Volume 9 | Issue 5 | Year 2006

The following is an excerpt from a speech focusing on 21st century leadership, given by Wal-Mart CEO H. Lee Scott to associates at the company’s home office in Bentonville, Ark.
Wal-Mart started as one man’s dream 43 years ago, a courageous vision brought to life as we speak, by more than one million Associates serving over 100 million customers every week. Sam Walton’s goal was simple, and yet when you think about it, radical: He wanted to help the people living in small towns and rural America enjoy a similar quality of life as those who lived in the big cities. While retailers were rushing to the suburbs, Sam Walton built a business serving these overlooked and under-appreciated customers. He knew intuitively this was right for the country, but also that there was a big business opportunity to provide this kind of value and service.

Sam Walton’s dream to serve the under-served changed the world. His method was to go where other businesses feared to go. The other retailers of that time were convinced they wouldn’t make money in small town America.

In other words, we didn’t get where we are today by being like everyone else and driving the middle of the road. We became Wal-Mart by being different, radically different.

To better understand our impact on the world and society, we spent a year meeting with and listening to customers, Associates, citizen groups, government leaders, non-profit and non-government organizations, and other concerned individuals.

You know, we are in uncharted territory as a business. You won’t find any case studies at the Harvard Business School highlighting answers for companies of our size and scope. If we were a country, we would be the 20th largest in the world. If Wal-Mart were a city, we would be the fifth largest in America. People expect a lot of us, and they have a right to. Due to our size and scope, we are uniquely positioned to have great success and impact in the world, perhaps like no company before us.

After a year of listening, the time has come to speak, to better define who we are in the world, and what leadership means for Wal-Mart in the 21st century.

In the group meetings I referenced earlier, we talked about jobs, healthcare, community involvement, product sourcing, diversity, environmental impact: all the issues that we’ve been dealing with historically from a defensive posture. What became clear is that in order to build a 21st century company, we need to view these same issues in a different light.

Frankly, I thought the environment was the least relevant. We were recycling responsibly and we are not wasteful, so a Wal-Mart environment program sounded more like a public relations campaign than substance to me.

But we kept talking, and as I learned more a light bulb came on for me . and that’s a compact fluorescent light bulb!

Environmental loss threatens our health and the health of the natural systems we depend on. The challenges include:
Increasing greenhouse gases that are contributing to climatic change and weather-related disasters.
Increasing air pollution, which is leading to more asthma and other respiratory diseases in our communities.
Water pollution, which is increasing while safe fresh water supplies are shrinking; water-borne diseases causes millions of death each year, mostly among children.
Destruction of critical habitat, causing unprecedented threat to the diversity of life, the natural world and us. And that just to name a few.

As one of the largest companies in the world, with an expanding global presence, environmental problems are our problems. The supply of natural products (fish, food, water) can only be sustained if the ecosystems that provide them are sustained and protected. There are not two worlds out there, a Wal-Mart world and some other world.
I believe, in fact, that being a good steward of the environment and in our communities, and being an efficient and profitable business, are not mutually exclusive. In fact they are one in the same.

Our environmental goals at Wal-Mart are simple and straightforward:

To be supplied 100 percent by renewable energy.
To create zero waste.
To sell products that sustain our resources and environment.

These goals are both ambitious and inspirational, and I’m not sure how to achieve them, at least not yet. This obviously will take some time. But we do know the way.

There is a simple rule about the environment. If there is waste or pollution, someone along the line pays for it. For example, if our trucks are inefficient from a fuel standpoint, we’ll pay for that at the diesel pump. If the dumpsters behind our stores fill up with trash, you can be assured that we paid someone to send that trash to us, and we will pay someone to take it away.

You know, in the last 43 years our Wal-Mart Associates have become some of the most productive retail workers in the world. Why not spend the next four decades making our trucks, refrigerators, stores, lighting, packaging, shipping – every aspect of our business – the most productive in the world? This will be good for the environment, it will save us money and, in some cases, it will actually add profits to our bottom line.

Who better than Wal-Mart to make a kilowatt of electricity go twice as far, or a gallon of diesel take our trucks twice the distance? Or three times? Who better than Wal-Mart to stretch our energy and material dollars farther than anyone ever has? To help lower our energy bills and gas prices for years to come? We didn’t just get needed goods to Katrina victims – we did it less expensively than anyone. The environment is begging for the Wal-Mart business model. And if we do that, everyone will benefit.

