Also, as Michael T. Duke, Wal-Mart’s president and chief executive, said in a Web cast on Thursday, “We know we need to get ready for a world in which energy will only be more expensive.”

At the beginning of the decade, Wal-Mart began taking an industry-leading role in environmental sustainability, in part to burnish its image. Soon, Wal-Mart was wielding its heft to change industry practices.

Wal-Mart said supplier participation in its effort to reduce greenhouse gas emissions would not be mandatory. But the giant retailer — with sales of more than $400 billion last year — made it clear that it was interested in doing business only with suppliers that share its goals.

Critics argue, though, that rather than change its business model, Wal-Mart pressures suppliers to change theirs — which can lead them to cut corners and produce shoddier products.

“You can’t argue with asking companies to reduce packaging,” said Stacy Mitchell, a senior researcher at the Institute for Local Self-Reliance, an advocacy group. “But if durability is not part of what matters in retailing anymore — and Wal-Mart arguably has been the leader in making that the case — that’s something we have to grapple with.”

Ms. Mitchell added that large stores have been shown to encourage consumers to drive farther from home, increasing emissions. And as Wal-Mart accelerates its growth overseas, putting more stores around the world, its carbon footprint will expand.

Wal-Mart has started many environmental initiatives in recent years, from improving the efficiency of its truck fleet to creating a global index to measure the environmental impact of products. In the last couple of years, the chain worked with 20th Century Fox Home Entertainment, which produces DVDs, to cut greenhouse gas emissions by eliminating the plastic knob in the center of its CD cases.

For the latest initiative, Wal-Mart is collaborating with organizations including the Environmental Defense Fund, PricewaterhouseCoopers, ClearCarbon, the Carbon Disclosure Project and the Applied Sustainability Center at the University of Arkansas. The groups will help advise Wal-Mart and its suppliers, as well as evaluate and measure reductions.

Already, Wal-Mart is working to change the labels on clothing it sells to indicate the products can be washed in cold water (therefore lowering customers’ electricity bills), and to sell private label compact fluorescent light bulbs in Mexico. The company said the 20 million metric tons of greenhouse gas emissions it intends to cut from its supply chain by the end of 2015 is 150 percent of the estimated growth in carbon emissions from its own operations over the next five years.

Matt Kistler, Wal-Mart’s senior vice president for sustainability, said the initiative was also a way of getting ahead of pending energy legislation. For “suppliers who could be adversely affected,” he said, “this will just put them further ahead.”