Q.No.

3 The case highlights that apart from improving its image, motivating employees,
Wal-Mart can also save money by going green. As a HR manager discussed in detail
strategies of the company and the need for changing branding retail strategies with the
changing of environment?

With endless racks of cheap apparel, brightly lit mega-stores, and 18-wheelers unloading daily,
Walmart has traditionally stood more for consumerism than conservation in the minds of most
Americans. Thus, it may come as a surprise that Walmart is leading other retailers in its
commitment to reduce greenhouse gas emissions from its owned supply chain and encouraging
suppliers to follow suit.

Walmart’s motivation for reducing greenhouse gas (GHG) emissions centers on financial and
operational success. First, reducing energy consumption improves Walmart’s profit margin by
lowering utility costs. Innovations in trucking logistics that reduce transportation-related
emissions—which comprise 14% of all GHG emissions—lower fuel costs.[1] Even small
improvements in electricity and heating—which comprise 25% of GHG emissions—add up to
significant emissions reduction and energy savings across 11,000+ global stores with over 1B
square feet.[2],[3] Second, environmentally-friendly operations reduce Walmart’s vulnerability
to potential future regulatory fees such as carbon taxes. For example, if the U.S. government
imposes a fee equal to its estimated social cost of carbon ($36 per metric ton), the effective price
of coal-powered electricity could double.[4],[5]
Along with reducing current energy costs and avoiding potential future fees, the company also
has an interest in mitigating the decline in crop yields and increase in extreme weather, which
could increase commodity prices or interrupt supply. With stores in in 28 different countries and
over 100,000 suppliers, Walmart’s geographical interest in preserving environmental integrity
are far-reaching.[6] This unparalleled size and reach also serve to magnify any altruistic
motivation the organization has—i.e., any small change made to operations can have a large
environmental impact—which may be in line with the values of the leadership team, or to
‘green’-minded shoppers and shareholders, or both.
How, then, have Walmart’s supply chain managers capitalized on energy savings opportunities?
Major streamlining efforts began in 2016 when the company signaled to suppliers that they
would be required to reduce delivery windows from four days to two days and reduce packaging
mistakes. Under the new On-Time, In-Full (OTIF) program, suppliers will be required to meet
these higher standards 95% of the time by February 2018.[7]
To support such precise delivery schedules, Walmart is standardizing supplier appointment
scheduling systems throughout its distribution network. Reducing variability in delivery timing
avoids backlogs of trucks at loading/unloading docks and worker downtime—i.e., blocking and
starving. Supply chain management also revised the merchandise replenishment prioritization
logic such that distribution center managers can more closely coordinate inbound cargo with a
store’s “must-arrive-by-date.”[8] By reducing the throughput time between the production of
merchandise to the shelving in stores, Walmart can reduce the inventory held throughout the
supply chain. Indeed, 17Q2 results showed a slight decrease in inventory on the balance sheet
compared to last year ($43.4B as of July ’17 vs. $43.5B as of July ‘16) despite an increase in
quarterly revenue ($122.0B vs. $119.6B.).[9] This translates to lower warehousing costs—
including energy savings—as well as savings from working capital improvements. In stores,
Walmart reduced energy use by 20% between 2005 and 2016 for a run-rate savings of $1 billion
per year.[10]
In addition to improvements in its own supply chain, Walmart has secured commitments from
major suppliers to reduce the environmental impact of their own operations. In past years, eight
of the world’s largest food companies pledged to eliminate six million metric tons of GHG and
expand sustainable agriculture programs to eight million acres of farmland.[11] In partnership
with P&G, Walmart is targeting a 25% reduction in water per dose for all liquid laundry
detergent, which will reduce packaging and transportation costs and emissions.[12] Such product
innovation and production process improvements increase the sustainability of all goods sold by
these CPG companies, not just those on Walmart shelves.
Looking forward to a retail industry increasingly fueled by e-commerce, Walmart should shift
their ‘greening’ efforts from the producer-to-shelf supply chain to the producer-to-doorstep
supply chain. In a case study conducted by Walmart and Bain & Company, online orders shipped
to the home produced more GHG emissions on average than store purchases, driven by smaller
basket sizes for online orders (see figures 1 and 2).
[13] To minimize emissions related to omni-channel retail, Walmart should encourage in-store
pickup for online orders, which customers are likely to coordinate with other purchases and
errands.  It could also offer pickup locations in higher-traffic areas than its existing supercenter
locations to avoid extra car trips.
To date, Walmart’s climate-friendly agenda has been budget-friendly, but it’s unclear whether
conservationist efforts that don’t translate directly to bottom-line benefits are feasible for the
publicly traded company. Will shareholders tolerate lower returns for an environmentally-
friendly investment? Or could Walmart pass on cost increases to customers—do Walmart
shoppers care to go ‘green’? Walmart’s supply chain innovations may need to stay true to the
motto: Save Money.

Reference:

[1] “Climate Change 2014: Synthesis Report,” Intergovernmental Panel on Climate Change,

2014, pp. 47 https://www.ipcc.ch/pdf/assessment-
report/ar5/syr/AR5_SYR_FINAL_All_Topics.pdf. Accessed November 2017.
[2] Ibid.
[3] Walmart Inc. (March 2017). Form 10-K. http://stock.walmart.com/investors/financial-
information/sec-filings/. Accessed November 2017.
[4] “Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis – Under
Executive Order 12866,” Interagency Working Group on Social Cost of Greenhouse Gases, US
Government, August 2016, pp. 4 https://www.epa.gov/sites/production/files/2016-
12/documents/sc_co2_tsd_august_2016.pdf. Accessed November 2017.
[5] “Coal Prices and Outlook” U.S. Energy Information
Administration, https://www.eia.gov/energyexplained/index.cfm?page=coal_prices Accessed
November 2017.
[6] Walmart Inc. (March 2017). Form 10-K.
[7] Edwin Lopez, “Behind the scenes of Walmart’s new on-time, in-full policy,” Supply Chain
Dive, October 2017 https://www.supplychaindive.com/news/Walmart-OTIF-inventory-flow-
ecommerce-supply-chain/507301/ Accessed November 2017.
[8] Ibid.
[9] Walmart Inc. (August 2017). Form 10-Q.  Note: No causal link is explicitly reported between
the OTIF and reduced inventory.
[10] Kelsey Lindsey, “Why Walmart is a retail sustainability leader (but doesn’t really want to
talk about it),” Retail Dive, August 2016 https://www.retaildive.com/news/why-Walmart-is-a-
retail-sustainability-leader-but-doesnt-really-want-to/423713/ Accessed November 2017.
[11] “Walmart asks suppliers to deliver supply chain innovation,” Consumer Goods Technology,
April 2014. https://consumergoods.com/walmart-asks-suppliers-deliver-supply-chain-
innovation Accessed November 2017.
[12] Ibid.
[13] Aaron Cheris, Casey Taylor, Jennifer Hayes, Jenny Davis-Peccoud, “Retailers’ Challenge:
How to Cut Carbon Emissions as E-Commerce Soars.” Bain & Company Brief, April
2017 http://www.bain.com/publications/articles/how-to-cut-carbon-emissions-as-ecommerce-
soars.aspx Accessed November 2017.