Walmart: The Power–And Limits–Of Efficiency
Arguably, Walmart has done more than any environmental group, politician, government regulator or Silicon Valley clean tech firm to nudge the U.S. economy towards sustainability in the last five years. Walmart’s 2011 Global Responsibility Report, published last week, makes clear that despite the recession and some revently rough going for the company–lately its stock has lagged the S&P500 –Walmart is pushing ahead towards its big goals: To generate no waste, to be 100%-powered by renewable energy, and to sell lots more products that sustain people and the environment.
Yet a closer look at the report demonstrates that there are limits to what any company, even one as vast as Walmart, can do. Most of its environmental gains have come from doing what Walmart has always done very well–driving efficiency in its stores and supply chain. When sustainable initiatives cost more money, as they sometimes do, progress has been halting.
Still, Walmart deserves at least two cheers, maybe two-and-half for its efforts, particularly in the current, dispiriting political climate.
As Elizabeth Sturcken of the Environmental Defense Fund, which works closely with Walmar, told me:
Leadership on environmental issues is coming from Bentonville these days, not from Washington. Some people in Washington want to roll back basic environmental protection on clean air and clean water, saying it’s bad for business. Our work with Walmart proves that’s not true….Generally, all the signs that I see are full speed ahead.
Andrea Thomas, who has led Walmart’s sustainability work for the past six months, made a similar point. The company set big, bold, broad goals back in 2005, without knowing how it would meet them. Since then, it has discovered unexpected business benefits.
Rather than being paralyzed by (the goals), they ignited a lot of energy behind doing experiments, trying different things. Today, there’s a lot of interesting work going on, not just in the U.S., but all over the world. I’m very encouraged by the progress we’re making.
Here’s one success story from the report, a promising new initiative and an arena in which Walmart’s progress appears to have stalled:
Waste: WMT has turned its garbage into an asset, just by thinking about the stuff it throws away in a more disciplined fashion. Across California, more than 80% of waste has been diverted from landfills and made into something else, turning what was a cost center into a source of new revenue.
Said Thomas: “We would pay for people to haul our trash away. And we paid to put it in a landfill. Now people are paying us.”
Success hasn’t come as easily as it sounds, of course. To help find an outlet for food waste, Walmart’s foundation donated 100 refrigerated trucks to food banks. “ Now they have a means to pick up and deliver some of the food that we can’t use in the stores, but that’s still good food,” Thomas said.
Supporting small, local farms: Last fall, WMT announced an array of targets related to agriculture. In the U.S., the company promised to double sales of locally-sourced produce, so that it accounts for 9 percent of all produce sold by the end of 2015. Globally, WMT said it will sell $1 billion in food sourced from 1 million small- and medium-sized farmers in emerging markets by the end of 2015.
To achieve those goals, Thomas told me, WMT has to simplify its supply chain to deal directly with farmers and eliminate some middlemen. “The logistics aren’t as difficult as you might think,” she said. “The farmer can actually drop off produce at the distribution center or at the store.”
If all goes according to plan, WMT should be able to sell fresher, local food at lower prices, and eliminate some of the greenhouse gases generated by a global supply chain for food. Like the waste initiative, the agriculture initiatives mostly dovetail nicely with the culture of efficiency at Walmart.
Clean energy: To achieve its goal of being powered by 100% renewable energy, WMT has made its fleet, stores and distribution centers more efficient. But its commitment to wind and solar power has been limited because they cost more than electricity from fossil fuels. The report says:
During FY11, we successfully completed several renewable energy projects, including the installation of 35 solar projects in Arizona, California and Puerto Rico. Eight of the solar projects installed in FY11 utilized thin-film solar, which created manufacturing jobs and accelerated this new technology’s entry to market. We installed seven fuel cell projects in California this year and completed two microturbine wind projects on the parking lot light poles at the Walmart in Worcester, Mass., and at the Sam’s Club in Palmdale, Calif.
This is all to the good. By buying renewable energy in selected markets, WMT will help bring costs down. But because wind and solar power generally cost more than electricity from coal, nuclear or natural gas in most places, WMT can’t or won’t buy clean energy on a scale that matters. (If the company says in its report how much of its energy now comes from renewable sources, I couldn’t find it. I’d guess it’s well under 10% of WMT’s total energy spend, but I’m ready to be corrected.) Buying renewable energy would drive up its costs, with no tangible benefits to customers, and put the company at a competitive disadvantage, as the company says in the report:
In our efforts to ensure our operations are contributing to everyday low prices for our customers, it has sometimes been difficult to find and develop low-carbon technologies that meet our ROI requirements.
This, then, is where we run up against the limits of efficiency and, more broadly, what any company can reasonably be expected to do to become more sustainable.
More broadly, it’s a reminder that the rhetoric of green business — how green is gold, how green is green, how clean energy will generate jobs and growth — hasn’t always served the cause well. Sometimes, indeed often, “green” is more expensive than “brown,” or to be more precise, the full costs of “brown” (air and water pollution, GHG emissions) aren’t captured in its price. This is why policy matters. This is why we need to price carbon emissions into the energy economy.
Put another way, so long as environmental leadership is coming from Bentonville and not Washington, we’re in trouble.
Other Posts by Marc Gunther
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