This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.


Driven by public concern, all the candidates agree that action is needed to slow global warming. No matter who's elected, America's policy will be different a year from now.... Sounds Good, but we can't afford to make any more mistakes in how to 'save the planet.' Start by ditching corn ethanol.

Just the Tree of Us

Driven by public concern, all the candidates agree that action is needed to slow global warming. No matter who's elected, America's policy will be different a year from now.

Jerry Adler
Updated: 2:42 PM ET Apr 5, 2008

At this vital juncture in the earth's history, it's clear that the American people are looking for a presidential candidate who will take climate change "very seriously." One who favors "unbiased research" into the problem and promises to support regulations that are "based on science." Someone, perhaps, like George W. Bush, who in 2000 managed (in those words) to convey just enough assurance of his good intentions to defuse global warming as a make-or-break issue in the campaign. After seven years of inaction on greenhouse-gas emissions, Bush can honestly claim that he hasn't changed his position. "I take the issue seriously," he told a news conference at the end of last year.

Even back then, of course, the leaders of environmental groups understood that their interests aligned more closely with Al Gore, who would go on to win the Nobel Peace Prize for his campaign against global warming. This year, though, those leaders want to make sure there's no confusion on the part of the voting public. The environment, which typically ranks somewhere around "regulatory reform" among voters' concerns, has emerged as a leading issue in this election cycle; last year more than three voters in 10 said they would take a candidate's green credentials into account, according to pollster John Zogby, up from just 11 percent in 2005. "It was clear starting all the way back in Iowa and New Hampshire that this campaign would be much more about the environment," says Dave Willett, a spokesman for the Sierra Club. "The questions weren't 'Do you think global warming is happening?' but 'How are you going to deal with it, what's your approach?' " Willett presumably means questions from citizens. Climate-change skeptics and deniers sometimes charge that the threat of global warming is a conspiracy kept alive by the media, but the reality seems rather different. The League of Conservation Voters tracks how often candidates are asked about environmental issues in televised debates and interviews, and the current tally shows that of 3,231 questions by the leading political reporters from five networks, exactly eight concerned global warming.

The league, which generally calls the tune for most mainstream environmental groups when it comes to national politics, hasn't chosen a candidate for 2008. Officially, it is keeping an open mind, while waiting for John McCain to elaborate on his global-warming plan. But it would constitute a major political upheaval if the league, for the first time since it began making presidential endorsements in 1980, chose the Republican. In its ranking of senators based on their positions on 15 votes in 2007 (including farm subsidies, gas mileage and biofuel standards), the Democrats are almost all clustered in the top half of the standings, while the Republicans, with a couple of exceptions (essentially, Susan Collins and Olympia Snowe, both of Maine), bring up the rear. Specifically, Barack Obama and Hillary Clinton are considered strong environmental candidates. In addition to the annual rankings, the league maintains lifetime standings, which may be more significant than those based on a single year's votes. The Illinois senator has a 96 percent lifetime voting record; Clinton has a 90 percent lifetime rating and was endorsed by the league as an "environmental champion" in her 2006 re-election campaign. "It's clear from both of their voting records in the Senate that they're committed to supporting energy efficiency and slowing global warming," says league spokesman Jay Natoli. "In fact, they're too similar to say at this point that one is better than the other. [As for] McCain, his plan isn't as strong, but he has sponsored and supported legislation that shows he cares about the environment. But at this point, we're not ready to endorse."

Nor are most environmentalists willing to admit that they breathed a sigh of relief when McCain locked up his party's nomination, but he was widely viewed as the most acceptable of the major GOP contenders. "It's unusual to have a Republican candidate who openly disagrees with the Bush administration on the need for capping carbon emissions," says Dan Kammen, an authority on energy policy at UC Berkeley who has advised all three leading candidates and is now associated with the Obama campaign. "There's more disagreement with the current administration than with each other." Admittedly, McCain's 2007 league rating is zero, putting him in the company of eight other Republicans, including the global-warming denier James Inhofe. But that's because McCain missed all 15 key votes; the league counts a missed vote the same as a vote against its position. He was campaigning for president last year, of course, but so were Obama and Clinton and other Democrats. A plausible explanation is that McCain sought to avoid taking a position that would offend either conservative primary voters or the moderate ones he will need in November. A more relevant statistic might be his lifetime LCV rating, which is 26 percent, compared with an average of 16 percent for all Republicans. As recently as 2004, when his rating for the 108th Congress reached 56 percent, the league endorsed him for re-election to the Senate.

