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Wal-Mart Yanks Its Own Chain
Joel Makower, 21 Oct 05

Wal-Mart CEO H. Lee Scott announced today that his company, long a target of activists of pretty much every stripe, was going to be paying a lot closer attention to the environmental and labor standards of its overseas supply chain. In a speech on Thursday at a conference on retail trends held by the University of Arkansas' Sam M. Walton College of Business, Scott said:

The factories in China are going to end up having to be held up to the same standards as the factories in the U.S. There will be a day of reckoning for retailers. If somebody wakes up and finds out that children that are down the river from that factory where you save three cents a foot in the cost of garden hose are developing cancers at significant rates -- so that the American public can save three cents a foot -- those things won't be tolerated, and they shouldn't be tolerated.

What in Sam’s name is going on here?

First, some background -- just in case you haven’t been paying attention to anything lately beyond Iraq, hurricanes, and the Supreme Court.

For several years, a broad, diverse, and growing movement has been targeting Wal-Mart, which has become something of a tabula rasa for interest groups. Pick a social issue and you’ll find some group that’s painted a target on Wal-mart: Environmentalists, labor groups, women’s groups, minority groups -- that’s just for starters. There are also small business groups (who complain that Wal-Mart puts them out of business), first amendment groups (who object to Wal-Mart’s censorship of music lyrics and magazine and book covers and content), community activists (for contributing to sprawl), and so on.

I sat in on a meeting last year of a group of environmental activists looking at taking on Wal-Mart as part of a bigger campaign. At the table were environmental groups focusing on mining (Wal-Mart is one of the world’s biggest jewelers, so it buys lots of gold, platinum, silver, and diamonds); trout fishers (run-off from Wal-Mart’s parking lots foul local creeks, streams, and rivers for outdoors types); and forests (how else to target the world’s biggest seller of Pampers and Charmin?).

Labor, for their part, has another whole batch of activists under the name Wal-Mart Watch -- a multimillion dollar campaign funded in large part by the service employees union. (Earlier this year, the union launched PurpleOcean.org, “the world's first Internet-based union membership program.”)

But much like Nike before it, Wal-Mart’s overseas supply-chain challenges have raised the most heat among activists. The issue is both labor and the environment -- the low wages and poor working conditions of workers in Asian factories, and the environmental legacy that comes from practices to cut costs such as clear-cutting of forests and industrial factory farming of seafood.

In recent weeks, the heat has been turned up, as activists have prepared for release on November 13, of WAL-MART: The High Cost of Low Price, a documentary by Robert Greenwald, director/producer of last year’s “Outfoxed: Robert Murdoch’s War on Journalism.” The week of November 13-19 has been dubbed “Wal-Mart Week,” in which “3000+ screenings in 19 countries and all 50 states are already in the works for the largest grassroots mobilization in movie history,” according to the movie’s official Web site.

So, Lee Scott’s recent pronouncement is significant.

But is it real? That’s the $285.2 billion (fiscal 2005 sales - PDF) question.

There’s evidence to suggest that this isn’t just window-dressing -- that Wal-Mart is serious about making changes. Consider the comments of one strategist I know who’s watching Wal-Mart -- someone not prone to fawning over multinationals.

“This is definitely not greenwashing, and that's going to become clear to the public over the next few months. When they set their minds to do it, they like to become a leader, and that's what they've done with sustainability. When they decided they wanted to be the best supply-chain management, they not only because the best but they revolutionized the business.”

He continued. “Wal-Mart has always perceived themselves as highly ethical and in the business of providing good service to customers and enhancing quality of life. So some of the pushback they've been getting is troubling to them because it's not their intention to cause problems out there. Lee Scott is very sincere. They're going to do some amazing things. This has the potential to be the fastest turnaround ever on sustainability and the most comprehensive.”

Clearly, it sounds like someone has imbibed the Kool-Aid.

I, for one, am skeptical that the great, great Wal-Mart turnaround is nigh. But I’m also not ready to write off Lee Scott or his company as sustainability poseurs. I believe we’ll see a steady stream of new initiatives coming out of the company’s Bentonville, Ark., headquarters in coming months. One example: In his speech, Scott said his company would start selling clothing made from organically grown cotton next year.

"We're going to take thousands of tons of pesticides out of the environment and produce a better garment for our customer and a garment that they can be proud of. Those are the kinds of solutions that exist out there that take more sophistication," he said.

Wal-Mart alone could make a global market for cost-competitive organic cotton, something that companies like Nike and Patagonia (along with a bevy of much smaller players) have been struggling to ramp up for years.

And there are other actions. On Wednesday, Wal-Mart announced that it will invest $25 million to establish a private equity fund that will directly issue equity investments in women and minority-owned business enterprises.

The question, of course, is whether a few good deeds here and there -- liberally infused, of course, with sprinklings of the company’s $10 billion or so annual profits -- will make a significant difference.

The answer is likely “no.” The company will need to do much more. For starters, it will need to produce a comprehensive sustainability report detailing its environmental and social impacts around the globe, demonstrating that the company fully understands its impacts, has a plan to continually measure, track, and improve them -- and to report annually the results. That’s the minimum standard these days for a socially responsible company, and once-reviled companies like Nike and Gap have made huge strides in turning around their negative social images through such means.

Beyond that is an even more formidable challenge: Transforming the Chinese manufacturing economy, the source of much of Wal-Mart’s goods, to embrace environmental and social responsibility, including strong labor practices.

That’s no small feat, but Wal-Mart could pull it off. According to some accounts, Wal-Mart exports now account for 1% of China's GDP. (Wal-Mart says it exported US$18 billion of product from China in 2004 -- roughly 1% of China's $1.6 trillion GDP in 2004). That’s 1 in every 42 dollars of China’s industrial exports.

