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Inside Walmart's green strategy

Walmart Canada’s sustainability program is ambitious.

What do you ask the president of the world’s most powerful company when the two of you are just hanging out at Walmart headquarters?

In my case, I ask David Cheesewright about the gum drum. “What the heck is that thing?” I inquire, pointing to what looks like a child’s toy drum attached to a recycling bin. There are loads of these contraptions all over Walmart’s low-slung head office in the sprawling city of Mississauga, Ont. You can’t miss them. So during a break in our photo shoot with Cheesewright, president and CEO of Walmart Canada, I just have to ask what the drums are for. “Oh those,” he replies. “The thing is, when you want your office to produce zero waste, you have to recycle everything. And that includes gum.” Together we peer down the drum’s tiny opening. Sure enough, a few chewed-up morsels have been deposited by Walmart staffers. When I wonder aloud whether all this old chewing gum is going to be recycled into new sticks of Trident for Walmart’s shelves, Cheesewright just laughs.

In fact, all that chewing gum gets turned into compost and organic fertilizer. It’s part of a massive effort within Walmart to eliminate waste entirely. Next to the gum drum sits a box to collect polystyrene–the foamy white stuff used in cheap coffee cups and product packaging. Polystyrene is nasty stuff for the planet. It takes hundreds of years to break down. I’m told Cheesewright has an especial hate-on for polystyrene and doing something about it has become something of a priority. Two years ago Walmart found a company that could recycle it. Today all the polystyrene from head office and 30 Walmart stores in southern Ontario is shipped out and turned into fire-resistant commercial insulation.

These are two examples, albeit tiny ones, of how key sustainability has become to Walmart. It’s hard to look into any of the company’s operations these days and not see sustainability interwoven in some way. At the top level, Walmart now diverts 84% of the waste it produces at all of its stores and warehouses in Canada from landfills. The head office diverts 95%. Each new Walmart store is at least 30% more energy efficient than stores built four years ago. The company is adding wind turbines and solar panels to some stores, and operations staff have scoured older Walmarts this year in search of environmental leaks to plug. Simply going back and checking the HVAC system at 150 Walmarts (a process known as recommissioning) has improved heating and cooling efficiency by 6% to 10%.

Meanwhile in Nova Scotia, Walmart’s Bridgewater store cut its garbage output so much that, as of this April, it had reduced waste pickup from once a week to once every two months. In July, that location became the first in the chain to create near zero waste. And in Manitoba, Saskatchewan, New Brunswick and Nova Scotia, 31 Walmart stores are now supplied by rail rather than trucks, resulting in a 45% reduction in emissions and 5% to 10% savings in fuel. At the same time, Walmart is encouraging suppliers and its 86,000 employees to think green. “As the world’s biggest retailer, Walmart can inspire more people than just about anybody,” says Paul Lingl, a climate change specialist with the David Suzuki Foundation in Vancouver.

But it is Walmart’s latest green initiative that is surely the most eye-popping. In February, just before the 2010 Winter Olympics, the company organized the Green Business Summit in Vancouver and invited not only suppliers, but also rivals like Loblaw, Shoppers Drug Mart and Canadian Tire, to swap environmental ideas. Walmart is willing to share anything it’s learned about sustainability with the competition, declares Cheesewright. “The environment is not something any of us should be looking at for a competitive edge. The problem is too big and no one is going to solve it on their own. The more we share, the better.”

My plan is your plan

To find the roots of Walmart’s green strategy, you have to go back to the morning of Oct. 24, 2005 and a conference call convened by Lee Scott, worldwide president of Walmart, with his executives. Scott began by talking about Walmart’s unbelievable size–“If we were a country, we’d be the 20th largest in the world”–and its many critics. He had recently started to meet with some of them, such as Jeffrey Hollender, founder of the influential household cleaning products firm Seventh Generation. Folks like Hollender said Walmart needed to become more responsible and change how it did business. Scott didn’t disagree. (It’s interesting to note that while Hollender used to say he’d never do business with Walmart, his company’s products recently hit shelves in some Walmart stores.)

