Walmart's Environmental Sustainability Strategy and Supply Chain

Efficiency-Driven Environmental Stewardship

Walmart has taken on the mantle of environmental responsibility not out of goodwill toward the environment, but because it has found that many of the actions that improve its environmental outcomes also reduce its costs. The company recognized this congruence and has become increasingly creative at finding ways to reduce waste. The key equation — that waste equals money — led Walmart to realize that significant inefficiency existed throughout its system.

As a result, Walmart works with suppliers to streamline their packaging. Less packaging tends to mean less waste diverted to landfills and less petroleum consumed in the production of plastic, but it also means more product can fit onto a truckload, thereby improving transportation efficiency. The result is a win-win situation for both the environment and Walmart — and its customers. Thus, Walmart's approach to environmental stewardship tends to be efficiency-driven. The company seldom, if ever, willingly engages in environmental efforts that would increase its costs — partly out of corporate philosophy, and partly because it recognizes that raising prices to accommodate such efforts would run counter to its business model and would be a problem for its customers.

By seeking out these win-win situations, Walmart is effectively using the principles of sustainability to improve its bottom line. The company works with suppliers to improve efficiency throughout its entire supply chain. Working with suppliers has always been part of Walmart's strategy — leveraging its bargaining power to drive efficiency across the supply chain rather than just within its own operations. For Walmart, applying this approach to sustainability is simply an extension of a strategy it already employed. The key difference is that once Walmart recognized the link between waste and money, it was able to look to sustainability and environmental science for additional opportunities, and now actively seeks out situations where environmental and financial benefits align.

Seafood Supply Chain Reform and MSC Certification

The seafood category offers a clear illustration of how Walmart's sustainability approach works in practice. Seafood is an area where Walmart identified a logical need for change. Wild seafood is generally inefficient in terms of production, and with many species it raises serious ethical concerns, because those species are threatened or at risk. Scarcity caused by overfishing was compounding the inefficiency of wild-caught fish. One outcome of this scarcity is that wild fish is becoming more expensive — a trend unlikely to appeal to Walmart's cost-conscious customers. Fishing for wild seafood also accounted for approximately 1.2% of total global oil consumption, representing a major drain on scarce energy resources in pursuit of increasingly scarce fish.

The natural response has been to increase the use of farmed seafood. For Walmart, farmed seafood presents both opportunity and challenge: farmed fish generally has lower nutritional value, but it can be produced far more efficiently than wild fishing. Additionally, Walmart was facing supply shortages as it expanded its share of the U.S. seafood market.

One of Walmart's responses to the fish problem was to utilize the Marine Stewardship Council (MSC) program, which was developed by Unilever and the World Wildlife Fund to label sustainable seafood products and discourage consumers from purchasing species at risk of population collapse. From this foundation, Walmart built the supplier networks needed to address its seafood challenges. The company committed to sourcing only sustainable wild-caught fish and also focused on an initiative called cluster farming, used in Southeast Asia for shrimp production — a region that is a major source of the world's farmed shrimp supply. Cluster farming helps enforce quality and sustainability standards while providing better livelihoods for small-scale farmers. Walmart also supported initiatives to create marine reserves and raise public awareness of seafood-related issues.

MSC certification was important to Walmart because it focuses on sustainable fisheries "from boat to plate," providing control over the entire supply chain — something Walmart has always valued. Greater supply chain control also reduced the likelihood of fraud. A notable example from the case involves Russian illegally-caught salmon being passed off as legal Alaskan salmon. With Walmart-level oversight of the supply chain, such fraud becomes extremely difficult to execute. As it turned out, there were significant volumes of illegal fish in the market, along with substantial supply chain inefficiencies that were adding cost and degrading fish quality. Walmart was largely unaware of the extent of the problem and took steps with its suppliers to eliminate such waste, resulting in a consolidation of the supply chain.

This partnership has generally worked well for Walmart. It added complexity and short-term costs for suppliers, because the MSC program requires considerably more documentation. Over time, however, suppliers are expected to find ways to reduce those administrative costs. For its part, Walmart gains access to better-quality, lower-cost, and sustainably sourced fish. The company has even increased its degree of vertical integration as a means of expanding the volume of MSC-certified fish available on the market. The program has been successful because all stakeholders have a vested interest in its continuation: fishermen depend on fish stocks for their livelihoods, and so does Walmart, so neither party benefits from overfishing. Suppliers are further motivated to meet Walmart's criteria because Walmart is one of the largest fish buyers in the United States, commanding significant attention from anyone seeking to sell seafood.

Motivating Suppliers and Engaging Associates

Walmart motivates its suppliers to reduce their environmental impacts through several mechanisms. The first is the traditional Walmart approach: leverage. Walmart holds tremendous bargaining power over its suppliers, many of whom depend on Walmart for a substantial portion of their business. When Walmart asks its suppliers to do something, they take that request seriously. At the same time, Walmart works collaboratively with suppliers when doing so creates mutual benefit. The company shares ideas for improving environmental performance, and both parties reap the rewards of greater efficiency.

Walmart is also developing metrics for measuring sustainability. Accurate measurement generally makes improvement easier, because it establishes a baseline and clarifies targets. Because sustainability measures vary by product category, it is important that appropriate metrics are devised for each context. Developing these measures supports the broader cause of sustainability and helps Walmart frame and evaluate its own efforts.

Walmart also communicates publicly about its sustainability initiatives. This serves multiple purposes: it improves Walmart's brand image, and it creates a public expectation of continued environmental performance. It becomes easier to bring suppliers on board when Walmart has publicly committed to a strategy and is actively shaping customer expectations around environmental policy. Public communication functions as an accountability mechanism — it holds both the company and its suppliers to stated commitments.

Beyond supplier management, Walmart also works to improve its environmental record internally. Rather than establishing a dedicated sustainability division, the company opted to build a small core sustainability team and make environmental responsibility the shared duty of all associates. Every employee is expected to contribute to sustainability initiatives, and in some cases associates are evaluated on those contributions, which increases motivation. Engaging associates also makes practical sense: employees know their stores and operations better than most managers do, and far better than members of a centralized sustainability team. The result is that associate engagement has generated more — and better — ideas for efficiency and environmental stewardship than a top-down approach would have produced.