Transparency and Trust
Ambitious sustainability goals Walmart revealed in late 2005 were dismissed by some at the time as a publicity stunt on the part of a company looking to bolster its reputation. That has proven not to be the case, as a decade of extensive behind-the-scenes work has yielded considerable progress against the goals set by former president and CEO Lee Scott. Now Scott's successor Doug McMillon has drawn a new line in the sand with 2025 set as a target date by which to achieve broader goals. To meet the deadline, Walmart is counting on Laura Phillips, a longtime merchant, who became senior vice president of sustainability in January 2016. Phillips spoke with Retail Leader about the company's goals, tactics to accomplish them and how trust engendered by transparency represents a new source of competitive advantage for Walmart.
Retail Leader: Walmart set some big aspirational goals back in 2005 that were recently updated. Bring us up to speed on the accomplishments so far and the revised goals for 2025.
Laura Phillips: I was in the merchandising area of our Walmart U.S. division back in 2005, and our CEO at the time, Lee Scott, pulled together a group of about 30 leaders. He asked us how we should we think about sustainability and should we do something about sustainability. To be frank, at the time many of us didn't really know what the word meant. So we formed working groups across the company to see what we could accomplish, and we very quickly realized that we could make some changes in our business that were really good for our business and good for society broadly, and we could really drive great impact using our strengths. When Lee gave his Leadership in the 21st Century speech in 2005, he outlined three really ambitious goals which were: to be supplied 100 percent by renewable energy, to create zero waste and to sell products that sustain resources and the environment.
RL: Where are you on those goals?
LP: Over the last 10 years we have been on a steady path on those objectives. We have a very long term, ambitious aspiration around energy, and 25 percent of our energy is now supplied by renewable power. We have achieved great cost savings from the work around efficiency, whether that is in our stores or clubs, with things like LED lighting, HVAC systems and refrigeration units. That has been really good for the business and the bottom line.
We also made efficiency gains with our fleet. We had a very ambitious goal around fleet efficiency, which we achieved last year, that resulted in $1 billion in savings for the company. Within waste we have also made a lot of progress. We are at about 75 percent waste diverted from landfills globally, and in the U.S. that figure is about 82 percent. There is a lot of innovation in that space. From what we've done with recycling we also are making recycling income, and that has been very good for the business.
And we have also done a lot in the area of organics and food waste reduction. Walmart helped set up an infrastructure around the organic waste area that has really made a difference. We also use food when we can to help fight hunger through our partnership with Feeding America. [For] food that we are not able to sell or give to Feeding America, we have a program in place where we provide food for animal feed or other uses.
Walmart's recycling both diverts waste from landfills and generates income. Its goal is now 100 percent recycling in its private brand packaging.
Within our product space, we have made a lot of progress, whether it is our packaging goal that we achieved where we reduced packaging by 5 percent or on our journey on sustainable products. It is always a journey, not a destination, on product sustainability. For example, seafood is a category we have worked on for many years and made a lot of great progress in that category. As well, [we work] deep in supply chains with what I call a "factories and fields" approach, where we work with factories to improve their energy efficiency, mainly in China. And we work in fields with farmers globally on sustainable agriculture practices. Those have been our three areas of focus and we've made a lot of progress against them.
RL: Are the goals set in 2005 still the right ones?
LP: Broadly speaking in sustainability, those three goals are still the right ones. What we are really doing as we look to 2025 is broadening and deepening those goals and putting some time horizons on those objectives. Within the energy space, we still have that long-term ambition to be 100 percent supplied by renewable forms of energy and to reduce our emissions. So we announced a new approach where we signed on to the approach that the U.N. is taking that was part of the Paris agreement that looks at science based agreements and targets. Walmart was the first retailer to sign on to that approach and have a plan approved of our emissions reductions. That entails reducing our emissions in our operations by 18 percent over that time and getting to about 50 percent renewable energy over the 2025 timeframe. We've announced our intention to work with our suppliers across our supply chain to remove a gigaton of emissions. That is a big area for us.
RL: A gigaton sounds like a lot. Can you put that in context?
LP: It is the equivalent of 211 million vehicles off the road for one year, and it is work we will do together with our suppliers.
RL: What about the waste area?
LP: Within waste we have put a timeline on some of our markets getting to zero waste by 2025. As well as continuing to work on food waste end-to-end to ensure there is enough food for the growing population.
RL: How about the journey you mentioned to sell sustainable products?