McCain is an appealing figure to some environmentalists precisely because he is a Republican from a Western state, whose occasional departures from Republican orthodoxy seem to be grounded in genuine conviction. In 2003 he introduced, with Joe Lieberman of Connecticut, the first-ever bill to regulate carbon emissions in the United States. It never passed, and environmentalists have now mostly shifted support to newer, stronger proposals, but it was a landmark bill for its time. McCain has also sided with environmentalists on fuel-efficiency standards and the talismanic issue of protecting the Arctic National Wildlife Refuge. He traces his environmental awareness to the sainted Rep. Mo Udall, an Arizona Democrat who took McCain as a young congressman under his tutelage. "Mo and I traveled around the state, visiting the Indians, looking at land, and things like that," he told Men's Journal in 2005. To environmentalists, that's like saying you learned about civil rights by driving around Alabama with Martin Luther King Jr.

So, ironically, McCain—with a voting record that would put him at the bottom of the heap among Democrats—is sometimes perceived as more passionate about the environment than his Democratic opponents, whose objectively much stronger rec-ords are viewed as a matter of party orthodoxy. But a legislative record is only one of the things that will factor into an endorsement; green groups will also be weighing the candidates' positions on the issues important this year. Environmentalists agree that the two Democrats, whose positions are mostly indistinguishable, are considerably ahead of McCain. Both Clinton and Obama call for identical reductions in greenhouse emissions through a "cap and trade" system—auctioning off permits to emit carbon dioxide in gradually declining amounts, and setting up a market in which these can be bought and sold among industries. They aim for a reduction of 80 percent from 1990 levels by the year 2050, which most scientists think is the minimum necessary to head off the worst effects of climate change. McCain's plan is similar, but sets a less ambitious target, and has some other provisions environmentalists are less happy about. "We're waiting for [McCain] to further define his plan before we make any judgment about him," says Nick Berning, a spokesman for Friends of the Earth. "He could still surprise folks." Both Democrats also set a target of 25 percent of electricity from renewable sources by 2025, and 60 billion gallons of biofuel annually by 2030. McCain is more supportive of nuclear power, a red flag to many environmentalists, although some are starting to suggest that compared with burning more carbon-based fossil fuels, it's the lesser evil.

In the end, no president gets his program through Congress intact. The differences in emphasis and wording mean less at this stage than the emergence of environmentalism as a broad-based political force, rather than an elite preoccupation of people concerned about the effect of rising sea levels on beachfront property. Not long ago, African-American politicians talked about the environment mostly in terms of lead paint and inner-city air pollution. But Obama speaks about snorkeling the coral reefs in his native Hawaii, which are threatened by global warming. The industrial workers who are among Clinton's strongest supporters once regarded environmentalism as a plot to close their factories, but now rust-belt politicians like Michigan's Gov. Jennifer Granholm and Sen. Debbie Stabenow hope to attract "green collar" jobs building wind turbines. And tough-minded advocates of "energy independence," who once defined the problem in terms of drilling more oil wells on American soil and off American coastlines, now see conservation as an essential part of any solution. "Whoever is elected," says Berkeley's Kammen, "will need a pretty good energy plan as part of their first hundred days' agenda." The president Americans choose this fall will take office in 2009, the year in which a new international treaty on global warming is to be negotiated, replacing the expiring Kyoto Protocol. It will likely set the course of energy and technological change for the first half of the century, and if America wants to have a voice in the process, it must have leaders willing to engage in it. As matters appear now, it likely will.

With Daniel Stone in Washington and Karen Breslau In San Francisco


Sounds Good, But ...

We can't afford to make any more mistakes in how to 'save the planet.' Start by ditching corn ethanol.

