CSR and Ethics in Business

Cod. 30281

Walmart Mini-Case 1

As early as 1989, Walmart attempted to label its products as “green” based on the suppliers’
own assessment. However, the initiative ended up a failure after some tagged products were publically
shown to be far from environmentally friendly. While other initiatives were maintained, the
environment quickly left Walmart’s list of strategic priorities.

By contrast, the 2005 sustainability campaign aimed to be long-lasting and embedded in the firm’s
activities. It all started in 2004, when environmental impacts appeared on the radar of the firm’s legal
and PR challenges. A consultant from Blue Skye pitched ideas about how to reduce them to Lee Scott,
Walmart’s CEO, and was entrusted with Walmart’s environmental impact assessment. With Blue Skye,
Conservation International and the Environmental Defense Fund, Walmart estimated its environmental
impact across 164 product categories on 5 dimensions: greenhouse gas emissions, air pollution, water
pollution, water use and land use. Thus, by 2005, the three priority areas of waste, energy and products
were identified. Overall, 50% of Walmart’s impact was related to food products. In October 2005, Scott
announced the launch of the company’s sustainability strategy. Consistent with the impact
assessment’s results, he defined 3 aspirational goals: produce zero waste, be fueled by 100%
renewable energy, and sell products that sustained people and the environment. He also insisted on
the need to consider the entire value chain to properly assess and reduce impacts.

To translate the general objectives into actionable plans, 14 sustainable value networks were created
around what Walmart considered its main environmental challenges. 4 on energy: greenhouse gas,
alternative fuels, energy, design construction and maintenance, global logistics; 2 on waste: operations
and internal procurement; and 8 on sustainable products: textiles, electronics, food and agriculture,
forest and paper, chemical intensive products, jewelry, seafood, China. Very few additional jobs for
sustainability were created as Walmart wanted to ensure sustainability would be integrated with the
firm’s everyday activities. But the networks were staffed with one or more external consultants to help
handle the workload. Additionally, the networks would together include hundreds of external members
such as NGOs, suppliers, academics, eco-friendly competitors and so on. The networks aimed to shape
Walmart’s new strategy, from creating value from products to creating value from relationships.

Concretely, networks went through a process to “engage, explore, and expand”. Engaging stakeholders
beyond traditional business partners; exploring products life cycle and environmental issues;
expanding by rethinking the company’s business model across the whole value chain. Each network
was asked to identify at least 6 quick wins, 2 innovation projects of 1 to 3 years and 1 game changer
which represented a radical shift from traditional ways to do business. For example, in the Textile

1Adapted from Walmart’s sustainability Strategy (A) and (B), 2010, Stanford Graduate School of Business, Ref OIT-
71 and OIT-71B..
sustainable value network, quick wins included messaging, education/training, post purchase care,
recovered raw material, packaging shift and chemical inputs; the innovation projects related to organic
cotton and alternative fibers; and the game changer involved the sustainability of the supply chain.

The sustainable shift was meant to be consistent with Walmart’s overall low cost strategy and generate
simultaneously saving and social and environmental gains. For example, reduced packaging allowed
cutting costs tremendously (e.g. $3.5 million saved in transportation of a single toy) and largely
improved fuel efficiency (doubled in 2015 compared to 2005) by reducing transportation . Walmart’s
objective was to “democratize” sustainability. The networks quickly produced results in terms of cost
savings, increased transparency and strengthened supplier relationships.

However, the main challenges Walmart faced related to the measurement of the impacts and the
definition of comprehensive sustainability scores across product categories in order to help
consumers’ purchasing decisions. Internally, Walmart could not reach a consensus about which social
and environmental dimensions to include in the sustainability score and how to weight them. The
company therefore launched a call for input from its suppliers in 2008. Again, the responses Walmart
received were totally inconsistent. Some dimensions spun across product categories, like packaging or
recycled content, but Walmart was wary of using a label based on a single dimension as it might be
perceived as a way to hide other information- in other words, greenwash. Thus, Walmart consulted
external experts. But once more, it seemed as if the single standard Walmart was looking for simply
did not exist. Finally, in 2009 Walmart launched a collective industry-level Sustainability Consortium to
develop shared standards. But rather than developing easily comparable labels, the Consortium ended
up putting 110 knowledge bases by product category over 2011-2015 2 . While they could inform
managerial decision-making, these files could not be used to uniformly communicate impact to
consumers as Walmart was hoping.

Walmart was more successful in collaborating with its suppliers to improve the sustainability of its
supply chain. In 2009, Walmart launched its Supplier Sustainability Assessment. It asked 100,000
suppliers to answer 15 questions on 4 areas: energy and climate, material efficiency, natural resources
and people and community. Walmart then established scorecards by product categories to help its
suppliers reduce their environmental and social impacts. By 2013, in the US, 200 of the largest
merchandising categories were covered by the scorecard initiative. Walmart announced that by the
end of 2017, 70% of its US products would be bought from suppliers using the scorecard2. Additionally,
buyers and sellers were put together in common teams and some sustainability objectives were
included in its buyers’ incentives systems. Buyers were expected to look for supplier innovations that
produced more sustainable goods at little or no additional cost.

Keeping in mind its objective to share all the information it had gathered with its consumers, Walmart
identified Sustainability Leaders among its suppliers on its website. But, although Walmart added a
statement to suggest it did not guarantee that the individual products were the most sustainable ones
in their category, the initiative was again considered as part of a greenwashing strategy by some critics.
Indeed, the Leaders were identified among Walmart’s network of low cost suppliers which may not
have represented the most sustainable pool of suppliers.

2Source: Spicer, Andrew, and David Hyatt. 2017. Walmart’s Emergent Low-Cost Sustainable Product
Strategy. California Management Review, 59(2): 116-141.

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Questions:
1. What does sustainability mean for Walmart?
2. Why does it matter for Walmart? Is it about protecting the firm’s reputation? Is it a way to create
value that can establish and maintain a strategic advantage?
3. What changes did the sustainability transition imply for Walmart?