Wednesday, March 3, 2010

Is WalMart green if its supply chain is?

WalMart recently revealed a campaign – on no less – to cut 20 million tons of GHGs from its supply chain. In fact, WalMart has been a sustainability leader for about five years; it one of the largest sellers of organic produce in the U.S. and has made both its fleet and stores more energy efficient. Now Walmart is leaning on its supply chain to get green by focusing on sourcing sustainable products. Can WalMart count the sustainability of its supply chain towards its own accomplishments? Sure. WalMart keeps some suppliers alive- it supports an entire network of commerce (too big too fail?). WalMart is a fantastic example of how critical marketpower can be in affecting rapid change, and of how creative a company can be in implementing CSR measures.

WalMart has an impressive sustainability record. One day in 2005, WalMart just decided to get environmental. Maybe it was the constant barrage of negative press about its tendency to kill local competition, or bad press around its labor practices. While those stories haven’t really waned, WalMart has exploded with environmental activity, which partly because of its size and marketpower, is ultra effective.

Now WalMart is applying its business model -buy so much of something that suppliers will agree to an ultralow price- to its sustainability practices. Few WalMart suppliers can afford to give up the volume of business WalMart offers, no matter what WalMart demands of them. Many suppliers wouldn’t even exist, let alone have a motive to buy green, except for WalMart’s commercial pressure. This is how WalMart gets the prices it does, and this is how they will accomplish the GHG goal they announced last week.

WalMart’s CSR is delightful not because it is a perfect company; there are plenty of WalMart critics. It’s because WalMart has thought its CSR, and particularly its sustainability initiatives, through in minute detail. It takes gains where it can, and thinks creatively; for example, it redesigned packaging so that more skus can be efficiently packed into trucks, saving trips. It has discovered how to use its core competency as a business to address social problems where it makes the most sense. The extension of business efficiency applied to social problems is the most productive form CSR can take. This may be why Walmart still gets criticized for labor minimalism; raising pay would hurt its business model. Where WalMart’s green initiatives are have a distinctly WalMart flavor- high volume, supply chain emphasis.

In the same way it makes sense for AT&T to have donated cell phones in Haiti, or for Johnson and Johnson to do so much work around sanitation, a natural first step in CSR is for companies to capitalize on preexisting strengths for the public good. Companies can often be extremely effective, like Walmart, by applying the strength of its core competencies toward a new purpose: doing good.

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