But back in late 2005, Walmart’s reputation was sinking fast. It was the poster child for endless consumerism, cheap labour and offshore manufacturing. Yet in the summer and fall of 2005, there had been a brief pause in the tarring and feathering of its reputation. That August, Hurricane Katrina had smashed into Louisiana and Mississippi. While the government institutions people expect to help in an emergency (the police, hospitals, the Federal Emergency Management Agency) failed, Walmart did not. The retailer shipped in millions of dollars’ worth of products to the area ahead of FEMA, and in one case a store manager in Mississippi cleared a path to her store with a bulldozer, then started giving away everything that wasn’t damaged to the local citizenry: water, shoes, socks, food–even insulin from the pharmacy. After retelling that story to his executive team, Scott suggested that if one Walmart employee could make such a big difference in a catastrophe, what could Walmart achieve if it set the whole organization to do something positive, such as improving its impact on the environment? He then announced Walmart’s new sustainability initiative, which he boiled down to three goals:

1.  To be supplied entirely by renewable energy

2. To create zero waste

3. To sell products that sustain resources and the environment

One thing Scott didn’t decree was how each of its global divisions should achieve those goals. Walmart Canada has largely developed its own initiatives. Those began in 2006 under then-president Mario Pilozzi. But they’ve sped up since Cheesewright took over as president in February 2008. “He’s really taken this to a new level,” says Walmart’s VP of corporate affairs and sustainability, Andrew Pelletier.

Take February’s Green Summit, for instance. Pelletier came up with the idea to get businesses together to share their green strategies. But at a meeting, Cheesewright asked whether Walmart’s retail competitors would be invited. They should, he argued. For Cheesewright, asking Loblaw, Home Depot and Shoppers Drug Mart to attend seemed like a no-brainer. In Great Britain, where he grew up and cut his teeth at Mars and at Walmart subsidiary Asda, retailers often share information where it relates to solutions from which they can all benefit.

It’s no wonder, then, that since that summit in Vancouver Walmart has kept in touch with companies like Home Depot. Staff from the hardware giant have touched base with their colleagues at Walmart on several occasions, says Home Depot spokesperson Tiziana Baccega. Cheesewright is especially impressed with Home Depot’s Eco Options program, which employs government rebates on environmental products and encourages people to return old, inefficient lawn mowers to the stores to get credit for a new one. He thinks there are more opportunities to share sustainability information with others. That’s where comes in. The website was launched around the Green Summit and contains case studies and information on what companies are doing to be green. “There’s enough work being done to look at what everyone is doing and share it,” says Pelletier.

Much of Walmart’s sustainability initiatives, however, are focused on hammering away at the three goals laid out by Scott in that 2005 conference call. They include retrofitting stores to improve energy efficiency by 20%, slashing plastic bag use in half and diverting 90% of Walmart’s waste from landfills by 2014, up from the current 84%. In October, Walmart will open its first refrigerated distribution centre designed around sustainability. The facility in Balzac, Alta. will be 60% more energy efficient than a typical cold warehouse and forklifts will run on hydrogen fuel cells instead of lead-acid batteries.

The bottom line

All these initiatives aren’t just good for the planet. They’re good for Walmart’s bottom line. Over the next five years, the Canadian operation expects its sustainability programs will reduce costs by $140 million. Switching to low-watt light bulbs at its 300 stores alone will save $6 million a year. What’s probably more interesting is that sustainability is earning Walmart money–an estimated $60 million over the next five years as it sells material for recycling.

Critics might point out that this shows Walmart’s sustainability programs aren’t entirely altruistic. Cheesewright doesn’t dispute it. Ever since Sam Walton opened the first Walmart in sleepy Bentonville, Ark., in 1962, the company’s mantra has been to lower prices. To do that consistently, it has to keep cutting costs. Sustainability is one way to do that because it removes inefficiencies and waste. “There aren’t many initiatives I sign off on that don’t give a business return,” Cheesewright says. “There might be more flexibility in what returns we need for sustainability initiatives than other things we do, but we try to make sure there’s nothing we do that isn’t financially returnable in the long term.”

One sustainability program Walmart doesn’t have a line item for, though, is called “My Sustainability Plan”–an effort to get the retailer’s employees to do something good for themselves, their families and the environment. Walmart Canada was the first division outside the U.S. to take on the program and Cheesewright is now involved in the global initiative. About half of all employees in Canada have signed on. The program is simple, says Cheesewright: commit to something good, tell your co-workers about it and then keep them up to date on your progress. At Walmart headquarters, staff have filled a bulletin board with some of their goals: one pledged to buy a tankless water heater; another wants to quit smoking. Someone else vowed to stop drinking pop while another person promised to make her own cleaning products.

