Wal-Mart's Environmental Game-Changer

Harvard Business Publishing ^ | Thursday July 16, 2009 | Rosabeth Moss Kanter

[Einigkeit_Recht_Freiheit]

Wal-Mart has just changed the game with respect to environmental issues. Now it doesn't matter whether Congress' new cap-and-trade law meets all its promises, nor whether the G-8 leaders dithered rather than acted on environmental issues.

Wal-Mart's unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labelling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

Say au revoir, adios, auf Weidersehen, zai jain, and rest-in-peace to environmental skeptics and laggards; they are soon to be out of the picture. And it did not take legislation to neutralize them. It took a principled action by a self-interested company. That is values-based capitalism at its best.

This is one small step for Wal-Mart and one giant leap for Planet Earth. It is also one enormous demand on suppliers, among them many small companies that will feel crushed by the giant's new non-carbon footprint. But though Wal-Mart spent $200 billion buying from 56,000 U.S. suppliers in 2007, a high proportion of Wal-Mart's total annual purchases emanate from China where it's high time environmental standards are raised.

The beauty of the Wal-Mart innovation is that it doesn't ask anyone to change anything except the information that is provided and received. If polluters want to keep polluting, they are free to do so as long as they provide that data on their Wal-Mart labels. And if consumers choose to buy from polluters whose labels they can read, they are free to do so. In theory.

In practice, of course, we know that suppliers will change their practices to avoid embarrassing disclosures, and consumers will think twice about the choices they make. Consumer activists have been clamoring for information. At a recent conference discussing the company of the future, many seemingly informed people were astonished to learn how many gallons of water it took to make just one cup of Starbucks (or anyone's) take-out coffee - they had forgotten irrigation of coffee plants, fluids consumed by transportation of coffee and manufacturing of paper cups, and so forth.

We also know that the Wal-Mart concept is certain to be emulated by other retailers in their own ways. Who could possibly hold themselves up as Not-Green when over 130 million people visit a Wal-Mart store every week, according to company figures, and are made more conscious of environmental concerns? You can bet that a competition will ensue among retailers to out-do Wal-Mart in having the best green-oriented program. That might make "cheapest" the battle of the past and redefine "value" in the minds of consumers and the public.

Wal-Mart is not the first company to go green, nor even the first to reach deeply into its supply chain to require that suppliers meet particular standards. But it is the biggest, the most visible, and the least likely, given its past reputation. Its transformational action turns Wal-Mart into what I call a "SuperCorp" - a vanguard company that uses its power to improve an outcome for society, while knowing that its innovations will create profits as well as social benefits. In my new book, SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good (to be published in August by Crown), I identify a number of companies ahead of the pack in innovating for the good of society and raising standards, often in collaboration with public officials, while still keeping an eye on the bottom line, including Procter & Gamble, IBM, Cemex, and Cisco.

Wal-Mart had been the company that the left loved to hate, because it seemed to have too much power and to use it in non socially constructive ways, squeezing suppliers or keeping wages down. Today Wal-Mart reminds us that a new kind of capitalism is possible in which big companies can use their power constructively, for the good of society and to move on issues that are still largely unaddressed by government. Clearly self-interest still prevails; Wal-Mart would not be taken the labelling action, with all of its complications, if its decision-makers did not see a definite commercial market benefit.

We should applaud Wal-Mart for joining the vanguard and leading a new parade. First for the green program and all that might follow from it. Second for showing that a new model of principled, not just greedy, American capitalism can take shape.

[eclecticEel]

Not really certain if they still do this, but back in the day Walmart made a point of highlighting the “Made in America” products it sold in its stores. Of course, that didn’t change the fact that most of what they sold was being made in places like China or Mexico. It was however, a reasonable enough PR move: the company was coming under criticism for selling too much imported junk and such moves helped to shut up the critics chorus - and if shoppers cared they could go out of their way to buy American, since the company was making money in any event it was no skin off their nose.

