McMillon challenges Wal-Mart and suppliers in ongoing sustainability push

In his first public forum as CEO of Wal-Mart Stores Inc. Doug McMillon challenged employees and suppliers to innovate, saying he would push the envelope in testing these new ideas that will drive the retailer’s future growth. McMillon and several top executives took the stage in Bentonville on Monday (Feb. 17) for the retailer’s annual Global Sustainability Milestone Meeting.

McMillon told the group that he was in the room 10 years ago when then CEO Lee Scott set three huge sustainability goals. He recalled several awkward conversations at the time as Wal-Mart first began it sustainability journey.

He said it was the first time he remembered the company focusing beyond its two major stakeholders — suppliers and customers. He said the sustainability initiative involved some awkward conversations at first when the retailer began asking other outside groups to critique the retailer’s performance in hopes of making Wal-Mart a better company.

“I remember going home and asking my kids at dinner one night if they thought Wal-mart should focus on being more sustainable,” McMillon said. “Spencer (then 7-years old) looked at me and said ‘duh, we’ll be here longer than you and we’ll need this earth.’”

In the past decade Wal-Mart has made big steps in the direction toward sustainability, but McMillon said the next leap will likely come from innovations that are aided by total-system thinking. He challenged suppliers and employees to figure out what they could do in their role to facilitate a more sustainable Wal-Mart.

BACK STORY
Peter Seligmann, CEO and founder of Conservation International, was in Bentonville for the company’s annual meeting on sustainability. He said the idea that Wal-Mart could be a huge player in sustainability first began years ago with a diving trip off the coast of Costa Rica between he and Wal-Mart board chairman Rob Walton.

He said Walton attended a meeting with him the following day with the President of Costa Rica about how the country was managing its fisheries.

“I told Rob that the president was going to look at me and see an environmentalist … but, if he were to ask about opportunities for sustainable sourcing of fish for Wal-Mart, the conversation would go better. Within a few months there was a change in the way Costa Rica was managing its resources. I told Rob, who was a board member of (Conservation International) at the time, that if he really wanted to change the world, he had to get Wal-Mart involved,” Seligmann said.
 
He said Walton responded by saying, “Let’s go to Bentonville.” Seligmann said they met Lee Scott and other executives about the role Wal-Mart could play and the excitement became infectious as Wal-Mart “democratized” the broader conversation.

“Sustainability is a story about humanity, it’s a big conversation,” Seligmann said. “With climate shift and 80 million new births annually, the planet is stressed out. The biggest challenges for mankind will be how to take care of these new people with shrinking resources.”

WAL-MART PERFORMANCE
Charles Zimmerman, vice president of product innovation at Wal-Mart, said the three goals set in October 2005 by the retailer simple in theory, but lofty in scope for a 2020 target.
• Be supplied 100% by renewable energy;
• Create zero waste; and
• Sell products that sustain people and environment.

The first two, he said were aspirational goals, precise in nature.

Zimmerman said the energy piece involves sourcing renewable energy where it can, as well as generating renewable energy sources. The company reset its energy efficiency goal last year to reduce its energy consumption by 20% by the year 2020. He said through the third quarter of last year, the company reached a 7.4% reduction, well past the 3% needed at the time to be on track for the new 2020 goal.

“While I get excited about those percentages the real impact is financial. That 7.4% is a savings of $250 million in energy costs annually,” he said.

He said LED innovation is leading the way for these savings and it’s largely through products created with its suppliers, products that have revolutionized the entire lighting industry in the process.

Wal-Mart was quick to find lighting applications such as exit signage, freezer cases and parking lots, but the elephant in the room was the large supercenter sales floors which comprise 90% of the retailer’s lighting costs, according to Zimmerman. He said a year ago only 20% of the store planners had evolved their prototypes to be 100% LED. Today, that’s up to 80%. The technology is something its competitors will be using within two years, but in the meantime, Wal-Mart will build some 2,000 stores using the 100% LED lighting.

Touching on the renewable energy source efforts, Zimmerman highlighted the progress made in its Mexican business unit, where the company doubled the amount of wind turbines that power stores there. By the end of 2014, he said 60% of Walmart de Mexico’s energy needs will be met through renewable sources.

Zimmerman said a zero tolerance policy on waste with 11,000 stores is a huge goal, and many would say, “no way.” He said three of Wal-Mart’s largest markets have already achieved 80% no-waste — Walmart U.S., Seiyu in Japan and Asda in the U.K. 

LOGISTICS GAINS
Chris Sultemeier, executive vice president of Walmart U.S logistics, said his division is known far and wide for its efficiencies dating back to Sam Walton’s distribution methods that allowed him to put stores in rural areas. He said all distribution center warehouses and fulfillment centers are converting to LED lighting that will save $10 million annually in utility costs. The retailer also is using hydrogen fuel cells to power the fork lifts used in the warehouses. 

“We have 2,000 of these in use in our distribution centers in the U.S. and Canada, the largest fleet of its kind in the world,” Sultemeier said. “By doubling the fleet efficiency of our trucking operations we shipped 658 million more cases, driving 300 million less miles and saving 43 million gallons of fuel.”

But the more interesting part of Sultemeier’s presentation involved the forward look toward new technology and fuel innovations the retailer is testing with key suppliers. The company spotlighted efforts to collect waste grease from stores and Sam’s Club that is then used to create biofuel. The company also is working to build hybrid trucks that run more efficiently and create a new prototype for the semi-truck of the future — Walmart WAVE.

Wal-Mart said the new WAVE is still a few years away from mass production.

USED CARDBOARD BOXES
McMillon closed the meeting in a candid conversation with suppliers, employees and other groups attending the annual event. He asked anyone in the room who had stories to shares or suggestions that could help Wal-Mart further its sustainability journey to approach the microphone.

The last attendee to speak was Marty Metro, the CEO of UsedCardboardBoxes.com.

He pointed to a box baler on stage in the Wal-Mart home office auditorium and said that’s what everybody thinks is a sustainable effort, but it’s not.

“What really happens is that these boxes can be broken down and then shipped to China. Twelve years ago we set up a company and infrastructure to buy used cardboard boxes and then resell them to people who reuse them again. We buy millions and millions of boxes from General Mills, Nestle and McCormick Spices and instead of baling them, we break them down, inventory and inspect them, then resell them as used boxes. We do sell a tiny, tiny bit to Wal-Mart, but lots to Target, T.J. Maxx, Ross and Marshalls and all those competitors,” Metro said.

He told McMillon he made the trip from California, hoping to spark an interest from Wal-Mart, a huge venue that is shipping millions of boxes to China, in hopes they could work together in the future. 

“Working with Wal-Mart who gets boxes from the suppliers, we could buy those empty boxes and sell them back to suppliers creating a sustainable loop,” Metro said.

McMillon joked that Metro was the marketer among the group, but then quickly added that he figured out how to pay for the meeting.

“You made it to the right microphone,” McMillon said, before he asked his workforce who was going to be responsible for following up with UsedCardBoardBoxes.com.

Wal-Mart’s reverse logistics group answered the call and McMillion noted it. He then asked Metro if he had any other ideas. Metro smiled and said he can’t solve all the world’s problems, so he’s been focused on cardboard boxes for 12 years and his firm does that really well.