LP: What's new for 2025 in the products space is, we are really doubling down on packaging and aiming for 100 percent recycling in our private brands. Deforestation is another area where we are making new commitments to achieve zero net deforestation in 20 critical commodities by 2025. Fundamentally, we do believe that our customers are requiring even more transparency into how products are made, where they are made, who made them and what resources are used, so we are working on new solutions and ideas around how we really improve transparency across our products area. Included in that is the notion of trust and transparency, but also people. Another big theme from the 2025 commitments is how we are doing more to invest in our own people, our opportunity agenda and people in our supply chains. Our responsible sourcing team works globally to advance our programs, as does the Walmart Foundation and our people in communities.
RL: How are you defining transparency?
LP: What we are really looking at, from the customers' point of view, is what are those areas and products that customers want to know more about that helps them make even better purchasing decisions for their families. I love this quote from the 2025 speech Doug gave when he said, "When the light shines on us and our products, we want to ensure there is a great story there to tell and we have done the hard work in the background to really tell that story to the customer." We are working on how we will implement and execute that, but keeping the customer at the front as we think about transparency in the future will be a real focus for us.
RL: The "how" is the key. When a customer is walking through a Supercenter, how do you convey to them all the work going on behind the scenes on their behalf?
LP: It is a challenge. We have worked hard for 10 years deep in supply chains with our suppliers on the ground to drive what we call systems change to improve entire production and supply chains so that all the products that we sell are on a path of continuous improvement for customers. That is an approach that is different than some of our competitors'.
Where we interact with the customer is on the product itself. As we are making changes and improving products, we want them to know when they come in the store they can just trust us. They may not want to read extra material, so we want them to trust that we are going to do all the hard work on all the products to improve their sustainability. Seafood is a good example where we have recently added signing in many of our stores to tell shoppers what we are doing. Packaging is another way where our suppliers will label packaging for recycling or explain how they have innovated and improved sustainability.
RL: What role does digital play in the communication effort?
LP: We believe digital more and more is going to be an area of opportunity in the future. We are working with lots of different partners to bring new solutions to customers over time that will help them make decisions better with more information both online and in stores with digital tools.
RL: Can you elaborate on capabilities and technologies you are looking at?
LP: I don't know as we are ready to elaborate on those yet other than to say we are working on several different solutions and ideas here. One that I can speak about is our use of the sustainability index we have relied on for several years. It is a tool at the category level and supplier level that helps improve sustainable performance and is a critical component to our success and a great tool that we have used in collaboration with The Sustainability Consortium (TSC).
RL: How ingrained is that index in your communications and joint business planning activities with suppliers?
LP: We are continuing to participate in the TSC and use the index with our suppliers. The inclusion of sustainability in business discussions and commercial conversations is really important and has been a driver of progress. It is good for business. As we see companies improve in the sustainability index, we also see many times their supply chain metrics improve in areas such as fill rates and must-arrive-by dates. The data helps them get better and adds value to the business.
RL: Talk about your sustainability journey and what the team that you are part of looks like now.
LP: I spent most of my career in merchandising and then worked on a project strategy team in 2015 focused on digital before moving into my current role. I had been working on sustainability in the product space for about 10 years, not full-time, but as part of my merchant role. In this role I work across all of the different business units globally. We have a few more people on the sustainability team than we did back when we started. We have about 12 to 15 people on the team in the corporate affairs area, but we have people working on sustainability all over the world.
RL: So how has the company to achieve the goals it has thus far?
LP: We believe in doing the work in the business and want sustainability embedded in the functional areas, whether that is buyer, store manager, sourcing or our operations area. We want them thinking about and owning the work.
Sustainable agriculture is a major focus at Walmart, to the point where the company works directly with farmers in the fields.
This year at one of our sustainability milestone meetings Doug looked around and said, "Where is the sustainability team, I want to recognize you, in fact I want the whole room to raise your hands." That is fundamentally how we think the work is best done. And it has been one of the keys to our success and we are committed to that approach.
RL: So in essence it is everyone's job?
LP: That's right.
RL: To be transparent you have to be able to measure things. What are you doing on the measurement front?
LP: The measurement piece is critical. We use several different means of measurement and aim to be as transparent with those as we can. We publish progress against our sustainability commitments in our global responsibility report every year where we list all the commitments and track them. We also publish through the Carbon Disclosure Project our emissions and we use the sustainability index in our products area to report suppliers' progress in key hot spots.
RL: The notion of transparency has gained importance and continues to accelerate. Do you expect it to become a competitive advantage as Walmart works toward the 2025 goals?
LP: One of the things that is different compared to 10 years ago is that our customers care more and more about sustainability and social responsibility, and we think that is a good thing. We've been working hard for many years to get ready for that and to be able to meet and exceed their expectations. That will continue to be our mission for 2025, continuing to do the hard work so they don't have to worry about it and they can trust us when they visit our stores and clubs or shop online.