Wal-Mart should be applauded for taking serious steps to green its supply chain. Now it must humanise it
It took a hurricane to turn Wal-Mart green. When Hurricane Katrina rocked New Orleans in 2005, the US retailer was on the frontline of the relief efforts, delivering food and drinking water to flood survivors. Meanwhile, in Bentonville, Wal-Mart chief Lee Scott saw in Katrina an augur of catastrophic global warming. Two months later, in October 2005, Scott announced his plans to make the big-box giant a leader in environmental stewardship.
Wal-Mart’s immediate response to Katrina showed just how effective the company can be when it puts its mind to something. Within hours of the disaster Wal-Mart had flexed its logistics muscle and sent trucks packed with aid to hurricane victims. It is no surprise, then, that since turning his attention to the environment, Scott has got results. As Jon Entine explains in this month’s cover story (from p36), Wal-Mart has taken huge steps to spread environmental best practices throughout its supply chain. When the retail giant strode towards sustainability, its 6,000 suppliers had no choice but to follow.
Wal-Mart’s transformation in the last three years has left many observers wondering what to think of a company that once seemed to represent the worst of global big business: the race to the bottom for cheap overseas production; the battering of small, local retail competition; and, the neglect of environmental impacts.
Still, many ask: has Wal-Mart really changed? The answer to that question – both “yes” and “no” – reveals much about both the power and the limitations of big business to drive sustainable development.
First, the plus side. Wal-Mart is clearly serious about addressing its environmental impacts. It is promoting “sustainable” products to customers: energy-efficient light bulbs (100 million sold by October 2007), or concentrated detergents that use less water (saving 400 million gallons of water), or clothes made from organic cotton. Wal-Mart will buy 9,000 tonnes of organic cotton this year, more than double the amount used by the entire world in 2000. It is building more energy-efficient stores and purchasing green energy from renewable sources. It is further rationalising distribution to save fuel and getting suppliers to cut tonnes of excess packaging.
Yet for all its progress on the environment, Wal-Mart still lags on labour standards – in particular at contract factories in Asia from where it sources most of its cheap products and where labour problems persist. Although Wal-Mart’s environmental efforts are welcome, its weak and barely improving record on labour practices dent claims that it has transformed itself into a sustainability champion. Wal-Mart has given a green twist to a supply chain that still lacks a human face.
The performance gap between Wal-Mart’s actions on social and environmental matters exists for this reason: tackling climate change fits squarely within its current business model; improving labour standards does not. Getting suppliers to use less energy and cut other resource use saves on their production costs. This means Wal-Mart can bargain with them for even lower prices. In contrast, better labour standards are still associated with the higher costs of higher wages and the investment needed in continuous monitoring and fostering better relationships between management and staff.
Wal-Mart may have made a dramatic shift in its attitude towards the environment, but the dynamic that governs its relationships with suppliers remains the same. Scott’s green vision gives suppliers yet another reason to find ways to cut costs – this time by investing in energy efficiency, for example. Reforming labour practices at contract factories is a different challenge. It requires giving more power to employees at the bottom of the chain, for example through encouraging them to join unions and bargain collectively. That is not the Wal-Mart way.
The alternative to workers in developing countries joining unions and demanding factory owners improve labour conditions themselves is for brands to exert pressure on suppliers on their behalf. Brands that are most progressive on reforming supply chain labour practices recognise that reforms cannot just come from above. Nike and Gap, for example, are attempting to collaborate with local unions and labour rights campaigners to raise standards. These efforts are not enough to eradicate abuse, but they represent a considered approach to improving the lives of contract workers.
Will Wal-Mart follow the lead of Nike and others? While the company has improved its reporting of violations at supplier factories, it is not yet entirely transparent in disclosing where abuses have occurred. To improve, Wal-Mart must do two things. First, it must toughen up its monitoring: only a quarter of supplier audits conducted in 2006 were unannounced. More importantly, it needs to complement better monitoring of suppliers with meaningful support of grass roots labour groups in all countries that it sources from. Only by giving contract staff the chance to debate conditions with suppliers from below, just as Wal-Mart bargains with them from above, will a fairer deal for all be struck.
When Scott urged his suppliers to believe in his environmental vision, they had no choice but to follow. Supply chain labour problems will not be solved in exactly the same way. But Wal-Mart certainly has the power to improve the lives of contract staff, should the giant put its mind to it.