Wal-Marts Environmental Sustainability Program - Essay Example

International Sustainable Business: Wal-Mart’s Environmental Sustainability Program Wal-Mart was founded by Sam Walton in 1962 as a discount store at Rogers, Arkansas. It is the largest and most successful retailer in the US today with “8,446 stores and club locations in 15 countries employ more than 2.1 million associates, serving more than 176 million customers a year” (Wal-Mart: History, 2010, par. 5). Wal-Mart is well known for its every day lowest prices products. It manages to provide these low costs because of its well optimized supply chain management. Furthermore, Wal-Mart has also come to be known for its initiatives in sustainability. The company started this initiative in 2005 as Lee Scott, the CEO, believed that “being a good steward of the environment and being profitable are not mutually exclusive. They are one and the same” (greenhrm.org). Thus, the company recognized the importance of going green on sustainability much before the others in the business. Since Wal-Mart is a retailer of a wide variety of merchandise products, management’s thrust into environmental sustainability comes in the form of ensuring that the products they sell should conform, not only to the highest standards of quality, but more so, to comply with the products’ impact on the environment. Recently, Wal-Mart initiated a program which would label each product they sell according to an eco rating, which aims to “measure the environmental friendliness” of the product/s (Whitney, 2009, par. 1). The program would attest to the company’s commitment to adhere to its sustainable strategies. The information provided by the suppliers of the products would be encoded in the company’s database and an eco rating system would be available to the consumers, as required. In this regard, the objective of the essay is to proffer an analysis of the company’s environmental performance and how this could be enhanced by the new service. Likewise, the proposed labelling service would be analyzed in terms of enhancing environmental sustainability and the benefits it would accord to its customers, both in the short-term and in the long-run. Proposed Labelling Service for Eco Rating System In a report written by Rosenbloom (2009), the proposed system envisioned by Wal-Mart is described as creating “a universal rating system that scores products based on how environmentally and socially sustainable they are over the course of their lives. Consider it the green equivalent to nutrition labels” (par. 3). The mechanics of the system would initially require all their suppliers to answer 15 simple questions to determine the sustainability index of their respective products and the impact of these products to the environment. The copy of the supplier assessment questions are shown as Appendix 1. Daniel Goleman (2010) clearly indicated the thrust of the new program, to wit: “Wal-Mart has handed the environmental movement a new tool for ameliorating the human footprint: using an emerging generation of information systems to create market pressures to upgrade the ecological performance of commerce and industry. This strategy entails making life-cycle-assessment data for products transparent — that is, labelling them with a sound, independent rating so shoppers can easily take the ecological impacts into account as they decide what to buy” (par. 3). The benefits of the proposed system would be in terms of the following: (1) consumers would be given accurate information on the products they intend to purchase according to ecological impacts; (2) suppliers would be given the chance to assess their products’ sustainability and environmental friendly compliance; (3) suppliers could improve their current products’ raw materials and upgrade them, as required, given the factors conforming to environmental sustainability; (4) suppliers that could not comply with the required standards would ultimately be dropped from Wal-Mart stores worldwide and thereby assure customers that products that comply with the eco rating system are given shelf space in the company’s stores; and (5) the move would pave the way for other retail merchandisers nationally, and eventually, globally to follow the same strategy for environmental and consumer protection. Further, various stakeholders would benefit from this proposed system. The move by Wal-Mart would provide the impetus for an all-in-one rating which would eventually be used by various business organizations globally. According to Goleman (2010, par. 9), “the index will produce a sustainability rating label that retailers will post as a single number or symbol next to an item’s price tag. The Sustainability Consortium, which is developing the index and is centered at Arizona State University and the University of Arkansas, envisions the system as a new industrial standard, one that many retailers beyond Wal-Mart will adopt, and that companies and other organizational purchasers will use in business-to-business buys”. The prototype of the system can be seen from GoodGuide.com “launched earlier this year, aggregates more than 200 databases — from the global warming evaluations of companies compiled by ClimateCounts, to government listings of toxic chemicals — into a single rating on a 10-point scale” (Goleman, 2010, par. 10). As much as there are vast advantages to the program, the disadvantage is the bulk of the work to do this labelling system and the cost associated with it. Further, the time frame for implementation, due to the bulk and nature of work for the program is within five years (Miner, 2009, par. 2). Therefore, the transition period is still long and anything can be developed in the market by other competitors through technological breakthroughs and advancement. Current Environmental Performance of Wal-Mart Looking at the core areas where the company has come under fire from environmentalists is the pollution caused by the massive buildings and parking lots of the stores. The major problems are created by the way the company operates and the size of its operations. The company builds massive superstores which work 24 hours a day. With such operations the company uses 96,500 British thermal units of energy per day which is almost three times the average use by a residential home in the US each year (walmartwatch.com). This is almost double the rate of its competitors’ consumption as they work only 12-14 hours a day. Besides this, they also have much lesser number of stores as compared to Wal-Mart. As per the company’s estimates, it was responsible for 15.3 million metric tons of CO2 emission in 2005 which is equivalent to emission by a country like Chile (walmartwatch.com). With all its planning to reduce CO2 emission, the company will be able to reduce 2.5 million metric tons of emission by 