Wal-Mart's Journey Toward Sustainability and Greater Value

Wal-Mart's Journey Toward Sustainability and Greater Value

Greener by Design 2009
Rand Waddoups is senior director of Business Strategy and Sustainability for Wal-Mart Stores Inc. Almost four years ago, Wal-Mart announced three major goals that have since driven the company's operations internally and externally. Today, Rand gives us an insider's update on Wal-Mart's efforts toward sustainability, it's progress and next big challenges.

Leslie Guevarra: Rand, thank you very much for being with us today.

Rand Waddoups:
Thanks for having me.

LG: We appreciate your coming to speak with us about Wal-Mart. The firm did something radical in 2005 -- it set some unprecedented goals: It set a target for having 100 percent renewables, for absolutely zero waste and to put products on the shelves that sustain the environment ...

RW: I'll tell you ever since that speech in October of 2005 when our CEO laid out a foundation for what our big goals would be, it's been amazing to watch this company progress.

It's been amazing to see that Wal-Mart is very good at eliminating waste naturally, and so I'll start out with that waste goal. We've made a lot of progress with regard to first measuring how much waste was actually being in our stores, and I'll tell you, we were a little surprised at how much value there was in our trash cans. And so from that angle we've spent quite a bit of our time over the last couple of years since 2005 really understanding what was going in our trash can back then, how we could develop some value out of that, and therefore, obviously, when you can get value out of your trash, diverting those waste streams and turning them into new things is really exciting.

We've done things like take some of our old plastic products that are brought back to our stores as either damaged or in some way returned, and when those get broken down into plastics, we're now shipping them off to Bissell, and they're now turning them into vacuum cleaners. We've discovered that there are a lot of plastics in our trash that most people would just throw away and put it landfills, but we've actually managed to turn them into other new kinds of products like stepping stools. There's actually a company in Texas we're working with to take some things like our old oil bottles, and oil bottles are difficult to use because they're coated with oil on the inside --

LG: (Laughter) Exactly.

RW: -- but we're making railroad ties out of these now. It's just been really fun to take a look at all of the things that you just think of as "of course that goes in the trash can" and figuring out new ways to create value with those so that they can turn into new products, and even in some cases, things we sell on our shelves again later. We decided that would be our waste goal.

And some of the fun things we've done there on our energy side ... First of all, we've set some really lofty goals around reducing the amount of energy in our stores, because being able to get to 100 percent renewable energy requires first that you go back and look at how much energy are you using. And so we've got some prototypes that we've put out there that are very aggressive in trying to reduce energy.

In fact, one in Las Vegas is up to a 40 percent reduction in energy use from the stores we were building back in 2005 -- not, you know, super-inefficient stores from 30 years ago, but literally our best, high-quality, super-efficient stores from 2005. This store is 40 percent more efficient than that one. And we've been able to make a lot of progress in doing a lot of the things that truly our customer's don't really see, but the stuff that makes a huge difference in our energy load, and one of the coolest things about that is that we've been able to do it in a way that's saved us a ton of money on our electricity bills. And it's been exciting, one, to be able to get that kind of progress with regard to energy efficiency in stores, but two, because we're putting a lot of money back to the bottom line with that ...

We recently announced an agreement where we're purchasing a lot of wind from Texas. We've done a lot of work with solar. We've even started putting our toes in the water and doing some small wind, micro-wind, projects in our own stores including one where we're trying out a windmill on top of a light pole, which is a really fun kind of way to think about how to produce energy at the store.

Our final goal is around products. If we work on really measuring and figuring out what more sustainable products are, we really learn a lot about how to take sustainability to the next level in what we're showing our customers.
RW: We're excited about small wins and some incremental things like our compacted laundry detergent where we're taking things that are pretty simple -- like taking the water out of a detergent product, and therefore, obviously, being able to shrink the bottle down by about a half the size, you're saving a whole bunch of resources, a whole bunch of transportation miles in doing so.

We're fundamentally reshaping what a category is, and how we sell things, and why we sell them the way we do. We recently became the largest purchaser of organic apparel in the world. We've looked beyond just the normal things and really tried to study also how we make a big impact. And so we looked at -- going back to that Tshirt example, the apparel example -- we've looked at some opportunities to start to wash things more in cold water, because as we started to really measure out the impact for the T-shirt, we discovered that one of the most impactful things we could do is help our consumers not have to wash those T-shirts in hot water.

And so working with our partners in Procter & Gamble and with Tide Coldwater as a solution, and working also with our apparel manufacturers to come up with garments and towels and bath rugs and things that can be washed in cooler water and come out just as clean, we've been able to make some progress in some of the things that may not be the first things you think about when you think about going in and making impact on a product -- but are actually the places where we're going to make the most substantial, most long term impact.

LG: Would you develop the idea of how Wal-Mart leverages its market influence in getting things, not only into its stores, but also out into the greater market that are actually doing some greater good. You mentioned detergent, and you mentioned the organic products like apparel. Are there other things as well?

