Norway’s Consumer Ombudsman has banned car manufacturers from claiming that their vehicles are green. Some of the strictest advertising guidelines in the world went into effect this week, prohibiting language which represents cars as being “green,” “clean” or “environmentally friendly.” So, I wonder what Norway’s Ombudsman would make of Wal-Mart positioning itself as green? If a car can’t be green, clean, or environmentally friendly, can the world’s largest retailer make such a claim? Is Wal-Mart guilty of greenwashing on a grand scale, or can they deliver on their green ambitions?
On Wal-Mart’s list of “Sustainability Efforts” are three ambitious goals for the company:
- To be supplied by 100% renewable energy
- To create zero waste
- To sell products that sustain our resources and environment.
One of the specific waste-reduction initiatives cited is a call for the improvement in packaging of all private label products within two years. Not content with simply improving the packaging of his own company’s products, Wal-Mart CEO Lee Scott recently told a conference of 250 CEOs that he also intends to hold them accountable for the carbon footprints of their own companies, and expects them to reduce their packaging as well.
Of course, not everyone is buying Wal-Mart’s good intentions. For years many have regarded the company as one of the “bad guys” intent on building a giant business on the back of cheap labor and cheap goods sourced from China. Last year the union-funded Web site walmartwatch.com dismissed Wal-Mart’s environmental push as an expensive “greenwashing campaign.” (Click here for article.)
Those at walmartwatch.com may have good reason for suspecting that the greening of Wal-Mart is a stunt intended to distract attention from other issues. But there can be no denying that if the retailer’s intentions are sincere, it can make a big difference. Wal-Mart has the purchasing power to make buying green a much less expensive proposition for ordinary people. Far too often, I’ve noticed that those little sections of organic produce in U.S. supermarkets contain mostly high-priced items of poor quality. No wonder nobody buys it. Until now, producers of “green” and organic products have been faced with a Catch-22: less efficient production processes result in higher prices, higher prices result in lower demand, lower demand results in slower sales which increase spoilage and drive prices up further. But by buying green and organic, Wal-Mart could change all that.
The change in strategy benefits both not only consumers, but also suppliers, who will be assured of demand for their goods. Talking to Amanda Griscom Little, in MSNBC’s Grist, CEO Scott states “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.”
Of course, Wal-Mart’s green initiative is not just altruistic. There is good business sense behind it too. “It is clearly good for our business,” said Scott in the same interview. “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.”
The benefit to the bottom line has been substantial. Last summer Fortune reported that by eliminating excess packaging on their private-label line of toys, Kid Connection, Wal-Mart saved $2.4 million a year in shipping costs, 3,800 trees, and one million barrels of oil. Fortune also reported that the sandwich balers installed in the stores to recycle and sell plastic have added $28 million to the bottom line.
While there was a good business case for Wal-Mart’s sustainability initiative, there was also a business imperative to change perceptions of the company and revitalize its image. Just a couple of years ago the news was full of stories about the retail giant’s problems: discrimination suits, local opposition to new stores, and a poor environmental track record. Sales were flagging and new competitors were on the horizon. While Tesco’s stated intention to launch its Fresh & Easy neighborhood grocery markets in the U.S. was unlikely to pose any immediate threat to Wal-Mart, it could have been one more reason for Wal-Mart to seek something to turn its fortunes around. Tesco and other European retailers have invested heavily in going green (see previous post), blazing the trail that Wal-Mart is now following.
In the article in Fortune, Scott admits that the sustainability program started out as a “defensive strategy” but is, in his view, “turning out to be precisely the opposite.”
That strategy has many people, and even some environmentalists, rethinking their stance toward the retailing giant. Sierra Club Executive Director Carl Pope states, “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.”
And Norway? Last year, Norway sold off all Wal-Mart shares from its $236 billion government pension fund, citing “serious and systematic” labor violations in several countries.
The good news for Wal-Mart is that Norway did not cite its poor environmental record, as it did in the case of Freeport-McMoRan for dumping copper tailings in a New Guinea river. But then, maybe the Norwegians are just being realistic. Just as no car can be green, can any business really be environmentally friendly? Let me know what you think.
Tags: Millward Brown, Nigel Hollis, Wal-Mart, green, organic, greenwashing, green washing, sustainability, Lee Scott, walmartwatch.com, , environmentally friendly
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October 18th, 2007 at 3:13 am
In a recent meeting reviewing Sir Martin Sorrells call for WPP to become green we jokingly sugested that he can take a leaf out of the South African Black Economic Empowerment strategy, which is a really clever piece of legislature.