2013. With the rate at which it is growing its stores and the electricity consumption of these new stores, the company will actually add 28 million metric tonnes of new emissions within the same period. Recommended Strategies Concurrent with the eco labelling system that is to be fully implemented within the five year projected period, Wal-Mart could apply the following strategies to minimize the destructive effects of their stores’ operations to the environment: (1) a web-based delivery service can be provided by the store which will help in reducing the requirement of trips to the store; (2) reorientation of organizational focus on green product promotions; (3) reorganization of inventory management; and (4) emphasis on the benefits of zero waste. A web-based delivery service can be provided by the store which will help in reducing the requirement of trips to the store. The delivery of products will have a turnaround time based on the distance of the location from the nearest store. A re-orientation and focus on green product promotion basically stresses three areas – address a relationship between a product/service and the biophysical environment, promote a green lifestyle and present a corporate image of environmental responsibility (Dash). The basic 5 benefits of any green product are cost effectiveness and efficiency, health and safety, performance, symbolism and status and convenience (Ottman, Stafford and Hartman, 2006). The extra pricing of the service can be justified by the overall saving and convenience to the customer. The web-purchasing will be a differentiating factor as compared to the other stores which should be used to target new clients. The incentive schemes attached with web-purchasing for the clients can be used as a market penetration strategy. Likewise, the company will need to reorganize its stock keeping activity. With lesser walk-in customers, the need for huge stores will be eliminated and more inventory keeping space will be required. Similarly, the staffing requirements will differ. There will be change in logistics as the products can travel directly from the warehouses to the customer location rather than the stores. Finally, there are no reconsumption implications in this service as it is only a web based service. We do not generate any waste at the end of its life-cycle as it will be modified based on the situation when the service becomes redundant due to changes in technology. Conclusion Organizations like Wal-Mart which are committed to incorporate policies on environmental sustainability in the workplace have been proven to be successful in their endeavours. By continually monitoring changes in the environment, Wal-Mart actively addresses relevant factors that impact its consumers, both in the short-term and in the future. Total Word Count: 1,500 words Appendix 1: SUSTAINABILITY INDEX: SUPPLIER ASSESMENT QUESTIONS “Energy and Climate: Reduce energy costs and greenhouse gas emissions 1. Have you measured your corporate greenhouse gas emissions? (Y/N) 2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)? (Y/N) 3. What are your total greenhouse gas emissions reported in your most recently completed report? (Enter total metric tons CO2e, e.g. CDP6 Questionnaire, Section 2b – Scope 1 and 2 emissions) 4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets? (Enter total metric tons and target date; 2 fields or leave blank) Material Efficiency: Reduce waste and enhance quality Scores will be automatically calculated based on your participation in the Packaging Scorecard in addition to the following: 5. If measured, please report total amount of solid waste generated from the facilities hat produce your product(s) for Wal-Mart Inc for the most recent year measured. (Enter total lbs) 6. Have you set publicly available solid waste reduction targets? If yes, what are those targets? (Enter total lbs and target date; 2 fields or leave blank) 7. If measured, please report total water use from the facilities that produce your product(s) for Wal-Mart Inc for the most recent year measured. (Enter total gallons) 8. Have you set publically available water use reduction targets? If yes, what are those targets? (Enter total gallons and target date; 2 fields or leave blank) Natural Resources: High quality, responsibly sourced raw materials 9. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices, and product/ingredient safety? (Y/N) 10. Have you obtained 3rd party certifications for any of the products that you sell to Walmart? If so, from the list of certifications below, please select those for which any of your products are, or utilize materials that are, currently certified. People and Community: Responsible & ethical production 11. Do you know the location of 100% of the facilities that produce your product(s)? (Y/N) 12. Before beginning a business relationship with a manufacturing facility, do you evaluate their quality of production and capacity for production? (Y/N) 13. Do you have a process for managing social compliance at the manufacturing level? (Y/N) 14. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements? (Y/N) 15. Do you invest in community development activities in the markets you source from and/or operate within? (Y/N)” Source: (Rosenbloom, 2009) References Dash, SK. Green Marketing: Opportunities & Challenges, [Online]. Available at: http://www.coolavenues.com/know/mktg/sanjit-green-marketing-1.php [Accessed 19 August 2010]. Goleman, D. 2010. Green Intelligence: Toward True Ecological Transparency, [Online]. Available at: http://www.danielgoleman.info/2010/01/03/green-intelligence-toward-true- ecological-transparency/ [Accessed 20 August 2010]. greenhrm.org, Wal-Marts sustainability strategy, [Online]. Available at: http://www.greenhrm.org/greentools/greencases.html [Accessed 19 August 2010]. Miner, T., 2009. The Wal-Mart Eco Label, Coming to a Store Near You, [Online]. Available at:http://www.sustainablelifemedia.com/content/story/strategy/walmart_ecolabel_coming_tostore_near_you [Accessed 19 August 2010]. Ottman, A., Staffor, ER and Hartman, CL, 2006, Green Marketing Myopia, Heldref Publications, [Online]. Available at: http://www.greenmarketing.com/files/articles/Stafford-MyopiaJune06.pdf [Accessed 20 August 2010]. Rosenbloom, S 2009, At Wal-Mart, Labeling to Reflect Green Intent, [Online]. Available at: http://www.nytimes.com/2009/07/16/business/energy-environment/16walmart.html [Accessed 19 August 2010]. walmartwatch.com, Is Wal-Mart Really a Green Company? [Online]. Available at: http://walmartwatch.com/img/blog/environmental_fact_sheet.pdf Walmart Corporate. (2010). History [Online]. Available at: [Accessed 20 August 2010]. Whitney, L., 2009. Wal-mart to label products with eco rating, [Online]. Available at: http://news.cnet.com/8301-11128_3-10288186-54.html [Accessed 20 August 2001]. Read More