RW:
The reality is that the list is endless. I have a really fun job at Wal-Mart Stores Incorporated because one of the things that I get to do is hear the stories of our merchants every day, the things that they're doing, whether they be small or large, to be able to change the world. You know, our electronics area is very much focused right now on reducing the energy use of its products, and it's really exciting to see how much progress they're making. We set a goal just a year and a half ago to be able to reduce the energy use of our television sets by 30 percent, which is a pretty lofty goal when you consider it was really only a year and a half ago, and we're on our way; we're going to meet that goal.

We've done things like set goals around -- the electronics merchants set goals around -- selling RoHS-compliant electronics as opposed to normal electronics, and you know, those all really just started with some simple questions to suppliers. On the one hand, I'm really proud of our buyers for the questions they're asking and for the decisions that they're making with regard to their categories, but on the other hand, I'm really excited and proud of our suppliers. They've really stepped it up. We've learned just how much many of our suppliers are doing.

(Through) these conversations that we're now having with our suppliers about making a huge difference because of our scale and taking the things that only Wal-Mart can do because we're buying so much products into their products -- or into the innovation cycle of their products -- we're learning that because of this, we have a lot more partners than we'd imagined. People like 3M were doing this well before we were in this space and have taught us a lot. Because of our discussions around sustainability, it's opened up a new way to think about our relationship with those suppliers and what we can all do together.

LG: Please talk to me about how the company manages to stay ahead of the curve. Is it just the goals? Is it building in the engagement, not only with your suppliers and with your business partners but with people out in the industry? Are there more factors?

RW: That's a really good question, and I'll tell you that one of the best things about sustainability is that as soon as you start into it, you realize that it's impossible to know everything. (Laughter) It's impossible to truly be an expert in sustainability because it's huge. And so what you do is you immediately start to reach out to more and more people, and you realize the number of stakeholders that want to help you in this space -- non-governmental organizations, the government, industry organizations, other suppliers, your own people who are really excited about this topic.

RW: All of these people start coming to you and saying, "Wow, we can go make a difference like this, and I've got ideas, and we can do this together." That openness of dialogue has really changed the game for us, and really, that's how we're staying ahead as it relates to sustainability, as it relates to a lot of our business decisions today. We are innovating differently than we've ever done before, because we get to hear from our stakeholders, and they teach us, and they give us new perspectives that really are advantageous to our business.

LG: This sounds so much more collaborative than the traditional business model. Is this the way business will be going entirely, or is this simply the sustainability core?

RW: You know, I can't help but think that this is the new model for how business will be done, and I don't think by any means was it a model that Wal-Mart created or anything like that. I would never say that the credit is ours for it, but I really believe that this networking style with the way the world has become so flat -- as you know, some very smart authors of recent months like Thomas Friedman have said because of the flatness of the earth, because of the fact that the connections between people are so much better than ever before this ability to learn from anyone, anywhere at any time and -- oh, by the way, do it with extremely mobile devices where it's no longer hard for me to learn this stuff -- it's changing the game. It's changing the game, one, because we can be much more collaborative, and we can learn from one another, but two, because I think the customer, the general public, is beginning to expect a lot more transparency, and that transparency in how you do business and why you do business that way is going to make it so that people feel much more comfortable sharing.

A good example of late is -- two good examples, actually -- is Patagonia, and the way that they set out their Footprint Chronicles. If you haven't seen this I'd recommend you go take a look at them -- or SC Johnson, in the last couple of weeks they announced that they actually now have a website up where you can see every ingredient in the chemicals they sell. And just a couple of days ago, Lay's announced that they were going to start telling you where their bags of chips are coming from and where the potatoes were farmed. This ability to see your product and to be able to see the stakeholders that are in the chain of your product is really -- it's game changing, and it's making it so that we have an opportunity to collaborate more openly. It's also making it so that we all learn better from one another.

LG: Talk a little bit, please, about design metrics, and how all the things that we've been talking about, the greater expectations, not only that the public has of products but that businesses have of their own products as well; how does that factor in into how products actually come about these days?

RW:
Hm, that's a good question. You know, I actually like to liken this to, sort of, the quality movement.

LG: OK.

RW: You know, the quality movement was exciting, and everybody got excited about what new quality products could mean and defining quality was a really fun thing back in the '70s and early '80s, and then Six Sigma came along, and it became the metrics system that redefined how quality would come to life, and it became the rallying cry of the time. I think the same kind of thing is happening now with sustainability, and it's a little bit more complex. Essentially, a few years ago it was a fun thing to talk about, and sustainability was something that was engaging a lot of people, and it was creating a lot of buzz, but before long when people started to apply it into their own lives, and if you will, bring it into themselves and how they purchase and how they act. I think the business community realized pretty quickly that there was a need for a lot more information, a lot more metrics to be able to decide really what more sustainable products are, and how you know if you got there, when you're trying to build something new.

