The Gunther Report

Is Walmart’s index the best thing since sliced bread?

This is the second in a three-part series about Walmart’s supplier sustainability index. Part One can be found here.

Can Walmart change the way wheat is grown in America?

The company is trying to do just that. Here’s how.

Start inside a Walmart store in Laurel, Md. On sale here are nearly 40 brands of flour, many more varieties of bread and countless other products made from wheat, including cookies, cakes, crackers and pancake mix.

In theory, Walmart has influence over every one of those products. The giant retailer (2012 revenues: $469 billion) sells more groceries than any other supermarket chain. Brands such as Pepperidge Farm, Arnold and Sara Lee need access to its shelves.

To make agriculture more sustainable, Walmart has begun asking its suppliers probing questions about the grains they use. What percent of your grain is provided by suppliers that track fertilizer use and have goals and a program in place to optimize fertilizer use? What percent of your grain is provided by suppliers that monitor soil fertility and have goals and a program in place to minimize soil degradation and erosion? What about fuel use? What about water? What about pesticides? What about managing biodiversity?

Whew.

For the flour and bread makers, this is new territory. Most never deal with the farmers who grow their wheat. They buy from middlemen.

“When you run into production agriculture, with thousands of growers, the product is commingled, it’s by definition a commodity,” says Fred Luckey, a retired Bunge executive who is now chairman of Field to Market, a nonprofit group working with Walmart.

Now they have to did deep into their supply chains, if they want to stay in the good graces of Bentonville. No company has tried anything like this before.

“You’re looking out over a snowfield where there are no footprints,” Luckey says.

That helps explain why Tim Robinson, the senior buyer for baking commodities at Walmart, joined a tour of Kansas wheat fields organized by the Wheat Quality Council, an industry group, and invited a few suppliers to join him. “We were trying to understand where it all starts, upstream,” he told me. “Some of our suppliers don’t know their impact, back to the source.” Walmart isn’t asking its suppliers to trace their wheat back to an individual farmer, but the company is taking a broad-based, system approach to improving sustainability on the farm.

Over time, Walmart and its partners would like to identify farmers who have embraced sustainable production methods, see whether those practices can be spread and, ultimately, benefit Walmart, its customers and the environment. Using less fertilizer would be one place to start.

“There’s a whole host of things people can do that would allow them to reduce their use of fertilizer while maintaining their yield,” Robinson says. “That should allow them to be more successful, and pass some of the cost savings along, while doing what’s good for the world.”

Robinson’s work on baking commodities is a small part of Walmart’s supplier sustainability index, which is being rolled out to thousands of global suppliers. We’re taking a look at his work today to illustrate the scope and complexity of this undertaking, and to see whether it is having much impact.

Robinson, who is 29 and has worked at Walmart for eight years, is excited about the opportunity to have an impact. The company, he says, recognizes that a growing world population and climate change will greatly affect food supply, place increasing pressure on our natural systems. By email, he said:

Walmart represents approximately a third of the U.S. grocery industry, roughly half of our U.S. sales come from food, and approximately 90 percent of the impact Walmart has on the environment takes place in our supply chain.


It’s hard to know what suppliers think about all this. Most declined to talk. Here, for example, is a statement from a spokeswoman for General Mills:

We participate in Wal-Mart’s sustainability index as we share a clear and common interest in advancing a more sustainable global supply chain. At General Mills, we have been working toward this for some time and continue to do so via our sustainable sourcing strategies….

Blah, blah, blah. King Arthur Flour, another supplier, served up similar pabulum. They’re ducking the question: Are Walmart’s efforts making a difference?

There’s no way to know why, but we can speculate about a couple of possibilities. The first is that Walmart is shaking up the flour and bread industries, forcing them to take sustainability more seriously, and that the suppliers, particularly big brands like General Mills, don’t want to admit that it took a jolt from the outside to get them going. The second is that Walmart is having little or no impact, and the suppliers don’t want to say that for fear of offending an important customer. It’s also possible that the suppliers regard all this meddling from Walmart as a big-time pain in the butt, and you know they don’t want to say that.

Not all suppliers are enthusiastic about the index, Robinson acknowledged. “You can definitely sense from some folks that they’re thinking, uh, this is more busy work.” But other companies are eager to work with Walmart and while some that are sustainability leaders “were ecstatic….they’re getting credit where credit is due.”

Among the enthusiasts is Wheat Montana, a family-owned, vertically integrated grower, miller and baker that supplies flour, bread and pancake mix to Walmart. “You like those pancakes? I can take you out back and show you where we grow the wheat,” says Bo Maurer, the company’s head of sales. “Walmart loves to hear that. Their customers are getting flour from a farmer. That’s a compelling story.” Wheat Montana is expanding to deliver organic flour and bread to Walmart, among other retailers.

The supply chain involving agribusiness giant Cargill is more opaque. Cargill owns Horizon Mills, which buys wheat from cooperatives and the owners of grain elevators — not directly from farmers — and then supplies flour to Walmart and many of its other suppliers. Jody Longshore, a former marketing manager at Horizon who is now director of corporate responsibility for Cargill, told me that Horizon has done a lot around eco-efficiency on its own — investing in energy efficiency, reducing the weight of packaging, recycling, and curbing shipping miles — and that Walmart’s index would push the company, and its partners, to do more. “They’re trying to take a systems approach to the products that end up on their shelves,” Longshore said.

That’s where the Field to Market initiative will be key. The coalition of environmental groups (The Nature Conservancy, World Wildlife Fund, Environmental Defense Fund, etc.) and industry (Walmart, Cargill, Unilever, Coca-Cola, etc.) says it aims to “create opportunities across the agricultural supply chain for continuous improvements in productivity, environmental quality, and human well-being.” Among other things, it has developed a free online tool, the Fieldprint Calculator, to help growers analyze their environmental impact. “If you have 20 growers, you can see based on the indices we use how each grower stacks up against the next,” says Luckey, the group’s chairman.

Robinson, too, will measure his suppliers against one another. Just how he will reward the leaders or nudge the laggards isn’t clear. “I’m not going to make a decision that’s going to increase costs to our customers or decrease quality,” he says. “Really, what we want to achieve is continuous improvement.”

Image by Nagy-Bagoly Arpad via Shutterstock