Cheesewright has several of his own goals: get his three kids to recycle more; install energy-efficient light bulbs at home (that one is already done, he says) and eat together as a family at home more often. There’s one more: ride his bike to work at least once a week–a 21-kilometre trek from the nearby town of Oakville.

Testing, testing...1-2-3

It’s a bright Wednesday morning in July and I’m standing outside the new Walmart Supercentre in Burlington, Ont., a tidy, affluent suburb on the shore of Lake Ontario. Drive a few minutes west and a bridge takes you over the Armageddon greyness of Hamilton’s belching steel mills. But in Burlington the air is fresh and clean. So is the new Walmart. It opened last year and still has that opening-day sheen. It looks like any other Walmart, but really there’s no other store like it. This is Walmart Canada’s environmental demonstration store, designed with a pile of features that Walmart hopes to use in other locations to make its retail fleet the greenest in the country.

My tour guide is Andrew Telfer, Walmart’s manager of sustainability. Telfer has a degree in environmental geography, but he’s actually a food industry veteran. He started out in sales at General Mills selling brands like Cheerios, then went into research at Nielsen. Five years ago he joined Walmart’s pricing department, working on the retailer’s price strategy in food just as it was beginning to sell groceries in Canada. As sustainability manager, he’s involved in every part of the company’s environmental strategy, from purchasing to store building to operations.

Before construction of the Burlington store, says Telfer, “we decided to pack one store full of all the things we wanted to do with sustainability and then see what works best.” Those things start seven feet below the parking lot with 15 kilometres of piping filled with glycol, a heat transfer fluid. In summer, the pipes pull heat from the store and dissipate it into the ground. In winter, the process reverses. Heat from underground is sent into the store through the floor. On most days this geothermal technology is enough to maintain a comfortable temperature.

A host of gadgets ensure power use is kept to a minimum. Temperature sensors heat and cool only as needed. A white roof membrane reflects hot sun in summer. The lighting is all low-watt or LED to conserve electricity, and heat from refrigerators is collected and used to warm the store. The result: the Burlington store uses 60% less energy than a standard, old Walmart store.

There are more surprises as Telfer and I walk the store, the most inauspicious of which are found in the grocery aisles. The vegetable cooler, for instance. Like most stores, it’s wide open so customers can pick up their carrots, celery and lettuce. “It’s like leaving your refrigerator door open, though,” admits Telfer. To keep the cool air in when no one’s shopping, Walmart installed rollup blinds in the cooler. At night, after the store is shut, these reflective grey curtains are pulled down so the coolers don’t have to work so hard to maintain a chilled temperature. Over in the freezer aisle, LED lights have replaced typical freezer fixtures. The lights are also motion-sensor controlled, so when there are no customers in the aisle, it’s lights out.

Not everything has worked so well at this test store. Telfer points to the skylights as an example. A lot of Walmart stores in the southern U.S. have installed them. They let in more natural light, meaning less need for artificial lighting and therefore smaller electricity bills. But in Canada’s colder climate the tradeoff in heat escaping through skylights hasn’t been worth the savings in lighting costs.

Next we head into the back room where Telfer shows off the store’s compactor. Layer after layer of cardboard boxes and plastic bags are being stuffed into what is essentially a giant tiered cake of recyclables. Each crushed package weighs 600 pounds and they’re taken away twice a week to be recycled. Nothing is wasted–literally. For instance, organic waste from Burlington is packed into giant garbage bins for compost. But since government regulations forbid double-stacking of organic waste bins during transport, the empty space in the back of trucks is filled by polystyrene, which is also recycled. “It means only one truck on the road instead of two,” Telfer explains.

The Burlington store easily addresses two of the three pillars of sustainability laid out in 2005 by Walmart head honcho Scott. It’s the third–selling more environmentally friendly products–that remains a huge challenge. But it’s also where the company can make the biggest impact. As the world’s largest purchaser of products, Walmart has the clout to change not just its own environmental record, but that of its suppliers as well. Case in point: its decision three years ago to only sell concentrated laundry detergents. Manufacturers could make two-times concentrated detergent for Walmart and diluted versions for other retailers. But considering the giant volumes Walmart buys, that didn’t make sense.

