Wal-Mart: Big Strides To Become The Jolly Green Giant

Companies adopt green strategies for different reasons. By CEO H. Lee Scott Jr.'s own admission, the changeover at Wal-Mart Stores Inc. (WMT ) began in self-defense. Surveys showed that the retail giant's image had taken such a beating that some customers were staying away.

So Scott huddled with environment-alists, hired consultants, and came up with goals that astonished even some activists. He vowed to use 100% renewable energy, drastically reduce waste through recycling, and sell "sustainable" products that are more environmentally friendly. "Wal-Mart is implementing one of the most aggressive sustainability strategies I have ever seen," says Frank Dixon, adviser to both Innovest Strategic Value Advisors and Wal-Mart.

Although the effort began as image-burnishing, "we started seeing it as a business strategy," Scott explains. Cutting energy use is saving money, and consumers appreciate Wal-Mart's forays into organic cotton products and coffee certified to have earned farm workers a decent wage.

Switching stores to more efficient bulbs and adding skylights for natural light has trimmed Wal-Mart's electricity bill by 17% since 2002. Using less packaging on house brand toys will save $2.4 million annually in shipping costs. Even Wal-Mart's push to slash America's electricity use—and thus greenhouse gas emissions—by selling 100 million compact fluorescent bulbs a year has a bottom-line benefit. Customers would save $3 billion, "and the expectation is that those savings would come back in terms of purchases," says Brown University ecology professor Steven Hamburg.

Whatever Wal-Mart's motivations, many environmentalists are thrilled with the company's plans because of its massive clout. "They can have more impact than a bunch of smaller, more noble players," explains one. Wal-Mart's commitment to sell fish certified as caught in sustainable fisheries is doing more to protect stocks than government rules could, suggests Manish Kumar, CEO of The Fishin' Co., a major supplier: "It has brought an about-face in the mindset of the entire supply chain."

Wal-Mart still faces an uphill battle. A 2005 Innovest report on the company gave it the lowest rating. An update to that report will rank it higher, but far from the top. "Their failings on the social side are so strong," says Innovest analyst Elizabeth Lipton. Wal-Mart responds that its labor and health-care policies are little different from those of competitors, and that low employee costs help keep prices down.

Yet the labor issues may be difficult to lay to rest. And even on the environmental front, "they are certainly not sustainable now," says Natural Resources Defense Council President Frances Beinecke. "Their goals are bold, but they have just begun."

By John Carey

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