Let me give you some specific examples that have a direct tie to our business: Trucks: We have one of the largest private fleets in the U.S. At today’s prices, if we improve our fleet fuel mileage by just one mile per gallon, we can save over 52 million dollars a year. We will increase our fleet efficiency by 25 percent over the next three years and double it within 10 years. If implemented across our entire fleet by 2015, this would amount to savings of more than 310 million dollars a year. Compare that to doing nothing.

By being the leader, we will not only change our fleet, but eventually change trucks everywhere in the world. We will do ourselves a big favor, clean the air for our children, create new jobs, improve U.S. productivity, positively impact our country’s energy security, and more.

Stores: There is a technological revolution going on out there with respect to buildings, heating, cooling, compressors, lighting, refrigeration and more. Wal-Mart has always been a technological leader. And we are going to do it again with our stores. We want to eliminate 30 percent of the energy used by our stores.

When we opened our McKinney, Texas store, we experimented with what we think we can do. There are solar panels generating electricity for the store, shredded tires for mulch, heating supplied by used cooking and motor oil, mature trees shading our buildings, and wind turbines.

Our customers flocked to it and the store manager is enjoying nearly 10 percent energy efficiency gains versus a “normal” Super Center located a couple of miles down the road. While that is not enough to cover the cost of building the store, we are learning, and with our scale that will pay off as we introduce these technologies in new stores and clubs.
Increasing our efficiency in energy not only reduces dependence on oil and saves money; it also avoids greenhouse gas emissions.

We are looking at innovative ways to reduce our greenhouse gas emissions. This used to be controversial, but the science is in and it is overwhelming. Climate change doesn’t cause hurricanes, but hot ocean water makes them more powerful. Climate change doesn’t cause rainfall, but it can increase the frequency and severity of heavy flooding. Climate change doesn’t cause droughts, but it makes droughts longer. We believe every company has a responsibility to reduce greenhouse gases as quickly as it can.

Wal-Mart can help restore balance to climate systems, reduce greenhouse gases, save money for our customers, and reduce dependence on oil, and we are committed to aggressively investing approximately $500 million annually in technologies and innovation to do the following:
Reducing greenhouse gases at our existing store, club and DC base around the world by 20 percent over the next
7 years.

Designing and opening a viable prototype that is 25-30 percent more efficient and will produce up to 30 percent fewer greenhouse gas emissions within the next 4 years.

Increasing our fleet efficiency by 25 percent in the next three years, and doubling efficiency in the next 10 years.

Sharing all learnings in technology with the world, including our competitors (the more people who can utilize this type of technology the larger the market and more we can save our customers).

Aggressively pursuing regulatory and policy change that will create incentives for utilities to invest in energy efficiency and low or no greenhouse gas sources of electricity, and to reduce barriers to integrating these sources into the power grid.

Assisting in the design and support of a green company program in China, where Wal-Mart would show preference to those suppliers and their factories involved in such a program.

Initiating a program here in the U.S. over the next 18 months that would show preference to suppliers who set their own goals and aggressively reduce their own emissions.

These commitments are a first step. To address climate change we need to cut emissions worldwide. We know that these commitments won’t even maintain our fast growing company’s overall emissions at current levels. There is more to do and we are committed to doing our part.

This represents one of our most visible opportunities. Think about it: If we throw it away, we had to buy it first. So we pay twice, once to get it, once to have it taken away. What if we reverse that cycle? What if our suppliers send us less, and everything they send us has value as a recycled product? No waste, and we get paid instead.

We are already doing this with existing equipment utilizing a new process called “sandwich balers” at 99 SAMS CLUBS and 548 Wal-Mart stores. Through this process, we are now recycling plastic we used to throw away. If all stores and clubs were on this program it would have added $28 million to the bottom line this year.

This means working with our 60,000-plus suppliers and educating them. If it has to be thrown away, we don’t want it. We intend to reach the point in the near future where there will be no dumpsters at our stores, and no landfills with Wal-Mart throwaways.

To do that, we have to address packaging. Have you ever noticed that when you’ve taken the item out of the package you’ve got more packaging than item? We want to ensure that our goods come in the right size package, and we want to ensure that the materials in that packaging are made from renewable or recyclable materials that can make future packages. Pretty simple, really. And it saves us a lot of money.