Telfer thinks Walmart can do the same in other categories. Take clothing, for instance. The most damaging part of shirts and pants we wear to the environment isn’t at the retail level. It’s in laundry we do at home. What if Walmart’s suppliers made more clothing that required cold-water rather than warm- and hot-water washes? The savings in electricity worldwide would be huge.

Walmart’s influence is already nudging manufacturers in the right direction. Take it’s Packaging Scorecard, which measures whether suppliers are cutting back on their own waste. In 2009, Walmart Canada asked one of its suppliers, El-En Packaging, which makes private label garbage bags, to find a way to reduce its packaging. The company, based in Vaughan, Ont., immediately reduced the size and thickness of its chipboard boxes. Overall, the weight of the boxes dropped 20%. Cheryl Babcock, vice-president of operations, says there was big concern that the smaller boxes would get lost next to the larger containers of the big brands. But sales have kept up. The company expects to save 21 metric tons of paper a year because of the changes. As a result, Babcock says El-En will pay for new machinery it had to purchase within a year and a half. “It absolutely surprised us how much we saved.”

Before I leave Burlington, I’m struck by another unusual environmental benefit of this store: its size. At around 100,000 square feet, it’s half the space of Walmart’s earlier monster Supercentres. The smaller footprint is partly the result of Cheesewright’s European retail background. In England, retailers have less space to build stores and so rely more on clever merchandising and assortments than a supersized store floor. “Whenever a store manager says ‘I need more space,’ I kind of laugh to myself,” says Cheesewright. The Burlington store is doing great volume business, he says. And because of the smaller size, it’s cheaper to build and operate.

The trouble with tomatoes

David Cheesewright is a straightforward guy when it comes to the environment. Like most executives quizzed on the subject, he’ll talk about sustainability being the right thing to do and leaving the planet a better place for the next generation. But he’s pragmatic, too, and skeptical of ideas that sound good but don’t actually do anything.

Take the company’s Sustainable Product Index, currently in development. It’s been suggested that Walmart will colour- or number-grade each product’s environmental impact so customers can make informed choices. There’s a danger in making things too simple, though, Cheesewright points out. He cites an experience from his Asda days. Asda was importing tomatoes from Spain, but in deference to the local food movement it began buying only tomatoes homegrown in the U.K. To gauge the results, it hired an auditing firm. The findings surprised everyone: thanks to Great Britain’s soggy climate, tomatoes have to be grown in greenhouses. And the environmental damage of greenhouses is much worse than the impact of transporting sun-grown tomatoes from Spain. That is perhaps one reason why Walmart has so far relied on third-party sustainability certificates like EcoLogo and the Sustainable Forestry Initiative. Walmart now carries 1,000 such products, up from some 300 in 2007.

Cheesewright also wants Walmart’s sustainability initiatives to have some kind of payback. It could be immediate (such as recycling) or long term (solar panels). Cheesewright argues that asking for a return is a good thing because it forces employees to think creatively. For example, when Walmart’s store builders pitched the idea of geothermal energy for the Burlington test store, Cheesewright balked. The costs to install pipes underground were astronomical. Undaunted, the construction team found a company in Alberta that installs the pipes inexpensively using something called a spider plow. Suddenly, the project became cost effective.

Walmart’s focus on the bottom line doesn’t always please environmentalists. “I woudn’t call them a green company,” says Lingl at the David Suzuki Foundation. Still, he says Walmart is moving in the right direction. And Lingl’s boss, David Suzuki, hasn’t shied away from showing up at Walmart conferences like the Green Business Summit. He also appeared in a promotional video with Cheesewright in which he pointed out the obvious reason for paying attention to Walmart: “Because business can make changes faster than anyone,” said Suzuki.

Don’t think Walmart has gone soft, though. When I enter Cheesewright’s tiny office (the shelves are George brand ready-to-assemble furniture, sold at Walmart), I’m invited to interview the boss at a waist-high table. No chairs. Cheesewright prefers having meetings standing up. It’s a British thing, he says. People tend to get right to the point when they’re not sitting down.

Still, Cheesewright happily chats for an hour. As our interview winds down, he reiterates that Walmart is willing to share its environmental knowledge. “But we’re still a pretty tough competitor and we’re going to continue to be on behalf of the customer.”

Walmart may be turning green. But it’s still lean and mean.

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