Wal-Mart’s support for the anti-free market agenda of the
environmental movement is not silencing its liberal critics and may
be undermining the company’s financial future.
Wal-Mart CEO H. Lee Scott began pushing a so-called
sustainability campaign in October 2005 as part of an ill-conceived
attempt to deflect union criticism of its business practices. The
campaign includes spending $500 million a year to cut greenhouse
gas emissions to combat the unproven global warming threat, selling
more sustainable products, using more renewable energy, and
generating less waste.
In addition, Wal-Mart is donating large sums of money to
environmental organizations. Since 2003, the Walton Family
Foundation has donated $1.7 million to Environmental Defense. The
retailer is showering largesse on other liberal activist groups as
well, most notably the National Council of La Raza which received
$1,027,900 in 2005.
Wal-Mart’s environmental campaign is especially unfair to small
business.
The company is forcing its 60,000 suppliers to bear most of the
cost of its sustainability efforts or risk losing their lucrative
contracts. In September, Wal-Mart instituted a policy of asking
suppliers to disclose their carbon dioxide emissions. Although
ostensibly voluntary, Wal-Mart has made it clear that its goal is
to establish a program “that would show preference to suppliers who
set their own goals and aggressively reduce their own
emissions.”
On October 11, Lee Scott announced that the company is
introducing a supplier index that will give credit to vendors who
help Wal-Mart reduce its carbon footprint. Scott says Wal-Mart will
reward companies with good scores by aggressively promoting their
products through advantageous placement and other advertising.
Conversely, companies with poor scores will not get favorable
advertising.
It will be interesting to see how well this plays with
consumers, most of whom could care less about a product’s
environmental score. Some shoppers might find it annoying trying to
find their favored items that have been penalized with bad
scores.
Likewise, this year Wal-Mart introduced a packaging scorecard
that evaluates suppliers according to the environmental impact of
their packaging such as the amount of fuel used to ship packaged
materials and whether they use recycled components.
Starting next year, Wal-Mart will begin using the scorecard to
coerce suppliers into changing their packaging. “If after several
years they don’t improve their score,” says Wal-Mart sustainability
director Amy Zettlemoyer, “then they’re probably not going to be
able to compete in the future.”
These onerous environmental mandates, besides hurting small
business, contradict Wal-Mart’s sound business philosophy of
cutting costs to achieve “everyday low prices.”
This should be especially troubling to shareholders given that
the company’s stock has declined from $60 a share in 2000 to $43 a
share in October 2007. Its sales growth this decade has been
lackluster compared to the more robust growth of rivals such as
Target. Competitors are increasingly able to lure away Wal-Mart
customers by offering more selection, higher quality, and better
service.
Wal-Mart needs to devise new strategies to improve its
competitiveness and profitability. But it is not going to achieve
that by saddling its suppliers with ridiculous environmental
scorecards.
FOR INSTANCE, WAL-MART INTRODUCED this year an environmental
scorecard for electronics companies. This scorecard rates
televisions, computers and other electronics on their energy usage
and hazardous waste content. Yet, Wal-Mart is struggling to compete
with companies like Best Buy which offer better installation and
other services for its products. Last year, Best Buy sales rose 16
percent while analysts estimate Wal-Mart’s electronic sales rose
only 7.6 percent.
Rather than wasting time evaluating the “Greenness” of its
electronics suppliers, Wal-Mart should be concentrating on how to
match Best Buy’s superior customer service.
And there could be a limit to how much bullying suppliers will
take from Wal-Mart in its drive to appeal to environmentalists. In
2003, the company mandated that its large suppliers use a new
radio-frequency identification system to track products. However,
Wal-Mart dropped the mandate earlier this year after suppliers
complained about the high costs and poor return on their investment
in the technology.
Wal-Mart frequently touts its new lines of allegedly “Green”
products as innovative ways to promote environmentalism among
existing customers and attract new ecologically-minded ones.
But there are economic and even environmental problems with some
of these products. Wal-Mart is especially pushing sales of compact
fluorescent bulbs (CFLs) because they use one-third the energy of
traditional incandescent bulbs and last longer.
Consumers, though, are likely to be put off by the fact that a
single CFL bulb at Wal-Mart costs $1.65 compared to just 24 cents
for the incandescent bulb. Other CFLs can cost as much as $5 per
bulb.
In addition, CFLs raise safety concerns because they contain
mercury which can potentially pose health risks. The mercury level
in a CFL is very low when compared to a thermometer. Nevertheless,
a broken CFL can release mercury vapors that can affect a person’s
brain, spinal chord, kidneys and liver. The Environmental
Protection Agency recommends that if a CLF bulb breaks, an
individual should immediately open a window to disperse vapors, not
touch the area where the bulb was broken, carefully clean the area,
and remove all glass fragments.
If a bulb burns out, it is considered hazardous waste and must
be sealed in a safe container before disposal.
Wal-Mart is making a huge mistake by pushing products like CFL
bulbs just because environmentalists deem them ecologically safe.
Environmentalists are notorious for pushing “Green-friendly”
products that turn out to have their own ecological baggage. And in
the case of CFLs, environmentalists are sure to eventually reject
them because the mercury content will cause serious hazardous waste
disposal problems.
The company will then find itself scrambling to get rid of CFLs
to embrace yet another allegedly “Green-friendly” product.