Could Wal-Mart truly transform China -- and, in the process, itself?

There’s a case to be made that in order to redeem itself, it may need to do nothing less.

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Comments

when walmart announced the green stores I remember posting to several blogs about how it probably had more to do with building codes for green buildings in those areas than with Walmart's choice. It didn't. Walmart decided on their own to build green buildings. While I don't think they'll go far enough to please everybody as you say, as usual it seems like we should at least realize these are human beings with ethical and moral concerns. Maybe it's time to start e-mailing for a sustianability report.

Kind Regards,
A


Posted by: andrew on 21 Oct 05

IIRC, Wal-Mart was denied their green store in Vancouver. Maybe their management realized their track record was starting to limit their growth?

While this could be greenwash, it will be interesting to keep an open mind and see if they actually do interesting things.

I'm concerned that the one example mentionned - selling organic cotton garments - thrusts the responsibility back to the individual. Seems to me an organization could demand that its suppliers transition to organic agriculture, and set yearly targets. Both could be done at the same time of course- I just dodn't want to see any company painted green because they offer a couple green products.

Finally, I'm not concerned about sustainability. It's an amorphous concept, nearly impossible to pin down. What's so great of making sure things can stay the same? I want a company that dedicates itself to continuously reducing its physical impact, just like they try to reduce their costs. That sounds radical, but it's the same restorative idea that leaders such as Interface are pushing for. If a company like Wal-Mart got that, the future would look very bright.


Posted by: Daniel Haran on 21 Oct 05

It's easy to test Wal Mart's newfound greeness. Just ask a few questions:

Are they going green at all stores? No.

Have they introduced an equitable wage and health benefits scale into their labor relations? No.

Are they following Sam Walton's "Buy US" policy? No.

Are they buying from local suppliers so local business doesn't get waxed by their cheap Chinese crap? No.

Are they forsaking their sprawl development pattern for new stores? No.

Are they interested in greenwash? Yes.


Posted by: clib chubley on 21 Oct 05

When we truly enter the era of peak oil, we will see how sustainable, and green, Wal Mart's business model is. Are they going green because they discovered there are actually pockets of resistance out here? Are they going green to crush what few small competitors there are out here who started going green before it became fashionable?

In any event, the goal is the same, to crush all opposition and to destroy all American suppliers in the process. Mega stores that require people to drive all over hell and back will never be part of a green strategy.

Going green and insisting that suppliers meet American environmental and labor standards will never be compatible with Wal Mart's primary objective, impossibly low, low prices.

I'm sorry but I can't get inspired by a corporation that has singlehandedly destroyed most of American manufacturing. If this is a natural consequence of capitalism in America, the rules of the game need to be changed.


Posted by: tom on 22 Oct 05

Are they going green at all stores? No.

the stores are "experimental" right now according to their press release. I don't think them retrofitting stores if the benefits turn out to be good enough is out of the question. Also, as was pointed out, their Vancouver store was planned as being green so that does mean aside from the original two stores their now building more green buildings. the real question is, will they build green stores in towns that don't demand it? While McKinney doesn't require green building codes, they encourge it. In fact McKinney, TX is working with their new green buildings to make better green building codes based off what works.

Have they introduced an equitable wage and health benefits scale into their labor relations? No.

As The Economist has pointed out part of the reason why employees have almost no power to demand better wages is becuase of China. If Walmart is pushing for better Chinese working conditions, then ironically their giving Unions a new seat at the table. Also, Whole Foods is against unions too if you happen to favor them.

Are they interested in greenwash? Yes.


Posted by: andrew on 23 Oct 05

Just on that last note: please don't compare Whole Foods and Wal-Mart. While WF is not the perfect green company they play on TV, their opposition to unions is backed - unlike Wal-Mart - by one of the best benefits programs in America today; they also go out of their way to suppport local farms and local food-related NGOs.


Posted by: Justus on 23 Oct 05

What's most disconcerting to me is seeing Wal-Mart become the focal point of demands for fair trade rather than our own government. I predict Wal-Mart takes the same approach to fair trade as Burger King has for healthy food: offer a few high-priced niche items to demonstrate good faith, then cancel them when they don't sell and blame the consumer. "We tried, but there was no market for it," they'll say.

The one thing America has that the rest of the world wants is access to our markets. We should be using our markets as wedges to demand progressive increases in human rights, workers' rights, and environmental standards in China and all the developing nations we trade with. Instead we do just the opposite.

A strong US President could transform the WTO into a vanguard of fair trade by threatening to abandon it unless it commits to a program of increasing rights and standards around the world. If it won't, then it's not worth being a member of. We're not just squandering our jobs, we're squandering our capacity to lift people out of poverty and oppression.


Posted by: Dan on 24 Oct 05

Long NY Times article on it here:
http://www.nytimes.com/2005/10/25/business/25walmart.html

If they mean it, it's a big deal. In fact, a huge deal, because as the article notes, their power over suppliers means that the other customers of the suppliers will have to take the products too.

I think it'll work out for them in strictly business terms. Waste costs money, particularly with oil prices so high; and Walmart is so huge and has so much standardization that spending $100,000 to redesign some packaging on a $5 item to save 5c worth of plastic could pay off in, you know, a week of national sales. I'm quite interested to see how it goes.

They still have terrible labour relations of course. They need to change that - interestingly, apparently he also suggested a raise in the minimum wage, which is fascinating; Walmart more than any other business depends on the spending of those making less than average wages, so they have an actual interest in (some) policies that increase the amount of money those people make; of course, they have a countervailing interest in keeping low-wage jobs, well, low-wage. But to put it very crassly, if poor people get too poor to buy cheap crap, Walmart is in trouble.


Posted by: Jacob Davies on 25 Oct 05



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