Wal-Mart s Sustainability Strategy

1. Wal-Mart�s Sustainability Strategy Professor Doug Cerf Donald Bren Graduate School of Environmental Science and Management Corporate Environmental Management (ESM 281) Spring 2010

2. Printed on recycled paper-actually better, not printed at all

3. Printed on recycled paper-actually better, not printed at all Are you surprised? Has Wal-Mart gone from a company that was known for paying its employees low wages and generally not offering benefits to��� A company that has a mission to change the environmental impact of retail operations and global supply chains Across the industry, not just for Wal-Mart

4. Printed on recycled paper-actually better, not printed at all Business Model Wal-Mart� environmental strategy is not based on passing the (increased) cost to customers Wal-Mart�s customer�s are not willing to pay extra for green products Are they willing to pass the savings to customers? Is this a principle of their efficient supply chain. Wal-Mart is generally not willing to pay suppliers extra for green products. Would you expect Wal-Mart to add sustainability to their strategy?

5. Printed on recycled paper-actually better, not printed at all What motivates Wal-Mart to have a sustainability strategy? What is Wal-Mart�s motivation? Reduction of operating costs They believe that these strategies will lead to sustainable supply To promote innovation by their suppliers Sustainable strategy will lead to long term business value Public relations behavior or green washing?

6. Printed on recycled paper-actually better, not printed at all Describe Wal-Mart�s strengths and weaknesses that allow or prevent them from succeeding in their sustainability strategy. Explain why each item is a strength or weakness

7. Printed on recycled paper-actually better, not printed at all Business Value What is business value? Informal term that includes all forms of value that determine the health and well-being of the firm in the long-run. Is it current profit? Is it future profit? Cash flow model. Market Capitalization Stock price times the number of shares held by investors

8. Printed on recycled paper-actually better, not printed at all Question #1 Given the fact that Wal-Mart�s customers generally are unwilling to pay a premium for environmentally friendly products, how is the company deriving business value from its sustainability strategy, or if not, how can it ensure that it does?

9. Printed on recycled paper-actually better, not printed at all Creation of business value through reduction of environmental impacts.. Cost reduction through the value chain (raw material through end of product life) The elimination of waste and inefficiency in production, packaging, transportation, store operations and customer use (e.g.CFL�s) Creation of new revenue streams Revenue generated via Recycling (sandwich bale program) Selling carbon credits through reduction of carbon emissions Produce excess energy by placing solar panels on store rooftops

10. Printed on recycled paper-actually better, not printed at all Creation of business value through reduction of environmental impacts.. Assurance of Supply Lock-in available supply or contribute to the preservation of scarce resources (e.g. wild fish) Better supplier quality Suppliers that follow good environmental practices most likely will be managed better Right to Operate Ability to open new stores in previously unreceptive markets as a result of an improvement in public perception and reputation

11. Printed on recycled paper-actually better, not printed at all Question #2 Imagine that you are Andy Ruben or Tyler Elm, evaluating the progress of the electronics, seafood and textiles networks. Which networks have been most successful? What factors explain the success (or lack of success) of these networks?

12. Printed on recycled paper-actually better, not printed at all Success Factors of Seafood, Electronics and Textile Sustainable Value Networks (+) a success factor, (0) neutral, (-) not a success factor Credible Eco-label Seafood (+), Electronics (-), Textiles (+) Verifiability of environmental attributes Seafood (+), Electronics (-), Textiles (+) �Simple� linear supply chain Seafood (+), Electronics (-), Textiles (+) Potential long-term benefits from US regulation Seafood (-), Electronics (+), Textiles (-)

13. Printed on recycled paper-actually better, not printed at all Success Factors of Seafood, Electronics and Textile Sustainable Value Networks Consumer health appeal Seafood (+), Electronics (-), Textiles (+) Consumer operating savings Seafood (-), Electronics (+), Textiles (-) NGO partners directly support suppliers Seafood (+), Electronics (-), Textiles (+) Strong partnerships with nonprofits, suppliers and other stakeholders Seafood (-), Electronics (+), Textiles (-)