Sharon Begley
Updated: 9:42 AM ET Apr 5, 2008

You can stop berating yourself for buying that Spanish clementine or New Zealand lamb. Although lists of "what you can do to save the planet" include eating locally—buying food that is grown nearby—to reduce your carbon footprint, the calculation is more complicated than counting up your food's frequent-flier miles. If the local tomato comes from a greenhouse that gobbled up electricity produced from coal and was trucked in via an 8 miles-per- gallon pickup, and a long-distance one was grown in sunny fields and transported by a 400mpg train, you'll leave a smaller carbon footprint if you opt for the latter. Each calculation depends on the food and where you live, but studies find that dairy products imported by Europe from New Zealand leave half the carbon footprint as local ones, while imported New Zealand lamb (which is pasture-raised) leaves one quarter the carbon footprint as local kinds that rely on energy-intensive feed. While bottled water from the South Pacific is an eco-no-no, "you can't say that food from thousands of miles away is [worse for the environment]," says Jonathan Harrington, author of the new book "The Climate Diet." "Transportation is only one piece of it."

Veterans of the diaper wars know that environmental costs aren't always what they seem. But if we learned anything from that endless debate, it is that to determine a product's impacts you must include all of them—power to run the washer and dryer for cloth diapers, not just the landfill impact of disposables, for instance. (Cloth comes out only a little bit ahead; it's a clear winner if you run your appliances on sun or wind.) We can't afford to keep getting it wrong. We have already overshot the level of carbon dioxide in the atmosphere that "will preserve a planet [like] that on which civilization developed and to which life on Earth is adapted," climatologists James Hansen of NASA and colleagues argue in a new paper. Anything beyond 350 parts per million of carbon dioxide threatens widespread glacial melting and a rise in sea levels. We are at 385 and counting.

Yet errors have plagued efforts to green the planet. On the personal front, although recycling is better than tossing aluminum, plastic, glass and paper in the trash, the order of priority is "reduce, reuse, recycle." Instead of recycling two-quart juice bottles, we should have been telling people to buy 12-ounce concentrates and refill that bottle 100 times before putting it in the blue bin. Even hybrid electric cars aren't a clear plus. If your outlet gets its juice from the standard U.S. electricity mix (half of which is generated by burning coal), hybrid electrics emit half the greenhouse gases as standard gasoline cars. But if your utility burns dirty coal inefficiently, hybrid electrics are worse. If you plug in at night, when most people do, you'll also be using more coal-generated electricity. Perhaps the greatest folly, in time lost and dollars wasted, has been the push for ethanol to replace gasoline. In the United States, almost all ethanol comes from corn. When you tote up the carbon emissions caused by clearing land to grow corn, fertilizing it and transporting it, corn ethanol leaves twice the carbon footprint as gasoline.

The greenwashing doesn't end there. Only half of all hybrid vehicles on the U.S. market are more fuel-efficient than their non-hybrid versions, researchers at the Union of Concerned Scientists find: some models pair a big gas-guzzling engine with hybrid technology in a way that enhances only performance, not fuel economy, explains UCS's David Friedman. "Don't assume that because something's a hybrid it's better for the environment," he says (though the Prius is). The Web site sorts out the true greens from the impostors.

If the complexity of all this makes you decide to live however you want and make it up to the planet by buying carbon offsets, think again. Offsets are transactions in which you pay someone else, usually through a middleman, to reduce or soak up carbon emissions equal to those from eating, flying or just plain existing. In one common offset, you pay to have enough trees planted to absorb the amount of carbon dioxide from driving your car. But offsets do not necessarily lead to activities that compensate for the carbon you're feeling guilty about. If the project—a wind farm in the developing world, say—was going to happen anyway, you haven't accomplished much. More problematic, there is no guarantee that trees you pay to plant will live long enough to absorb the carbon on your conscience. "There is no agreed-upon standard for what constitutes a genuine offset," says Joseph Romm of the Center for American Progress. "Anyone can call anything an offset."

