The Wal-Mart Stores is an American retail chain founded in 1962 by Sam Watson. The retail chain has grown over the years to an international scale with over 8500 outlets in 15 countries across the world. The late Sam Walton founded the Wal-Mart stores inc., on the belief that efficient leadership entirely depended on cooperative service. To the stores management today, this means including the associates, suppliers and even consumers in all the aspects of decision making within the organization that may be relevant to them. Environmental sustainability is not only a corporate social responsibility as implemented by the stores, but also a business strategy with which the company can gain and retain more points with the consumers, employees, environmentalists and other stakeholders. A good CSR initiative is one that is aligned with company goals and objectives, and for the Wal-Mart Stores, environmental sustainability has an underlying benefit other than the green tags.
How Wal-Mart Is Deriving Business Value From Its Sustainability Strategy
Environmental sustainability is generally a tricky venture. While consumers are attracted by a company that cares about the environment, they also prefer companies that offer relatively cheaper products. This means that Wal-Mart must find another way of retaining its consumers even with the environmental sustainability program. Over the years, the company has managed to find a number of ways through which to derive extra revenue to keep the business running without transferring the costs to the consumers. While in some instances the suppliers may not be as cushioned as the consumers, they too are able to realize long term benefits like the company.
For example, from the recyclable plastics project the company manages to save up to $16 million that would be used to haul the plastic waste from it stores around the world. The company also saves $25 million in fuel costs by using auxiliary power rigs in trucks during loading and breaks. The triple concentrate detergent also saves the company over $1.3 million in transport costs as the small size needs smaller packing space thus fewer trucks used for transport. The paper towels packaging project also saves the business about $5.4 million while the dog food packaging saves $1 million.
Generally, the company saves a lot of money annually in the environmental sustainability initiative implying that the project is not only good for the environment but also aligned with the goals and objectives of the organization as a sustainable business. The profits continue to be realized even with the seemingly increasing cost of research and development for environmentally friendly products and packaging options. With over $55.9 million in annual savings, the company does not need to increase the retail prices of their products but rather push sales much higher through effective marketing communication techniques.
Also, the company derives revenue from the recycling initiative in which they provide other companies with material that can be recycled including plastics, paper and corrugated cardboard boxes among other things. The company also connects its suppliers with relevant NGO’s and environmental organizations for training and capacity building on sustainable environment friendly practices thus empowering them to continue doing business in the right way.
- Long term profitability
- Sustainable business
- Good market reception
- Supplier support and loyalty
- Shorter supply chain for traceability
- Manageable operational costs
- Greenhouse emissions in transportation as most products are manufactured overseas
- Vertical integration for efficiency
- Competition is catching up with the sustainable strategies
Networks That Have Been Most Successful And Factors That Explain The Success
The textiles network can be considered as the most successful based on the extent to which it has reduced the environmental footprints. This network has not only significantly reduced the toxicity levels of the dyes used in their fabrics by suppliers, but also encouraged farmers to practice organic farming by guaranteeing them of consistent demand. Previously, farmers took up organic farming and gave up soon afterwards for failure to find markets for their products. However, Wal-Mart has invested in purchasing the produce of these farmers consistently thus enabling them to stick to organic farming. Another indication for the success of the textile network is the amount of impact it has had in the reduction of greenhouse emissions. Previously, the cotton had to be transported twice before the finished products could get to the stores. As a result of the network’s effort, one trip has already been slashed and the cotton only goes from the farms to Guatemala as the need to be taken to China for processing has been eliminated.
The seafood network is not so bad by itself as well given the amount of progress realized over the past years. The network has eliminated the long chain of suppliers and the stores now get their fish directly from the seamen and their packaging units as opposed to the second, third, fourth and even fifth hand acquisitions that were experienced before.
The electronics network on the other hand has also had some incredible breakthroughs including the compellation of suppliers and manufacturers to produce environment friendly merchandise not only for the Wal-Mart stores but for all their consumers.
These networks were created to aid in the designing and management of environment friendly initiatives in these three departments. This means that their successes are measured by their progress is achieving environmental sustainability that is in line with the organization’s goals and objectives. Each of the networks has made a contribution to the company’s current environmental sustainability status but the textiles network’s contribution can be considered as the most significant considering that the end products have been widely accepted by the retailer’s consumers across the globe.
How Wal-Mart Stimulates Suppliers and how it Can Stimulate Development or Disruptive
Wal-Mart’s suppliers understand the importance of the environmental sustainability aspect to the organization. They thus understand why they have to share information with the company on the traceability of their products. In cases where the suppliers are unable to meet the thresholds for environmental sustainability, Wal-Mart offers help in terms of NGO connections for training and capacity building. Also, the company assures their suppliers of confidentiality when they share sensitive intellectual property. In this way, the suppliers are able to trust the company and aim at providing them with the best quality products that are geared towards environmental sustainability. In some instances, the company also agrees to do the product promotion and thus the supplier is compelled to provide them with the necessary information in order to achieve real results.
The Wal-Mart stores have come a long way from their first step into the subject of environmental sustainability in 1989. The company is no longer walking blindly in this arena but rather taking bold informed steps and reaping the benefits in terms of significant operational cost cuts. With energy savings, cheaper alternatives in renewable energy, storage space reduction and reduced transport costs among other things, the company is able to sustain its environmental sustainability project without increasing product prices. The production costs may be higher, but the amount of savings made annually is enough to cater for this increase without having to transfer it on to the consumers. The company has specifically made significant progress in its textiles network and the results can be seen in the sales numbers of the clothing departments. Efficiency in environmental sustainability for a retail chain can be measured by the market reception of the modified product. With regards to the suppliers, the stores have taken on a collaborative approach in which they partner with suppliers thus allowing for easier exchange of information on the products and their environmental compliance. In return for the information, they offer value addition mechanisms such as partnerships with relevant NGO’s, product promotions and other things on behalf of or in partnership with the supplier.