Wal-Mart chairman: Go green for money, not image
The massive retailer's bet that "going green" would be good for business has paid off because Wal-Mart has focused on efficiency and reducing waste, not altruism, says former CEO and chairman Lee Scott.
LAGUNA NIGUEL, Calif.--Wal-Mart Stores pushed forward with a risky sustainability initiative at a time when its public image was suffering. But ultimately the company's rationale for "going green" was purely economic, according to former CEO Lee Scott.
Over the past five years, Wal-Mart has put in place a number of initiatives including renewable energy at stores, reducing waste in packaging, and creating a sustainability index of its suppliers. Its actions have raised suspicions and admiration from outsiders, politicians, and employees.
But the effort has endured because the motivation was purely economic, said Scott, who was the first featured speaker at the Fortune Brainstorm Green green business conference here on Monday. If it had been done to repair its image, the company would have likely scaled back during the economic downturn last year.
"What Wal-Mart has done is approach this from a business stand point and not from a point of altruism. If we as a company focus on waste, we can make Wal-Mart a better company and at the same time, become a better citizen," he said.
During a low point in the company's image around 2005, Scott and his management team considered what previous company executives should have done 10 years ago. Seeking to avoid more problems down the road, Scott and board members came around to the idea that "at some point, the world is going to hold corporations responsible for the impact they had on the environment," Scott said.
What followed was a formal intitiative within the company to lower its carbon footprint and environmental impact. The company has installed solar panels on 20 stores as well as more efficient lighting and is testing other technologies with a "reasonable payback."
Originally, though, it was a voluntary effort. The first project within the sustainability push was started by an executive who figured out how to reduce packaging in a Wal-Mart-branded toy. That change eliminated the need for 215 shipping containers. From there, it spread to the point where now people who don't have an environmentally oriented initiative in the company are "outliers," he said.
"We recognized that (employees) were waiting for us. We thought we were leading, we weren't. We were meeting the expectations of people, particularly the 25- and 35-year-old buyers," he said.
As a giant corporation with more than $400 billion in annual revenue, Wal-Mart undeniably has a huge environmental footprint. For example, it is the largest private consumer of electricity in the U.S. On the other hand, large businesses create demand for green-technology products, which helps bring down the cost of energy-related products, such as solar panels, or consumer goods, such as organic foods.
Although a relatively small percentage of people are willing to pay a large premium for "green" products, most people are concerned with health and the environment. "There's almost a reverse snobbery that says that only educated people care about the environment," Scott said.