The greatest folly is the "what you can do" fairy tale. Yes, every bit of saved energy—by insulating homes, driving less—helps. But we shouldn't fool ourselves that individual eco-conscious behavior can prevent dangerous global warming. That will require "serious interventions from governments to change how we produce and use energy," says Gabrielle Walker, coauthor of the new book "The Hot Topic" with Sir David King, Britain's former science adviser. "Everyone can try to do our bit, but it's not the sort of thing that individuals can greatly influence by themselves." Some problems are too big to solve one weatherstrip at a time.


Transport Industry Least Prepared For Climate Change

April 8, 2008
Transport Industry Least Prepared For Climate Change

Aviation, healthcare, tourism, transport, oil and gas and the financial services sector all feature in the "danger zone" in a report on climate change risks from KPMG - meaning that they score highly on the risks which face them yet score poorly in terms of their preparedness to face these risks.

The climate change risks that companies should be paying more attention to are physical, regulatory and reputational risks as well as the emerging risk of litigation; yet the scope and potential impact of these risks appears to be under-estimated across all sectors.

While the oil and gas sector is far better prepared than any of the other sectors in the "danger zone," the climate change issues it faces make it the riskiest of all the 18 sectors. By contrast, transport is a far less risky sector but its level of preparedness is the worst of all the 18 industries examined.

However, even the sectors in the "safe haven" may not be as safe as they would like to think. "Take a sector like food and beverages for example," said Barend van Bergen, a director of KPMG Sustainability. "This is supposedly a low risk sector yet recent events have shown that this industry is highly vulnerable to climate related risks such as increases in agricultural input costs.

Desire To Be Thought Leader Drives Green Efforts: the top pressure driving companies to focus on green/sustainable supply chain programs today is the desire to be a thought leader for green and sustainability initiatives in their industry and markets

Desire To Be Thought Leader Drives Green Efforts

Forty-one percent of companies that participated in a recent Aberdeen study, Building a Green Supply Chain: Social Responsibility for Fun and Profit, have had green supply chain initiatives in place for 1-2 years, and thirty-nine percent have redesigned key parts of their supply chains to be green.

Against this backdrop, the top four pressures driving companies to focus on green/sustainable supply chain programs today are the desire to be a thought leader for green and sustainability initiatives in their industry and markets (51% of companies), the need to control rising fuel and energy costs (49% of companies), the demands to improve competitive advantage and market differentiation (48% of companies), followed by the requirement to meet current and expected government regulatory and compliance demands (31% of companies).

Results show that:

  • The Best-in-Class achieved a 2% decrease in their overall logistics and transport costs, versus one percent increase for Industry Average, and a four percent increase for Laggards.
  • Best-in-Class companies achieved a six percent decrease in energy costs, versus no change for Industry Average and a seven percent increase for Laggards.
  • Best-in-Class companies are 1.5 times more likely than all others to have implemented cross-functional metrics across their enterprise.
  • Best-in-Class achieved a two percent decrease in the cost of operations and facilities, versus no change for Industry Average and a four percent increase for Laggards.

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The Greening of Wal-Mart: Here’s how and why the world’s largest retailer is using a network approach to decrease its environmental footprint – and to increase its profitability

Stanford Social Innovation Review

The Greening of Wal-Mart

For much of its history, Wal-Mart's corporate management team toiled inside its "Bentonville Bubble," narrowly focused on operational efficiency, growth, and profits. But now the world's largest retailer has widened its sights, building networks of employees, nonprofits, government agencies, and suppliers to "green" its supply chains. Here's how and why the world's largest retailer is using a network approach to decrease its environmental footprint – and to increase its profitability.

By Erica L. Plambeck and Lyn Denend  Spring 2008

In 1989, Wal-Mart Stores Inc. launched one of the first major retail campaigns to sell environmentally safe products in recyclable or biodegradable packaging. The corporation promoted these eco-friendly products by labeling them with green-colored shelf tags. Although the company boasted more than 300 green products at its peak, it did not directly set or monitor the environmental standards of its suppliers. This resulted in negative publicity for Wal-Mart when the public learned that a green-labeled brand of paper towels had only a recycled tube – the towels themselves were unrecycled paper treated with chlorine bleach. The green tag program began to wane, and by the mid-1990s environmental issues seemed to have slipped off the company's list of priorities.