Our packaging team, for example, worked with our packaging supplier to reduce excessive packaging on some of our private-label Kid Connection toy products. By making the packaging just a little bit smaller on one private brand of toys, we will use 497 fewer containers and generate freight savings of more than $2.4 million per year. Additionally, we’ll save more than 3,800 trees and more than a thousand barrels of oil. Again, think about this with Wal-Mart’s scale in mind: this represents one relatively simple package change on one private toy brand.

We believe that Wal-Mart can significantly reduce the amount of waste going to landfills in our communities, and reduce costs through increased recycling of the remaining material. We are committed to:

Reducing our solid waste from U.S. stores and clubs by 25 percent in the next three years.

Working with suppliers to create less packaging overall, increase product packaging recycling and increase use of post-consumer material.

Replacing PVC packaging for our private brands with alternatives that are more sustainable and recyclable within the next two years.

We are a large company. For Wal-Mart to be successful and continue to grow, we must operate in a world that is healthy and successful. Of course, we are acutely aware that we have a business to run, and run it we will. At the same time, we believe that these initiatives and many more to come will make us a more competitive and innovative company, and one that is more relevant to our customers. We have an aggressive vision. With courage and commitment to change.we will be at our best and remain true to the legacy of the company Sam Walton founded some 43 years ago.

This speech excerpt has been reprinted
with permission from Wal-Mart.

A Bold Initiative
Wal-mart launches 5-year plan to reduce packaging

Impact equal to saving 667,000 metric tons of CO2, 323,800 tons of coal, and 66.7 million gallons of fuel

To further its leadership position, Wal-Mart Stores, Inc. plans to measure its 60,000 worldwide suppliers on their ability to develop packaging and conserve natural resources. This initiative, scheduled to begin in 2008, is projected to reduce overall packaging by 5 percent. The announcement came at the conclusion of the Clinton Global Initiative in New York City.

In addition to preventing millions of pounds of trash from reaching landfills, the initiative is projected to save 667,000 metric tons of carbon dioxide from entering the atmosphere. This is equal to taking 213,000 trucks off the road annually, and saving 323,800 tons of coal and 66.7 million gallons of diesel fuel from being burned. This initiative will also create $10.98 billion in savings, just from a 5 percent reduction in 10 percent of the global packaging industry. Wal-Mart alone is poised to save $3.4 billion.

“Packaging is where consumers and suppliers come together and can have a real impact both on business efficiency and environmental stewardship,” said Wal-Mart CEO H. Lee Scott. “Even small changes to packaging have a significant ripple effect. Improved packaging means less waste, fewer materials used, and savings on transportation, manufacturing, shipping and storage.”

On Nov. 1, 2006, Wal-Mart introduced a packaging scorecard to more than 2,000 private label suppliers. This is a tool that will allow Wal-Mart buyers to have all the information about packaging alternatives or more sustainable packaging materials in one place, allowing them to make better purchasing decisions.

On February 1, 2007, tools and processes will be made available to all of the company’s global suppliers. For 12 months, these suppliers will learn and share results within this process. And beginning in 2008, Wal-Mart will measure and recognize the entire worldwide supply base for using less packaging, utilizing more effective materials in packaging, and sourcing these materials more efficiently through a packaging scorecard.

Scott added, “When you bring the capabilities of the entire supply chain together, the ability to make a difference really pops. There’s a multiplier effect. Instead of just looking at what Wal-Mart can do alone, we have the opportunity to inspire thousands of companies and millions of customers, as well.”

Wal-Mart’s packaging vision began to form when the company partnered with suppliers to improve packaging on its private label Kid Connection toy line last year. By reducing the packaging on fewer than 300 toys, Wal-Mart saved 3,425 tons of corrugated materials, 1,358 barrels of oil, 5,190 trees, 727 shipping containers and $3.5 million in transportation costs, in just one year. Now Wal-Mart is taking what it learned from Kid Connection and applying it to the more than 160,000 products that are seen globally by 176 million customers each week.

Wal-Mart Sustainable Packaging Value Network, a group of 200 leaders in the global packaging industry, is leading the project. This group includes representatives from government, NGOs, academia and industry.

Wal-Mart operates over 6,000 discount stores throughout the United States, and is the largest retailer in the world and the second largest corporation in the world, behind Exxon Mobil, based on revenue as of 2006. For the fiscal year ending Jan. 31, 2006, Wal-Mart reported net income of 11.2 billion on $316 billion of sales revenue. It is the largest private employer in the United States and Mexico. Visit: www.walmartstores.com

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