Wal-mart rolls out ambitious sustainability plan

BENTONVILLE, Ark.—Last month, Wal-mart announced that it’s taking major steps to eliminate 20 million metric tons of greenhouse gas emissions (GHG) from its global supply chain by the end of 2015.

This is the latest in a series of steps the retail giant has taken on the sustainability front in recent years, including plans for a Sustainability Index that will tell customers how products sold by Wal-mart will impact the environment; using hydrogen fuel cell powered forklifts; reducing packaging sizes for toys; and installing auxiliary power units for its entire private fleet, among others.

Wal-mart officials said that removing 20 million metric tons of GHG emissions from its global supply chain is the equivalent of removing more than 3.8 million cars from the road in a year. This move is critical to its overall sustainability plans, the company said, considering that its global supply chain footprint is much larger than its operational footprint and presents a significant opportunity to reduce emissions.

Through collaboration with the Environmental Defense Fund (EDF), Wal-mart cited that the following three components will drive its plan to reduce GHG emissions:

Selection. The company says it’s focusing on the product categories with the highest embedded carbon. That will be defined by the amount of life-cycle GHG emissions per unit multiplied by the amount the company sells.

Action. Wal-mart will also concentrate on anything that reduces GHGs from a product in either the sourcing of raw materials, manufacturing, transportation, customer use, or end-of-life disposal. Wal-mart will also demonstrate that it has direct influence on the reduction and will show how that reduction would not have occurred without the company’s participation.

Assessment. This will be done by having Wal-mart and its suppliers jointly accounting for GHG reductions. It will also have external adviser, ClearCarbon, performing a quality assurance review of those claims to ensure methodology, completeness, and calculations are correct. PricewaterhouseCoopers, another external partner, will assess whether the defined standards were followed consistently to quantify the reduction claim once the claims meet the quality assurance check.

Wal-mart President and CEO Mike Duke said this endeavor reflects Wal-mart’s aggressive growth goals on energy efficiency and using renewable energy in existing and new facilities.

“We know we need to get ready for a world in which energy will only be more expensive…and there will only be a greater need to operate with less carbon in the supply chain,” said Duke. “Wal-mart and our supplier partners have a history of working together to create a more efficient supply chain that benefits us all. The effort to reduce energy will be no different.”

Duke also said that reducing carbon in the life cycle of Wal-mart’s products will often mean reducing energy use, adding that this will mean greater efficiency—and with the rising cost of energy, lower costs that will make its business stronger and more competitive.

Analysts said that this initiative is well-intended and could reap significant benefits for Wal-mart, its suppliers, and consumers.

“Wal-mart is proving that they’re leaders in the area of reducing GHG emissions among global businesses,” said Brittain Ladd, a supply chain consultant and lecturer on green supply chain strategies. “By reinforcing the importance of looking across the supply chain from suppliers to consumers, Wal-mart is laying out a business model that can easily be copied by other companies to achieve reductions in GHG levels as well as achieve reductions in costs regardless of the industry they compete.”

Ladd also noted that it is becoming more apparent that the focus on reducing GHGs is driving unheard of collaboration between suppliers and businesses that will significantly change the competitive landscape and place new pressures on supply chains.

Kevin Smith, president and CEO of North Kingston, R.I.-based Sustainable Supply Chain Consulting, said that if this is being done for the right reasons, with Wal-mart truly trying to conceptually improve the carbon footprint of its entire supply chain, this could be a good thing because it could be an initiative that works to everyone’s advantage.

“We should never be doing things just for the sake of being green,” said Smith. “If we’re in the business of making money we should be doing things to help the environment and add to the bottom line. This sounds like it’s sophisticated enough and I would applaud [Wal-mart] for doing this; but as an industry we need to be careful to make sure we are doing things for the right reasons, things that are good for the environment and good for supply chains by saving money and therefore benefiting consumers.”