Meanwhile, Wal-Mart's reputation among consumers was also slipping. Issues surrounding its competitive practices and labor policies loomed large in the public eye. "The company's environmental record was nothing to boast about, either," according to one Fortune article.1 Indeed, a 2005 McKinsey & Company study found that between 2 percent and 8 percent of consumers had stopped shopping at Wal-Mart because of the company's practices.2

Against this backdrop, Wal-Mart CEO H. Lee Scott Jr. unveiled a new plan to reduce the company's environmental footprint. In an October 2005 speech broadcast to all 1.6 million employees in all 6,000-plus stores and shared with some 60,000 suppliers worldwide, he announced that Wal-Mart was initiating a sweeping "business sustainability strategy." The idea was to reduce the company's impact on the environment through a commitment to three ambitious goals: "To be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain our resources and the environment." 3

But these weren't the plan's only goals. "Sustainability represents the biggest business opportunity of the 21st century," says Jib Ellison, founder of Blu Skye Sustainability Consulting, which helped Wal-Mart formulate its business sustainability strategy.4 His firm pointed out that actively pursuing an environmental agenda would help Wal-Mart differentiate itself from its competition, maintain a license to grow, and make its supply chain dramatically more efficient. In other words, a good business sustainability plan would help Wal-Mart get even better at what it does best: drive down costs to generate profits.

To go green, Wal-Mart, with its headquarters in Bentonville, Ark., would have to think outside the "Bentonville Bubble." For years, the company had operated in relative isolation from its external stakeholders, including nonprofits, government agencies, consultancies, and academic institutions. Without much in-house expertise on sustainability and environmental performance, it would need to involve these stakeholders in its new plan.

Moreover, as the paper towel incident illustrated, most opportunities for environmental improvements resided with suppliers. "If we had focused on just our own operations, we would have limited ourselves to 10 percent of our effect on the environment and eliminated 90 percent of the opportunity that's out there," says Tyler Elm, who was Wal-Mart's senior director of corporate strategy and business sustainability at the time the initiative was launched.

And so Wal-Mart began to reach out to its external stakeholders. The corporation first identified areas of maximum environmental impact and then invited stakeholders to join 14 "sustainable value networks" – such as the seafood network and the packaging network – to work toward business and environmental sustainability in each area. (See "Wal-Mart's Sustainable Value Networks," above.) In return, network participants would gain information about and say in Wal-Mart's operations.

Elm and Andrew Ruben, Wal-Mart's vice president of corporate strategy and business sustainability, directed Wal- Mart's network leaders to "derive economic benefits from improved environmental and social outcomes," says Elm. "It's not philanthropy," he adds. By the end of the sustainability strategy's first year, the network teams had generated savings that were roughly equal to the profits generated by several Wal-Mart Supercenters, Ruben and Elm report.

After interviewing more than 40 representatives from Wal-Mart and its network partners, we have uncovered seven practices that help the networks work for the environment, for stakeholders, and for the company's bottom line. (See "Networking the Wal-Mart Way" on p. 58 for a summary of these practices.) Four of these practices extend Wal- Mart's own managerial capabilities through the expertise and involvement of its network partners; the other three help motivate suppliers. To illustrate these practices, we explore three different networks in depth: seafood, textiles, and electronics. These examples also highlight some possible shortcomings of Wal-Mart's approach.5

Certified Seafood

In 2006, Science published a study predicting that all species of wild seafood would collapse within 50 years.6 That same year, Wal-Mart's seafood business grew roughly 25 percent, to approximately $750 million. "I am already having a hard time getting supply," says Peter Redmond, vice president for seafood and deli and captain of the Wal-Mart seafood network. "If we add 250 stores a year, imagine how hard it will be in five years!"

Continuity of supply is the greatest challenge for Wal-Mart's seafood network, explains Redmond. One way Wal- Mart could prevent further depletion of fish stocks while ensuring its continuity of supply is to buy fish that has been caught and processed using sustainable fishing practices. Rather than defining new standards for certifying sustainable practices, Redmond understood the advantages of tapping into a well-defined third-party certification program.

By partnering with the Marine Stewardship Council (MSC), which managed the leading program in the field, Wal- Mart would avoid criticism that its standards were not stringent enough while leveraging the established expertise of the MSC and its partners. Tapping into a successful program would also help the company achieve results faster than working alone.

