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Wal-mart Sustainability Strategy

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Team3 Sustainability

on 7 June 2010

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Transcript of Wal-mart Sustainability Strategy




Seafood

The Role of Suppliers

The direct cost of MSC certification was paid for by boat operators and processing plants.
=add $0.03 to every pound of fish

Other indirect costs
EX: Fisheries with most depleted fish stocks were forced to reduce their catches while repopulation occurred

Nevertheless Some embraced the opportunity to differentiate themselves from the competition
Some got involved for fear of being left behind in the industry
Others used certification to break into new markets EX: Europe
Potential benefits:

Sustainable fisheries tend to produce more fish for fewer inputs or less money Electronics

The Role of Suppliers

They agreed to sell the RoHS-compliant product as long as Wal-Mart would guarantee the order

EX: 4 weeks to 12 weeks of inventory Sustainable Buildings - Crucial SVN Network Goals
Design and build more energy- and water-efficient stores and clubs in U.S. operations.
Design store prototype - 25-30% more efficient
30% fewer greenhouse emissions
Game Changer - Daylight Harvesting What is Daylight Harvesting? Reduces up to 75 percent of the electric lighting energy used
Eliminates Unnecessary Heat in the building
Enough energy to provide electric power for 73 single family homes (11,020 kWh average annual usage) for an entire year.
Walmart’s lighting system is 38 percent more efficient - ASHRAE Standards
Reduces operating costs - saves an average of 800,000 kWh per year
Saves $50 million utility cost
Abrupt changes in light levels can cause irritation by occupants
Recommendation:
Use continuous dimming instead of switching

Dependence on humans if done manually
Recommendation:
BiLevel Blasts with ramping function for gradual transition between high and low level states
30-40% savings in lighting energy consumption if done automatically
Helps in going far above break even

Complex to implement from multiple design disciplines
Recommendation:
Prepare plans that document daylight zones
Establish independent control zones that work optimally with these patterns
Conduct a daylight simulation

When something doesn’t work, users often disable the system
Recommendation
Training users about the installed control systems
Increasing Awareness - Get it fixed

Challenges in Implementation Environmental Benefits Profit Opportunity for Wal-Mart Compact Fluorescent Lamps (CFL) Initiative - Is it profitable? Goal - To sell $100 million energy saving CFLs per year 3 E’s of Bottom Line Ecological:
Dramatic reduction in CO2 emissions - 20 million tonnes per year
Lighting accounts for 8% of total U.S CO2 Output
Why is Sustainability a major opportunity for Walmart?
Differentiating from the competition
Maintaining a license to grow
Remaining consistent to commitment of every day low-prices


Direct value creating goals :
Increasing energy efficiency
Transitioning to renewable energy
Optimizing the efficiency of the supply-chain through
more environmental-friendly operations
Example : goal of doubling efficiency of Walmart fleet in 10 years
Realisation : Betwen 2005 and 2006, improved efficiency by 25% :
75 million dol in annual savings and 400000 tons of CO2
per year economised
Indirect Value-Creating goals :
Providing more sustainable products
90% of the opportunity according to Tyler Elm
Doing good for people is the best way to create goodwill - Lee Scott
Example: Walmart relief to population during hurricane Katrina
results in extremly positive reaction from population How to reach these goals?
Walmart develops an ongoing collaborative approach to discover new sources of sustainable value-creation
"pulling -sustainibility ideas-from everywhere" :
consultants, NGOs, suppliers eco-friendly competitors, academics, critics
Selection criteria : genuing commitment of members to future outcomes
Allows to be more connected to reality and develop new ideas

