Walmart Pushes for a Sustainable Food Supply Chain(69985)

Walmart Pushes for a Sustainable Food Supply Chain

Last week, Wal-mart took its green , or sustainability , to another level. On October 14^th, it announced 5-year sustainability goals for the food supply chain. The company s CEO Mike Duke stated, When we think about our sustainability goals up to this point, it's not an area we have addressed adequately, but only four of our 39 sustainability goals address food. But that's changing, today.

It s All about the Brand

The world s largest food retailer announced that the program s objectives are: first, to source more food locally in U.S. Walmart stores; second, to invest in training and infrastructure for small and medium-size farmers in emerging markets; third, to measure how efficiently large suppliers grow and get their produce into stores.

The third objective builds on Walmart s Sustainable Product Index, announced in 2009. The stated goal of the index is to lead to higher quality, lower costs and measure the sustainability of products and help customers, live better in the 21st century. At that time, CEO Duke stated that, the index will bring about a more transparent supply chain, drive product innovation and, ultimately, provide consumers the information they need to assess the sustainability of products.

At last week s announcement, the CEO said, More than 1 billion people around the world rely on farming and hundreds of millions of them live on less than $2 a day. Globally, with a booming population, food production must increase roughly 70% to feed 9 billion people in 2050 . Through sustainable agriculture, Walmart is uniquely positioned to make a positive difference in food production for farmers, communities and customers. Our efforts will help increase farmer incomes, lead to more efficient use of pesticides, fertilizer and water, and provide fresher produce for our customers.

Although produce local/buy local activists might be given a pass for their skepticism of the giant company s motives (given its history of crushing local competition), both the new program and the sustainable product index are in-line with the brand focus established by now-retired CEO Lee Scott. In a 2005 letter to employees following the Hurricane Katrina disaster, Scott posed the question:

"What would it take for Walmart to be that company, at our best, all the time? What if we used our size and resources to make this country and this earth an even better place for all of us: customers, Associates, our children, and generations unborn? What would that mean? Could we do it? Is this consistent with our business model? What if the very things that many people criticize us for our size and reach became a trusted friend and ally to all, just as it did in Katrina? Thankfully Katrinas don t come around very often, but the world needs help all the time. People and the environment are being pushed to the limits.... As one of the largest companies in the world, with an expanding global presence, environmental problems are OUR problems. The supply of natural products (fish, food, water) can only be sustained if the ecosystems that provide them are sustained and protected... I believe, in fact, that being a good steward of the environment and in our communities, and being an efficient and profitable business, are not mutually exclusive. In fact they are one in the same Our environmental goals at Walmart are simple and straightforward:

1. To be supplied 100 percent by renewable energy.

2. To create zero waste.

3. To sell products that sustain our resources and environment.

It s not coincidental that Walmart changed its brand byline in 2008 from Always Low Prices to Save Money. Live Better. They might add (at least to themselves), Be More Profitable. In discussing the program, current CEO Duke stated that 30 to 40 percent of food is wasted as it moves from farms to tables.

But the executive said that, we must produce more and waste less." Every retailer knows that waste is a cost that has to ultimately be borne by consumers. Walmart clearly sees the opportunity to drive down the cost-of-goods, achieving the magic of both lower retail price and a higher margin percentage.

Part of a Trend?

In a July, 2009 article, none other than the Harvard Business Review stated that Walmart has just changed the game with respect to environmental issues. Now it doesn't matter whether Congress' new cap-and-trade law meets all its promises, nor whether the G-8 leaders dithered rather than acted on environmental issues. Walmart's unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. Walmart has transformed green standards from nice-to-have to must-have.

Walmart is not alone in its push for local sustainable food supply chains. Tesco, the world s 3rd largest food retailer, has a program called Nurture. Nurture is intended to ensure that best agricultural practices are employed in the production of fresh fruit, vegetables, and salad products. Like Walmart, Tesco has also developed a training program for suppliers, and has a program that promotes responsible product sourcing.

The question for other retailers is, what are you doing? In July 2009, Walmart took the unusual step of inviting its competitors (Kroger, Costco, Target) to join a consortium to promote the sustainability index with suppliers. The Sustainability Consortium, which is jointly administered by Arizona State University and the University of Arkansas, now includes suppliers such as Cargill, Colgate-Palmolive, Clorox, Coca-Cola, and Kimberly-Clark, and some retailers (e.g. Safeway, Best Buy, Ahold, Marks & Spencer).

But in our conversations with solutions providers about the efficacy of their green messaging, we get a curious response. As one executive said recently, most of our retailers say they will respond when consumers ask for it in other words, many companies choose to be reactive, not proactive. In taking that stance, retailers risk missing the opportunity to get involved in something that could not only add value their Brand, but also add money to the bottom line. And those retailers will find once again that another company (Walmart) has defined their reality, and thus has raised the cost-to-compete for everyone else.

Walmart Pushes for a Sustainable Food Supply Chain

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