Through this partnership, the MSC, which Unilever and the World Wildlife Fund (WWF) launched in 1997, maintains the standards for sustainable fisheries and certifies independent third parties to audit and accredit fisheries and processors throughout the supply chain. An MSC eco-label signals to shoppers that the fish has been harvested and processed in a sustainable manner from "boat to plate."7 By raising consumer awareness, MSC hopes to stimulate demand and thus motivate the industry to shift to more sustainable fishing practices.8

Wal-Mart, in turn, commits to working with MSC-certified suppliers, giving suppliers an incentive to seek certification – a time-consuming and expensive process. In 2006, Wal-Mart announced a highly ambitious goal to carry 100 percent MSC-certified wild-caught fish in its stores within three to five years. As the supply of MSC-certified fish is currently far from adequate to meet Wal-Mart's demand, this public announcement was effectively a commitment to buy from all fisheries that become MSC-certified.

The WWF plays another integral role in the partnership by helping boat operators and processors prepare for certification by identifying problems that need to be fixed (e.g., strengthening management practices, rebuilding stocks, and reducing environmental impacts) before they can be certified. This activity helps fisheries become certified more quickly to keep pace with the sharp increase in demand for certified seafood.

Another benefit of certification is that it establishes a clear view of each fish's chain of custody. "One of the problems we had was how much of our fish was coming to us third-, fourth-, or even fifth-hand," says Redmond. "Sometimes our supplier turned out to be nothing more than a packer who was going out to a market saying, 'I need 50,000 lbs. of salmon no matter where it comes from.'"

Greater transparency in the seafood supply chain allows Wal-Mart to select better suppliers, simplify the chain of custody, minimize paperwork, reduce transaction and transportation costs, and improve the quality of the fish it receives – all while improving environmental outcomes.

The nonprofits in Wal-Mart's seafood network win, too: Both the MSC and WWF are attracting suppliers who might otherwise have eschewed certification to capture or keep Wal-Mart's business. And their programs have gained unprecedented levels of visibility through Wal-Mart's involvement. This visibility helps them build clout with consumers and get other retailers interested in carrying more sustainable seafood.

Trustworthy Textiles

Unlike seafood, cotton is not in short supply. Yet farming conventional cotton creates millions of tons of pollution every year. In contrast, organic cotton farming is gentler on the environment and on farmworkers' health.

With labels that appeal to parents by emphasizing the softness and chemical- free nature of organic cotton, Wal- Mart has generated strong sales of organic cotton baby clothes – among other products. Wal-Mart customers are typically unwilling to pay extra simply because a product is better for the environment. When customers think that a product is better for their own or their family's health, however, they're more likely to dig deeper in their pockets to pay for it.

Both Wal-Mart and its customers initially had to pay more for organic cotton. Beth Schommer, a former Wal- Mart divisional merchandise manager for infants and toddlers, describes the pricing strategy when the program first started: "A little organic shorts set was maybe $10.94, whereas a similar non-organic outfit would have been priced at $6.94. So, yes, there was a price premium compared to other Wal-Mart products. But when you consider a $10.94 organic shorts set out there in the marketplace, that's not expensive."

Nevertheless, to bring prices closer to those of conventional cotton, Wal- Mart is attempting to expand its organic cotton business. Nonprofits and government agencies are playing a significant role in this effort. To select and uphold certification standards for organic cotton farming and manufacturing, Wal- Mart's textile network partnered with the Organic Trade Association and Organic Exchange. These groups helped convince the company to adopt the U.S. Department of Agriculture's standards for the growth of organic cotton – regardless of where the cotton is grown. They also advocated use of the Global Organic Textiles Standard for processing. "This is probably the toughest standard out there in the industry for organic processing and handling, and [now] it's the only certification process that can be followed for organic products coming to Wal-Mart," says Kim Brandner, senior brand manager of sustainable textiles for Wal-Mart.