Our reliance on cheaply made Chinese junk has only gone up ever since, Walmart’s PR campaign did nothing to stop it. Their latest “green campaign” will have similar effects - namely none at all.

[nathanbedford]

Unfortunately it is not clear from the article exactly what it is that Wal-Mart plans to do. The author At Harvard Business Publishing says only, "an environmental labelling program disclosing to consumers the environmental costs of making products sold at Wal-Mart". We are told that this has "just changed the game with respect to environmental issues" but we are not told how or why except that "environmental skeptics... are soon to be put out of the picture. And it did not take legislation to neutralize them. It took a principled action by a self interested company."

Does this mean that we no longer need to Cap and Trade? Has Wal-Mart done it all?

Evidently so because the author concludes his ecstatic remarks with the following:

The beauty of the Wal-Mart innovation is that it doesn't ask anyone to change anything except the information that is provided and received. If polluters want to keep polluting, they are free to do so as long as they provide that data on their Wal-Mart labels. And if consumers choose to buy from polluters whose labels they can read, they are free to do so. In theory.

In practice, of course, we know that suppliers will change their practices to avoid embarrassing disclosures, and consumers will think twice about the choices they make. Consumer activists have been clamoring for information.

So, the author thinks we have the perfect marriage of environmentalism and capitalism:

We should applaud Wal-Mart for joining the vanguard and leading a new parade. First for the green program and all that might follow from it. Second for showing that a new model of principled, not just greedy, American capitalism can take shape.

Even the left now sees the triumph capitalism and the superfluity of Cap and Trade.

[Cheap_Hessian]

“Say au revoir, adios, auf Weidersehen, zai jain, and rest-in-peace to environmental skeptics and laggards; they are soon to be out of the picture. And it did not take legislation to neutralize them. It took a principled action by a self-interested company. That is values-based capitalism at its best.”

What a bunch of bull. Goldman Sachs, GE, and Wal-Mart are all going to make billions of dollars in their partnership with the government with this green stuff. This has never been about the environment and has everything to do with control by keeping down small business and limiting new competition. The idea that people are classifying this as value-based capitalism over government/business corruption makes me sick.

[blueplum]

does walmart really expect the Chinese to comply? ha!

[gusopol3]

Is this the same author who wrote that the Segway was surely going to change the way we live?

[steelyourfaith]

 

Beam me to Planet Gore !

[KTM rider]

The Soviets already tried this experiment, it was called the GUM or "state store"....

[Freedom'sWorthIt]

NOt just Walmart. McDonald’s also.

A McDonald’s opened (reopened - they tore the old one down and built this new green one in its place) in my area which provides hookups for all the electric car drivers to plug in to and get some more “juice” for their electric cars!

Isn’t that special?

The madness has almost taken full hold of corporate America and yet the Eco-Nazi’s are STILL going to destroy this nation with Cap and Trade - despite the attempts of many in big business to try to be “green” friendly.

[Einigkeit_Recht_Freiheit]

I should point out that I found the original article on Bloomberg and not at HBP. Can’t post a bloomberg link though.

Remember when though when you attack Cap and Trade you are attacking a system and not what that system is intended to accomplish.

By the way, Cap and Trade as a system has been proven to effectively reduce powerplant emissions (SOX and NOX) in a market-based cost-effective manner. Your real bone of contention is with the need to reduce CO2 emissions at all. By attacking the system rather than the goals of the system you are implicitly agreeing that the goals are correct, but the system is the wrong one. Thus, if you don’t think CO2 needs to be controlled, you let the left win by saying their goals are correct, but their system is wrong becaues they can always find an alternative system.

[Einigkeit_Recht_Freiheit]

Please see post 10 regarding your attack on Cap and Trade.

If you attack Cap and Trade then the left has already won the battle my FRiend.

[Freedom'sWorthIt]

So you have read the Cap and Trade 1200 page bill with the additional 300 page amendment which was pushed through the House of Representatives?