Quite simply:
There are five pillars (procurement, shareholding, community contribution, enterprise development, etc.)that a company is audited on and awarded a ‘point out of 100′.
When a company buys from one that has a high rating it gets a higher score on the Procurement criteria than when it buys from one with a low rating. This again benefits the ratings of the companies that buy from them, etc, etc. Ultimately the Civil service has to buy from companies with high ratings, thereby making it desirable for everyone to get high ratings.
Obviously governments can do the same and simply alow a small tax deduction for an high Green-Rating. Since this is now an audited figure there can be little doubt about whether the claims made by a company is in doubt - or even their intentions.
For a company like Walmart to unilaterally set green targets for its suppliers ahead of the basic profit motive seems laudible, but I’m sure the profit motive will survive in the end.
October 18th, 2007 at 5:30 am
Hi Erik, nice to see you are still reading the blog.
The rating system sounds both simple and effective.
I am sure the profit motive will survive but the interesting point to me was that Wal-Mart has found going green can also have a positive impact on the short-term bottom line not just consumer perceptions. The CPG companies may well find the same thing. Super-concentrated detergent may look less compelling on the shelf but it takes less packaging and costs less to ship.
Nigel
October 18th, 2007 at 5:34 am
Wal-Mart has indeed been changing the debate. Rather than headlines on its most recent labor setback (lost a case in California last week), much of what is being written about them is about their environmental initiatives. At first I tended to believe this to be a cynical attempt to deflect attention from its labor practices and how it forced small companies out of business and displaced so many American workers. But as with many aspects of Wal-Mart’s strategy, this was a master stroke. Having Al Gore talk to their shareholders last year took the fight into the heart of “blue-state Wal-Mart haters”. In one move the most powerful commercial entity in the world began to wield power to improve the environment in ways in which our government couldn’t even envision. I still lack fondness for Wal-Mart, but I continue to admire them.
October 18th, 2007 at 7:04 am
“Just as no car can be green, can any business really be environmentally friendly?”.
I think the answer for a multinational corporation is no. But I wonder if the consumer expectation is that a company should be all-green. In terms of Wal-Mart, if they do decrease packaging, then they’ll save money and in doing so, be good for the environment (and be perceived as green).
My question is in organic produce. You’re right that organic is more expensive and of a lesser quality (although it across the board tastes better because it’s fresher). However, Wal-Mart could change the game one of two ways:
1. Offer organic produce from local farms at discount prices. (This would create a purchasing nightmare)
2. Game the regulations. In effect, get congress to slowly redefine ‘organic’ so that it’s economically more feasible to offer it. IE, agree that ‘organic’ lettuce from China is organic here. (this would be a smart business strategy).
If it’s #2, then it’s bad news for farms that currently offer organic food now for a higher cost. Because if the rules change, they can’t compete. And we consumers will be the worse for it.
October 19th, 2007 at 1:51 am
Dear Nigel,
Interesting post as usual.
The only thing this POV overlooks is taht Walmart is one of the top performing corporates in the world. If they have got there, the comopany must have some degree of foresight & business sense.
Yes, they run a tight ship and that has landed them in the soup a few times but they do the right things at the right time.
In my view, it is a good business move which makes sense from the brand’s point of view & just had to be done. That it would add to the bottomline straight away is a bonus.
The good point from the enviornment point of view that a brand like Walmart can make a difference.
Cheers
Sandeep
October 19th, 2007 at 7:17 am
Thanks for the comments. Couple of thoughts on them as follows.
Matt, I believe I have read that Wal-Mart is sourcing regionally if not truly locally. Apparently it is still causing turmoil in the organic industry and some producers have been accused of cutting corners in order to meet demand but from what I have read the last thing Wal-Mart needs is to be called out for “gaming the system.” Their credibility would be set back to zero.
Sandeep, I was not suggesting Wal-Mart is not a savvy business operator, they clearly are, but it takes more than a business and low prices to build a real brand. Phil Herr tells me that 15-30% of shoppers are actively seeking organic produce these days and so this has to be a winning move for them provided they follow through on their goals.
October 22nd, 2007 at 12:05 am
Hi Nigel,
I would tend to think that they do have a Brand despite the core promise of low prices.
They have been trying to move up the value chain (which has led to a lot of confusion amongst the consumers) and also work on improving the corporate / brand image.
The enviornment platform gives them the platform to move up the value chain while improving their image.
I would have expected them to have moved much earlier on this as enviornment isn’t a new topic in US.
Cheers
Sandeep