EVEN THOUGH WAL-MART HAS INVESTED so much money and effort into
being ecologically correct, the environmental movement dismisses
its initiatives as insufficient.
On September 6, 2007, a coalition of 23 environmental, labor and
human rights groups released a report, “Wal-Mart’s Sustainability
Initiative: A Civil Society Critique,” denouncing Wal-Mart’s
environmental campaign. Coalition members include the Sierra Club,
Friends of the Earth, ACORN, Global Exchange, and the United
Methodist Church.
The report concluded “that even if Wal-Mart achieved all of its
stated goals, the company’s business model is inherently
unsustainable.”
For instance, the report dismisses Wal-Mart’s pledge to spend
millions of dollars to cut greenhouse gas emissions. Although the
company is taking steps to cut 20 million tons of gases each year,
it is still creating 220 million tons of greenhouse gases each
year, “more than 40 times the emissions the company” plans to
eliminate.
The report also repeat’s organized labor’s long-time charge that
Wal-Mart mistreats its employees. Trina Tocco of the International
Labor Right’s Forum says “the company continues to squeeze workers
and suppliers in a global ‘race to the bottom’ in wages, benefits
and working conditions.”
This should put to rest any illusion Wal-Mart may have had that
“Going Green” would mute criticism of its labor practices.
In January 2007, eleven environmental and corporate
accountability organizations, including Greenpeace USA, sent a
letter to Lee Scott demanding that Wal-Mart “end its political
contributions to anti-environmental candidates.”
They called Wal-Mart’s environmental initiatives a sham because
most of the company’s political donations go to Republican or
pro-free-market lawmakers and candidates. The groups demanded that
Wal-Mart “end its contributions to anti-environmental candidates
and bring its stated intentions and actions in line.”
The environmental movement’s ostracism of some fellow activists
who are working for Wal-Mart is further proof that the company’s
sustainability campaign is doomed to failure.
In 2006, former Sierra Club president Adam Werbach entered into
a contract with Wal-Mart to help burnish its “Green” image. His
consulting firm Act Now is developing a Personal Sustainability
Project which purports to teach the company’s employees how to
practice environmentally responsible behavior in their daily
lives.
However, liberal activists are bitterly denouncing Werbach as a
traitor. The Sierra Club reportedly asked him to reconsider working
for Wal-Mart. John Sellers of the Ruckus Society wrote an open
letter, headlined “The Death of Integrity,” accusing Werbach of
abandoning his principles. And ACORN chief Wade Rathke says, “I
have no idea what Adam believes anymore.”
Indeed, activist anger is so deep over Werbach’s alliance with
the hated Wal-Mart that he can no longer speak in public without
special security.
WAL-MART’S MARKETING OF ORGANIC FOOD has also proved disappointing.
Wal-Mart hopes that by offering more organic food, it will improve
its appeal to urban, upscale consumers that tend to buy organic
goods.
However, organic activists emphatically reject Wal-Mart’s claims
to be organic-friendly. Advocacy groups, such as the Organic
Consumers Association and the Cornucopia Institute, believe that
large companies like Wal-Mart must rely upon factory farms,
increased imports and other mass marketing strategies that
undermine the organic ethos of small, traditional farming.
In November 2006, the Cornucopia Institute filed a complaint
with the U.S. Department of Agriculture charging that Wal-Mart was
incorrectly labeling several products as organic. Although the
department did not act on the request, the Cornucopia Institute
maintains that Wal-Mart continues to mislead consumers by
advertising non-organic products as organic.
In August 2007, the U.S. Department of Agriculture threatened to
revoke the organic status of the dairy company that supplies
Wal-Mart with its organic milk, charging the company with using
conventional farming methods in its dairy operations.
This year, the Organic Consumers Association called on consumers
to boycott Wal-Mart, labeling it “the nation’s largest and most
ethically-challenged retailer.”
Stacy Mitchell of the Institute for Self-Reliance concludes
there is no hope for Wal-Mart to redeem itself because “big-box
retailing is as intrinsically unsustainable as clear-cut logging.”
She says by building big-box stores that displace smaller
neighborhood businesses, Wal-Mart forces consumers to drive
farther, use more fuel and emit more greenhouse gases.
She also castigates environmentalists, like Werbach, who embrace
Wal-Mart. They “are not only absolving the company of the
consequences of its business model,” they spread the lie “that this
method of retailing goods can…be made
sustainable.”
Wal-Mart should have known better.
THE ACTIVIST RESPONSE TO WAL-MART’S sustainability efforts as
insincere is hardly a surprise. Environmentalists are die-hard
ideologues committed to an anti-free market agenda and there is no
way Wal-Mart can reconcile its rational pursuit of profit with
these zealots’ radical objectives.
Wal-Mart became one of the world’s most successful corporations
by pursuing an innovative, low cost strategy that revolutionized
the U.S. economy. By trying to curry favor with the environmental
movement, Wal-Mart is playing “Russian Roulette” with its
future.
Lee Scott’s sustainability campaign is not only doing a grave
disservice to shareholders, it is betraying the legacy of Sam
Walton. The founder of Wal-Mart didn’t believe in spending money on
glitzy public relations campaigns. He certainly would be aghast at
the idea of spending millions of dollars to build alliances with
liberal activists. Walton rightly understood that the only opinion
Wal-Mart needed to respect was the consumer’s. Lee Scott should
stop wasting time courting activists and start listening, once
again, to the consumers.