I will oppose Cap and Trade with every ounce of energy I have.

It will destroy what’s left of our economy.

[Einigkeit_Recht_Freiheit]

If you are differentiating between the Cap and Trade bill and the premise of Cap and Trade you might wish to make that distinction.

Otherwise, as I have said, if you just fight Cap and Trade as a system, you implicitly agree that something needs to be done about CO2 emissions but Cap and Trade is the wrong system.

It is a clever ploy for the left which would rather have a direct and obvious tax on CO2 rather than a Cap and Trade system. So, they get you to attack the system. If it fails they offer an alternative and pain the right simply as the party of “No” and no ideas.

[nathanbedford]

My reply was written tongue-in-cheek.

[Venturer]

You go to the store for what you need or want. The price is right , you buy it.

No one gives a red rat’s patoot about a tag on it that syas it isnt “green” enough.

Nice try Walmart——Lame.

[Hardastarboard]

There are SO many points in this article to pick apart. He pretty much hits every enviro-wacko capitalism-hating talking point there is in this screed.

The author states that those of us who think the environment isn't a major issue are now irrelevant. I don't HAVE to buy the greenest products. He says that businesses will have to change their practices to comply. Yes, or change their labeling to make it LOOK like they've complied.

He makes the standard Marxist point about a business doing good instead of just being greedy (as if there is no mutual benefit between business and customer, e.g. even though I hate insurance companies, where else would I get insurance if they disappeared?)

This is an ingenious move on Wal-Mart's part. I can see Wal-Mart using this move in two ways. The first (they think) is that it will disarm the left's hatred for them. That's not going to happen of course, but they'll advertise it so much that it will make the left look shrill. It demonstrates that businesses can strike back against activists. The second thing Wal-Mart will do is use this to further beat down their suppliers on price. "Give me a lower price or I'll announce that you aren't complying with our green standards".

Finally, if I'm a Wal-Mart stockholder, who's going to enforce this wonderful utopian idea? Are Wal-Mart profits going to be spent on policing this idiocy? Why should the environmentalists' utopia come out of my pocket? The last is a rhetorical question, of course - we know they're going to take it out of my pocket one way or the other.

I suspect we're going to go from the Left hating Wal-Mart to the Right hating Wal-Mart before long. I just read somewhere the other day that the bigger a business gets, the more a part of the establishment it gets to be. At this point in history, make no mistake, "the establishment" is liberal.

[Loyal Buckeye]

I trust that Wal-Mart is creative enough to make money off the idiocy emanating from our Federal government.

[LibLieSlayer]

My money has not been... and will never again go to walmartistan.

LLS

[Red Boots]

By rolling out an environmental labelling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

WalMart is smart. They know that this is going to go the way of nutritional labels: nobody cares ! They buy what they want anyway.

When they point out that, despite labeling, green products do not sell ( much like salads at MacDonalds, they'll have made their case in a way that the green people must see: no body cares !

Of course, then the green idiots will try to force people to.They'll be shown to be the totalitarians they are. It's not about green; it's about CONTROL.

[nathanbedford]

Sometime ago I posted my opinion that big business, in the wake of the firing of the head of General Motors, in anticipation of the deliberate bankrupting of the call industry, the subversion of the rule of law in the Chrysler bondholder case, the presumptive nationalization of the healthcare industry, to name some of Obama's usurpations, word spur these industries and many others to protect themselves with the million-dollar public relations blitz against the Obama administration.

Boy, was I wrong.

Obama is smarter than I am, he has managed, like Adolph Hitler in 1933, to co-opt virtually every industry out of fear and greed. The American Medical Association has just gone over to his side.

Our carmakers have become tame. Goldman Sachs is leading the charge against everything holy on Wall Street and in the banking community. Wal-Mart, whether experiencing a genuine conversion or merely finessing a public relations ploy, has given Obama a lot of running room.

If Obama succeeds in getting his healthcare and/or Cap and Trade, the America I grew up in will be gone forever.