Wal-Mart Grows Up

Wal-Mart is determined to improve its battered public reputation. Putting aside the much-debated "flogging" missteps, Wal-Mart has undertaken a series of actions designed to position the giant retailer as a socially responsible leader.

This past fall, Wal-Mart announced - first in Florida, then in a total of 15 states - that it would sell hundreds of generic drugs for just $4 a prescription. With rising health care costs a huge concern nationally, Wal-Mart's news generated strongly favorable media coverage, helping to enhance its reputation, particularly among the elderly and others on fixed incomes. Call that shoring up your traditional base of support (if you insist on using political campaign language ).

But Wal-Mart also has reached out to its critics and to potential new customers who might otherwise shun the discount retailer through a concerted "green" effort. CEO Lee Scott is a committed environmentalist who is determined to take actions to address issues of land, water and air pollution as well as the single largest environmental issue: global warming. He also is fully committed to financial results and to showing that the imperatives of social responsibility and business success need not be at odds with one another.

Scott's pledges to eliminate 30% of the energy used in Wal-Mart stores and to reduce solid waste from U.S. stores by 25% in three years have not assuaged the critics. Wal-Mart Watch is closely tracking progress on these and other environmental promises and well they should. Clearly the company needs to back up its public commitments.

Wal-Mart has an even more ambitious goal for 2007: to sell 100 million energy-efficient compact fluorescent light bulbs. The bulbs last much longer and use far less energy than conventional incandescent bulbs. Wal-Mart says that over the life of the 100 million bulbs, customers would save $3 billion in electrical costs while reducing greenhouse gas emissions by 20 million metric tons (much of the electricity produced globally is generated at coal-fired power plants producing millions of tons of greenhouse gas emissions that contribute to global warming). 

Only a company the size of Wal-Mart could commit to such an audacious goal: 100 million sales of the strange-looking bulbs (which are about eight times as expensive as regular light bulbs) would represent a 50% increase in industry sales of compact fluorescents.

"The environment,"  Scott told the New York Times, "is begging for the Wal-Mart business model."

That's the talk of a leader. It's clear that Wal-Mart is growing up. The folksy, home-spun company that Sam Walton founded in in 1962 in Bentonville, Ark., for years operated in a style that was very much in sync with its small-town customers. With its stunning success came growing pains. It took far too long for Wal-Mart leadership to understand that its small-time attitude toward PR was a poor fit for large-scale reputational battles. A subsequent hunker-down mentality only emboldened Wal-Mart's many critics.

"We would put up the sandbags and get out the machine guns," Scott told Fortune Magazine last July.

Now Wal-Mart and its lead PR agency Edelman stress engagement -- with customers and critics alike. That's smart PR, and flogging aside, will pay off in the long run. But like any solid reputational strategy, Wal-Mart's talk is backed by solid actions. For Wal-Mart, that means stepping up to the mantle of leadership. Waking up to the enormous positive impact it can have on vexing social issues, the world's second-largest company is finally getting comfortable in its over-sized clothes.

- Jon Harmon

Comments

[jon harmon]

Insightful comments all. Signs of Wal-Mart growing up are encouraging, and I do believe that Lee Scott does have a genuine, if pragmatic, commitment to environmental stewardship. But there are many measures of corporate social responsibility beyond environmental sensitivity. As pointed out in your comments, worker rights (Wal-Mart employees as well as its suppliers' employees) are an important measure as well. There are no shortage of Wal-Mart Watchdogs who will continue in their vigilence.

[john]

Wal-mart's problems are not in execution but in design. Everything they aim to achieve is good for Wal-mart and bad for just about everyone else...and before someone shouts "low prices for consumers" it would be good to look at the entire receipt to see just what we're paying in addition to those low prices.

The aforementioned "Wal-mart Effect" is a good example.

Given WM's history one needs to be a skeptic when they make the above claims.

My thoughts...

1. Environmental changes were not the biggest problems they faced. Human exploitation and a virtual gov't subsidy (health care)were. But now they have framed the conversation on an issue they feel they can win.
2. $4 Drugs. Great, but I don't see any change here - No one ever questioned their commitment to low prices.

3. Reduce energy use by 30%? Does anyone else picture rooms full of illegals peddling bicycle style generators?

4. Solid waste reduction in the stores? What are they going to do, lock up half of the toilets and send their employees out of the store when necessary?

5. Bulbs to reduce greenhouse gases. Hmmm, so if we buy more of WM's bulbs we'll be helping the environment - Not WM, the environment. Right.

So my impression is less of a company "stepping Up" then the scene from "Groundhog Day" where Bill Murray repeats aloud the things that Andy M. does not like in order to remember them the following day. He's not trying to become a better person, but he's learning these lessons so that he can be successful the next day in seducing Andy McDowell.

[Erin Thomas]

I agree with the author that Wal-mart has the ability to directly make an enormous impact on many social and environmental issues by attempting to minimize negative externalities associated with its operations as well as emphasizing its more eco-friendly products. However, this is just the tip of the iceberg. By leveraging its dominant position as the world's largest retailer to force its suppliers to conform to its own standards of energy efficiency and environment-friendly processes, Wal-mart could send a shock wave through the entire manufacturing sector and we would see an effect exponentially greater than its current efforts. Of course, doing so could threaten the very competitive advantage that has allowed the company to grow from a single store in Bentonville to the behemoth it is today; the ability to sell a wide variety of consumber products at the very lowest price.

[mvellandi]

Wal-Mart is a mammoth with the power to change a lot. It was they who introduced and continue to lead the best practices in inventory management and logistics.

However, their low wages and poor contributions to employee benefits remains Wal-Mart's largest detriment to society. Although good hearted efforts to bring great change through volume are well applauded, this issue should not fade away.

They are a major force in life. An excellent reportage of this company can be found in Charles Fishman's "The Wal-Mart Effect".