14. Printed on recycled paper-actually better, not printed at all Success Factors of Seafood, Electronics and Textile Sustainable Value Networks Alignment of environmental benefits and economic benefits for Wal-Mart Seafood (+), Electronics (-), Textiles (+) Effective network leadership Seafood (+), Electronics (0), Textiles (+)

15. Printed on recycled paper-actually better, not printed at all Question #3 How is Wal-Mart motivating its suppliers to share information about and continuously reduce the environmental impacts of products and processes? How can the company stimulate the development of disruptive, breakthrough innovations?

16. Printed on recycled paper-actually better, not printed at all Methods used to motivate suppliers Bear inventory risk by providing quantity commitments to suppliers Commitment for RoHS compliant PC�s Five year commitment for organic cotton Consolidate supply chain, more business for fewer suppliers Wal-Mart was able to rely on the Fishin� Company to proactively participate in MSC certification because they are the number one seafood supplier Fewer suppliers means a closer relationship with those suppliers

17. Printed on recycled paper-actually better, not printed at all Methods used to motivate suppliers Eliminate intermediaries, brokers Through the MSC chain of custody, Wal-Mart has been able to eliminate non-value added �middle men� from the seafood supply chain Give supplier stronger bargaining position Suppliers of RoHS compliant PC�s were in a position to get better terms from Wal-Mart Interact directly with lower tier suppliers Organic cotton farmers deal with Wal-Mart

18. Printed on recycled paper-actually better, not printed at all Methods used to motivate suppliers Provide supplier with direct access to specialized expertise WWF can assist suppliers with MSC certification Promote long-term personal relationships between Wal-Mart buyers and suppliers Encourage licensing Suppliers will be motivated to innovate to reduce harmful chemicals, obtain licenses and get Wal-Mart�s business

19. Printed on recycled paper-actually better, not printed at all Methods used to motivate suppliers Implement an auditing process to increase visibility of health, safety and environmental performance in supplier factories

20. Printed on recycled paper-actually better, not printed at all Question #4 For the network to which you have been assigned, propose one new �game changer� or innovation project not described in the case. To support your proposal, outline the environmental benefits, the business value and/or profit opportunity for Wal-Mart, the greatest challenges in implementation, and how Wal-Mart could overcome them. Looking beyond your assigned network, what other game changer or innovation project would you propose for Wal-Mart (optional)? In your teams, please prepare an answer to this question. The answer will be presented to the class in the form of a 5-10 minute presentation by all members of the team. The class will identify the top two game changers and prepare an implementation plan for Wal-Mart.

21. Printed on recycled paper-actually better, not printed at all Question #5 As evidenced by Exhibit 12, Wal-Mart�s sustainability strategy has generally been very profitable. However, two initiatives described in the case benefit society and the environment, but apparently decrease Wal-Mart�s profits. Identify those two initiatives and imagine that you are their internal champion. How would you justify pursuing those initiatives?

22. Printed on recycled paper-actually better, not printed at all Environmental strategies that are not currently profitable Holding product take-back events Develop a business model to make the product take-back process profitable Reducing its prices on CFLs and passing up sales of incandescent light bulbs Will these items be profitable in the long run?

23. Printed on recycled paper-actually better, not printed at all Is environmentalism Wal-Mart�s excuse to make their supply chain more efficient? Is Wal-Mart�s sustainability strategy a rebound strategy? Did Wal-Mart develop this strategy to change their reputation of not treating employees and suppliers well?

24. Printed on recycled paper-actually better, not printed at all Does the environmentalism stereotype hold for Wal-Mart? Does an environmental strategy always mean lower profits for the firm or higher prices for customers? Does environmental strategy mean Lower operating costs through lower energy costs? New revenue opportunities?