And so since then, there's been a really strong rallying cry to develop the right metrics to prove or to disprove the sustainableness of a product. It's been a really exciting time for me, and I know it probably doesn't sound really exciting to a lot of people, but we're talking about deciding on the right metric for what is a more sustainable product, but for me that's a really exciting idea because with that -- with that foundation of metrics as we figure these things out we'll really be able to take the next step, the next leap, in terms of massive improvement and in terms of big impact.
LG: So you're talking about drilling deep and getting quantitative analysis to help drive the qualitative factors of products. How does one decide, or how do a group of people decide which standard to pick?

RW:
That's a really good question as well, and I think for me it has to be based in life cycle analysis. You've got to consider a full product's lifecycle. You've got to then identify where the key impacts are, and then you've got to go ahead and focus your metrics that you're going to spend your time and effort on those really impactful metrics. I think it's going to have to differ by category for where you spend that time, but you really can't know unless you spend a little bit of time understanding the life cycle of a product and identifying where you're going to go make impact.

LG: Interesting. It also sounds like, not only an exciting project but a big one.

RW: It's a pretty mighty large project, yeah.

(Laughter)

RW: Just as a quick example of that, you know, earlier I was talking about that T-shirt example. The reason that our apparel folks focused their efforts on first trying to understand more sustainable cotton -- and beginning with organic was a good start for what that could look like -- and then moving onto coldwater detergent and coldwater washing was because that is where the impacts of a T-shirt are. It would've been really easy, and in fact, it would've been very normal for us to direct our focus on, say, hangers, but the hangers aren't really where the substantial impact is for that T-shirt that we were selling.

You know, we definitely should still look at hangers, and it's not that we should walk away from opportunities to improve hangers and make them more sustainable, but instead the fact that the vast majority of the impact of a T-shirt -- and by the way, when I say impact I mean that it's an environmental impact, but it's also a great indication for where the value and opportunity to drive business value is going to be. Looking for where these hot spots are is also really directing where you want to spend your time and focus.

LG: What are the most pressing concerns facing businesses today in terms of their efforts for striving for sustainability? Is it the economy? Is it something else?

RW: I believe it's actually what we've been talking about in large part. I believe that when we get to a point where we understand these metrics more clearly, the value will be so obvious that it cannot be an economics issue. In fact, the opportunity to drive value through sustainability is still so readily available; there's still so much low hanging fruit in this space that when we're better at finding it through the right metrics, we won't have any problems thinking about whether or not we're going to spend $10 now to make $100 in a year.

So, I mean, the economy is one of those things that it's always going to be -- when it's difficult like this, it's always going to be difficult to raise capital to be able to make big changes, and some big changes do need to be made, yes, and it's going to slow down the progress a little bit. But I think really the big obstacle -- the big opportunity really lies in this idea of making sure that we're measuring the right things clearly enough that we find the value, and then it's just about getting out of the way and letting the market really drive that value in a way that creates tremendous impact ...

It's important that we -- all of us -- are continuing to make sure that this (sustainability) is something that is part of everything that we're doing, as opposed to being, sort of, its own special activity.

When we can integrate sustainability into the way we do business, as opposed to making it a separate function that's slightly different from the way we do business, when we can take it into the way we make decisions on a day-to-day basis, instead of making it 'the thing that is a nagging concern that I keep trying to remember to get back to but not really want to deal with today,' you get so much more from it.

One last example: We tried to do this in our business, especially with our people, over the last couple of years through our personal sustainability project where we've gone out to our stores and our associates all across the U.S., and spent time with them, and helped them understand what sustainability is, and helped them understand how to activate it in their own lives, and we discovered early on was that, first of all, they were engaged and excited -- and at a level that really surprised us. Today there are over half a million associates who tell us they have a PSP -- a personal sustainability project -- a small thing they're going to do in their lives to make their lives a little bit better and to improve the planet.

But in addition to that, we quickly discovered that as they started to integrate it, and as they started to live it, they were finding business value, and they were coming back to us and saying, "You know, I have an idea. What about our opportunities to help with the issues around declining seafood populations in the U.S., and can we do some things differently to be able to affect that? And what about the fact that in the back of our stores our Coke machines have lights on when they don't need to? ... Let's pull out those lights." And we did, by the way, and we calculated the savings of pulling out the lights of all of the Coke machines in the backs of our stores, and it was about a million dollars in savings -- electricity savings.

These associates are going out, and they're doing amazing things, but they're also changing their own lives. They're changing the way they act. They're getting together as groups of stores, and they're cleaning up wetlands, and so they're doing these great projects very much from an environmental focus, but they're also coming back into our business and helping us find value. They're helping us find opportunities that we wouldn't have seen without them. And it's the integration, one, into your people and into the way we think, and two, into how we do business -- as opposed to being separate from it -- that really has changed the game for us, and I hope will become the model of business in years to come.

Of course, there's much more change that needs to happen. There's a lot more we need to do. We're by no means there. We have a long way to go before we are a sustainable company, but boy, it's been fun to see the progress we've made.

LG:
Rand, thank you so much for sharing your time with us today.

RW: Thank you.