How to reach these goals?
3 step approach for the Sustainability Value Networks
Step 1 : Engagement : identify and work with broader community of
participants for information and expertise for Walmart to achieve environmental goal
Step 2 : Exploration : analysing life-cycle of particular products and services and considering environmental issues
Step 3 : Expand : assessing if business needs to be done? can be done differently? or by someone else?, Is there opportunity for more value creation? The Network approach creates more value :
" the goals grew as the spirit of the possible grew"-Elm How to reach these goals? Creating value through the China network
Walmart worked with 50000 Chinese suppliers
Walmart is China's 7th largest trading partner
Walmart has interest helping China avoiding environmental crisis that would slow down trade
Example : China network put an NGO in contact with a supplier to help it
become more sustainable, else would have had to close
Value-creation : Walmart can continue doing business with this supplier
Equity:
Each CFL uses 75% less electricity
Each CFL saves consumer $30 in energy costs over its lifetime
Savings to Americans - $3 billion per year
Economic???
Sold only $40 million against a target of $100 million
Cannibalization of supplier’s business in incandescent bulbs
Thoughts..Why continue?!!
Sustainability – Taking care of triple bottom line
Educating consumers on benefits of CFL
Hoping to derive profits in future from the value proposition offered
Latest Statistics – Successful Indeed
Sold 137 million CFLs, surpassing our goal to sell 100 million bulbs
Saved customers $4 billion in energy costs
Prevented 25 million tons of carbon dioxide
Sustainable Value Networks Overall objective is to derive economic benefits from improved environmental and social outcomes
It’s not philanthrophy
14 sustainable value networks identified at Walmart with network captains
Electronic-Value Network Computers and other electronics still account for some 40 percent of the lead in U.S. landfills
Launched laptops and computers in US and Europe with ROHS (Restriction on Hazarduous Substance) compliance since 2006 and reduction in cost obtained due to standardization and long term commitment
Suppliers license their environmental innovations to get additional revenue
In 2006, hosted E-waste “Take Back” days in Wal-Mart parking lots across the United States that enabled to collect more than 1.75 million pounds of unwanted electronics to be sent to certified recyclers rather than landfills.
Textiles Value Network Farming conventional cotton creates millions of tons of pollution, in contrast, organic cotton farming is gentler on the environment
Wal-Mart’s textile network partnered with the Organic Trade Association and Organic Exchange to select and uphold certification standards for organic cotton farming
Wal-Mart is the largest buyer of organic cotton, with more than 10 million pounds purchased annually.
Entered in long term contract with organic farmers
Organic farming can not be done for extensive period as it absorbs the nutrition so alternate the crop with other legumes which Walmart made an arrangement to buy

Seafood Value Network Walmart seafood business grew roughly by 25%
As of January 31, 2009, in aggregate, 49 percent of the total pounds of fresh or frozen seafood sold at Walmart and Sam’s Club have the MSC or ACC certification
Consolidation of sea food network to result in $14 million in increased revenues and an additional $4.3 million in profits per year
Sustainable fisheries tend to produce more fish for fewer inputs or less money than fisheries that are unsustainable.
Walmart plans to purchase all of its wild-caught fresh and frozen fish for the U.S. market from Marine Stewardship Council (MSC)-certified fisheries by 2011.
Cost of certification MSC varies between $50 000 to $ 500 000 and take one to two years to complete

Factors determining success: Economic savings
Sell products that sustain our environment
Waste recycled

However, supplier is sensitive around intellectual property

If information is shared, the competition might gain a better understanding of its production costs and profit margins
Information could be used by Walmart in its price negotiations with the suppliers
Solutions : Encourage suppliers to license their environmental innovations

To derive additional revenue from innovation
Lead to improved environmental performance across the industry and more widespread benefits for Walmart
Textiles
Walmart made a five-year verbal commitment to buy organic cotton from farmers
Walmart Expected to pay slightly more and pass on to its customers
Chemical Intensive Products: Focused on identifying potentially harmful chemicals and motivating manufacturers to eliminate those chemicals from their products However,
Tested fewer than 200 of 62,000 chemicals
Manufacturers were hesitant to invest because competitors would quickly capitalize on the findings
Even if suppliers eliminated the three undesirable chemicals, Walmart could not advertise the improvement to customers
-since they don’t know the formulation and own the label
-They can’t guarantee the substitutes are harmless and may get lawsuits
Recommendations:
Build up strong relationship with reliable suppliers
Develop certified examination and set a list of healthy substitutes for suppliers
Gain trust from customers and start promoting products after making sure the whole supply chain is safe
Walmart Sustainability Strategy
Emilie Stern
Abhinav Srivastava
Hsin Jung Lu
Kunal Saigal
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