An interview with Wal-Mart CEO H. Lee Scott
Last week, Wal-Mart joined leading energy executives in their startling call for mandatory caps on greenhouse-gas emissions. The heart of this monolithic retail Grinch grew three sizes that day — or so it seemed to many environmental Who’s.
For many enviros, the name “Wal-Mart” has always triggered a shudder. The world’s biggest retailer has been charged with exacerbating suburban sprawl, burning massive quantities of oil via its 10,000-mile supply chain, producing mountains of packaging waste, polluting waterways with runoff from its construction sites, and encouraging gratuitous consumption. (And those are just the environmental complaints.)
But it’s precisely Wal-Mart’s size and reach that could make it a powerful force for good for the planet, say market observers and a growing number of activists. The company controls so much of the retail market, and has such sway over manufacturers, that any green initiatives on its part have huge ripple effects. And it’s certainly CEO H. Lee Scott’s intention to make waves.
In October, Scott announced a preposterously ambitious goal to transform Wal-Mart into a company that runs on 100 percent renewable energy and produces zero waste. Since then, he has impressed greens with specific commitments to cut the corporation’s greenhouse-gas emissions by 20 percent over the next seven years, double the fuel efficiency of its truck fleet within 10 years, reduce solid waste from U.S. stores by 25 percent in the next three years, and double offerings of organic foods this spring, selling them at prices more affordable to the masses.
Enviros hope Wal-Mart will have the same game-changing effect on mainstreaming environmental strategies that it has had on reducing prices. “Wal-Mart’s new commitments to increase efficiency and reduce pollution and waste are important first steps for a company that has such a profound impact on our environment,” Sierra Club Executive Director Carl Pope said in a public statement. “More companies should take these positive steps toward safer and healthier communities.”
Amanda Griscom Little recently spoke with Scott about his vision for “democratizing sustainability” and listened to his pitch about how green strategies will help fatten Wal-Mart’s bottom line.
Six months ago you outlined long-term goals to make Wal-Mart a company supplied by 100 percent renewable energy, creating zero waste, and selling products that sustain our resources and environment. Tell us what motivated you to set those goals.
I think two things happened. One, as we look at our responsibility as one of the world’s largest companies, it just became obvious that sustainability was an issue that was going to be more important than it was, let’s say, last year, and the years before. I had embraced this idea that the world’s climate is changing and that man played a part in that, and that Wal-Mart can play a part in reducing man’s impact. We recognized that Wal-Mart had such a footprint in this world, and that we had a corresponding part to play in sustainability.
On a personal level, as you become a grandparent — I have a granddaughter — you just also become more thoughtful about what will the world look like that she inherits. So I think it was a confluence of both the personal side and the business imperatives that at least drew me to be interested in it.
Were there bottom-line motives as well?
As I got exposed to the opportunities we had to reduce our impact, it became even more exciting than I had originally thought: It is clearly good for our business. We are taking costs out and finding we are doing things we just do not need to do, whether it be in packaging, or energy usage, or the kind of equipment we buy for refrigeration in our stores, that there are a number of decisions we can make that are great for sustainability and great for bottom-line profit.
Let’s take one of these examples and drill deeper into the bottom-line opportunities. Do you have to make investments on the front end that are eventually recouped?
Well, let’s start with packaging. It does not require a big investment to reduce the amount of packaging; what it does require is a different mind-set. We have reduced packaging on any number of private-label lines, which in turn has caused us to reduce the number of containers, the amount of energy that is used to create the packaging, and the amount of energy that was used to transport the larger package into our stores. Likewise, there has been a mind shift in the purchase of transportation equipment that may cost a bit more up front but pays energy-saving dividends in the long run.
And these savings, in turn, translate to lower costs for your customers?
Yes. Wal-Mart has always prided itself on being the low-cost supplier to our customers, working men and women. In some cases that carried over into decisions to buy equipment that cost less from a first-cost standpoint but not from a life-cycle standpoint — energy use and total maintenance cost and so forth. So those really weren’t good decisions whether you were focused on sustainability or not. They were wasteful to the company and they were wasteful to the environment.
What are the specific targets you’ve set for improving your environmental performance?
We will be investing approximately $500 million annually in technologies and innovation to do the following: Reducing greenhouse gases at our existing store base around the world by 20 percent over the next seven years. Designing and opening a viable store prototype that is 30 percent more efficient and will produce up to 30 percent fewer greenhouse-gas emissions within the next four years. Reducing solid waste from U.S. stores by 25 percent in the next three years. Increasing our truck fleet efficiency by 25 percent over the next three years, and doubling it within 10 years. If implemented across our entire fleet by 2015, this would amount to savings of more than $310 million a year.
Do you have a time frame for the 100 percent renewable energy target?
What I wanted to lay out were not just incremental goals but aspirational goals. The technology does not exist today to allow Wal-Mart or any company to achieve such goals in total. But we want people to understand that this is the direction this company is going.
Is the size of your company an advantage or disadvantage in this pursuit?
Because of our size, it enables us to help create markets for clean technologies that exist today, but don’t yet have fully established markets. If Wal-Mart started using or selling those items all of a sudden, there would be enough scale that those would be viable alternatives. So I’m always asking, how do I work with people, whether it be Jeff Immelt at General Electric or John Browne at BP, to use our scale to help propel an industry so that the production of that tech[nology] or product is now affordable for other people? I ask, what happens to the solar-panel market if Wal-Mart makes a large commitment to solar panels? What happens to the cost of compact fluorescent light bulbs or green building materials? Wal-Mart is one of the largest construction companies in the US, so if we start using a specific building material, does it then become more affordable for everyone?
Not to mention organic products — you are becoming one of the world’s biggest distributors of organics, right?
Yes, we are doubling our selection of organic products. I think we have the ability to allow people who can’t afford to pay more to participate in sustainability in a way that they can’t actually afford to today. The bigger theme here is democratizing sustainability. In some ways the shift toward sustainable lifestyles has thus far been stratified based on income or education levels.
Wouldn’t Wal-Mart’s shift toward sustainability require a substantial rethinking of your supply chain, given that you have one of the most extensive supply chains in the world?
You know I think clearly there will be challenges there. But today I will tell you our focus is more on the size of the products for the moment, which has impacts on the energy intensity of our supply chain. So if you took a Unilever washing machine product and made it a third the size that it was before, you reduce the number of trips by a third. Or take concentrated laundry detergent — you get more value in a smaller container. We call these VPIs — volume-producing items. We give the producers of VPIs confidence that we will give these products priority on our shelves and help customers understand their value. So we’re taking affirmative action to sell more sustainable products.
Wal-Mart caused many a jaw to drop last week when it joined energy leaders in a public request for climate-change regulations. What made you decide to take this stand?
Global warming is real, now, and it must be addressed. I have been out making trips to learn about carbon sequestration, I have been in discussions about carbon trading and carbon caps, and I understand the importance of a properly structured market-based system. I have advisors on all these matters. But at this point I would tell you that I still have much more to learn than what I currently know.