Wal-Mart pulls suppliers onto sustainability train

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When Wal-Mart speaks, its suppliers listen.
That’s why Unilever now provides the world’s largest retailer with a concentrated detergent in a smaller package. It’s also why more than 2,000 suppliers agreed to reduce their product packaging — helping Wal-Mart reach its goal of reducing packaging by 5 percent by 2013.
Why the emphasis on smaller packages? Cost savings.
Wal-Mart expects the packaging initiative to keep 213,000 trucks off the road each year and save more than 66 million gallons of diesel fuel — which will help it maintain its competitive edge, keep prices low and the bottom line high.
And the savings will equal — worldwide — $11 billion in the global supply chain that the corporation uses.
“They want to be more profitable, more competitive,” said Christopher Juniper, owner of Natural Capitalism Solutions, a nEldorado Springs based company that specializes in helping businesses reach sustainable goals. “That’s why they do it. It’s just cost-effective.”
Wal-Mart also has announced that its new stores will be “green” — meaning that they will rely on alternative energy for power and include sustainable features such as more porous parking lots and wind turbines. The company has saved about 20 percent in energy costs at the new stores.
“So they are going to make all their stores use renewable energy sources,” Juniper said. “It makes sense. The savings was enough for them. The bottom line is that these techniques work — they save money.”
Wal-Mart admits that its sustainability efforts are about saving money — but says it’s also about balancing profits with environmental consequences.
“Our goal is 5 percent reduction in overall packaging by 2013,” said H. Lee Scott, president and CEO of Wal-Mart. “Again, think about the multiplier effect of more than 60,000 suppliers around the world. Our supply chain alone could save $3.4 billion.”
In order to measure its goals, the company said that it would grade each supplier’s ability to reduce packaging.
One example, Scott said, is Wal-Mart’s efforts to reduce packaging on Kid Connection toys. The changes saved $2.4 million in shipping costs. A typical U.S. Wal-Mart stocks 142,000 items, so multiplying those savings makes sense, he said.
Juniper agrees. He said that Wal-Mart’s efforts will change the way many suppliers package their goods — and its efforts to support renewable energy will give that industry a needed boost.
“It’s not altruistic,” Juniper said. “It’s about the bottom line. And Wal-Mart’s definitely started a ripple effect within its own supply chain. If they remain this aggressive, then they will affect the supply chain throughout the world — everyone will listen, because they are such a huge customer.”
Juniper is in the middle of a similar project with a small Colorado company — Cliff Bar. The Boulder-based business is reviewing its supply chain — from rice fields to grocery stores — to see how it can become more sustainable.
Juniper is showing Cliff Bar how it can reduce its global footprint — and all because the company believes it’s better for the bottom line.
Fort Carson also is one of Juniper’s clients. And as the major user of electricity provided by Colorado Springs Utilities, Juniper said the Army post is working with the utility company to provide more renewable energy.
“It make sense; it lowers energy bills,” he said. “In Chicago, they combined with 48 other municipalities in a co-op to buy renewable energy — and they swayed the market by virtue of their buying power. Fort Carson definitely has the leverage to do that. They want to go to 100 percent renewable energy in 20 years. Utilities has got to pay attention to that — has got to provide the right mix.”
Juniper said that there are other ways companies can leverage sustainability efforts. Portfolio 21 is a sustainable mutual fund — each of the 100 companies has been vetted for its sustainability efforts. The fund identifies companies around the world that see sustainability as a competitive advantage.
But the fund’s chairman, Carston Henningsen, said Wal-Mart doesn’t make the list.
“It’s not about making changes in a single area,” he said. “To be in our list, there has to be a change in every aspect of the corporation — a change in the DNA.”
In essence, everything the company does must be about sustainability — from the raw products to the packaging to transport.
Two thousand companies were considered for inclusion in the portfolio, which began with 34 companies a few years ago.
“Businesses can save money quickly, merely by changing what kind of light bulb they use,” Henningsen said. “But we want companies that are saving money — impacting their bottom line — through the long run … gaining competitive advantage through using sustainable methods.”
Peer pressure, such as the pressure placed by Wal-Mart on its suppliers, is only one reason for the market shift, he said. And for many companies, the problem isn’t one of being concerned about the energy and ecological crises, but about saving money and staying competitive.
“Companies that don’t engage in sustainable strategies will be left behind,” Henningsen said. “Very, very soon, it isn’t going to be a choice. It’s going to be a matter of survival.”