By using external standards and accredited third-party organizations to certify practices at each link in the supply chain, Wal-Mart can guarantee that its products are, indeed, organic. The company can also minimize criticism that its involvement will dilute the stringent measures that organic products must meet (a concern raised by organic farmers, retailers, and NGOs alike). In addition, relying on network partners allows the company to accomplish its objectives without major investment because suppliers absorb most of the costs of certification.

Like the seafood supply chain, the textile network has become more efficient with the advent of certification. "It used to be that if Wal-Mart was buying Champion T-shirts, [it] wouldn't look past Sara Lee [which held the license for Champion products]. [It] didn't think about the spinner, or the dyer, the ginner, or the farmer," says Diana Rothschild, a former Wal-Mart employee and Blu Skye consultant to the textiles network.

But now Wal-Mart is forging ties much further up the stream of its supply chain to become more efficient and to reduce costs. "We used to buy cotton from Turkey, ship it to China for spinning and knitting, and then ship it again to Guatemala to be cut and sewn," explains Brandner. "Now … we're finding opportunities to do things like eliminate the shipment to China and have all processing done in Guatemala." Going directly to Guatemala not only saves time and money for Wal-Mart, but also further reduces the company's impact on the environment by lessening the amount of fuel and other resources used in shipping.

Wal-Mart is also cultivating closer relationships with its suppliers. Previously, textile buyers selected manufacturers on the basis of the cost and quality of their products. As a result, relationships with suppliers tended to be transactional and short-lived. Now Wal- Mart employees interact with more suppliers, more often, more directly, and for a greater duration than ever before. These closer relationships are necessary to sustain initiatives like the organic cotton project.

A major transformation within Wal- Mart has made it easier to have closer relationships with suppliers. In the past, textile buyers had been generalists, handling a variety of responsibilities. Now the textiles network divides the buyer role into four different job categories so that some buyers are dedicated to maintaining long-term relationships with suppliers. These employees are encouraged to hold their positions for many years, as opposed to the 12- to 18-month rotations that Wal-Mart buyers typically complete. According to Brandner, these organizational changes, backed by the company's focus on sustainability, have not only supported the objectives of the textile network, but also led the team to ask better questions. "It's helping us become smarter merchants," he says.

Another way that Wal-Mart is using its network is to build bridges between suppliers and environmental nonprofit organizations. For instance, when the Chinese government threatened to shut down a number of textile dye houses in Beijing, including one of Wal-Mart's suppliers, to reduce pollution in time for the 2008 Olympics, Wal-Mart immediately took action. "We put the dye house in touch with one of the NGOs in our network, which helped it formulate a more environmentally friendly process that reduced its toxic output very quickly," says Brandner. "Although other retailers were negatively affected by the shutdown of their Chinese dye suppliers, we did not have any of our production capacity cut with this vendor."

To boost supplies of organic cotton and help more farmers make the transition from conventional to organic farming, Wal-Mart has begun making longer-term commitments. For example, rather than working season to season, as the company has done in the past, it made a five-year commitment to buy organic cotton from a group of farmers. "It gives them confidence and stability," says Lucy Cindric, senior vice president and general merchandise manager of Wal-Mart's ladies wear division and captain of the textiles network.

The company is also helping farmers manage some of organic farming's challenges. "Organic farmers can't grow cotton in the same field for an extended time because it depletes the soil of nutrients," explains Rothschild. This forces farmers to alternate cotton with legumes, vegetables, and other crops to rejuvenate the soil. To meet organic standards, however, farmers must grow their alternate crops organically. Because alternate crops are not as lucrative as organic cotton, "this creates the temptation for farmers to turn to nonorganic farming," she says. To help solve this problem, Wal-Mart agreed to purchase some of the organic cotton farmers' alternate crops – an initiative that was synergistic with the efforts of the company's sustainable value network focused on food and agriculture.

Eco-Friendly Electronics

In 2004, the United States exported 80 percent of its electronic waste to developing countries, where the waste led to pollution levels hundreds of thousands of times higher than those allowed in developed countries.9 Despite this off-shoring of pollution, computers and other electronics still account for some 40 percent of the lead in U.S. landfills.10

One of the objectives of Wal-Mart's electronics network is to reduce these environmental impacts by recycling or disposing of e-waste more safely, as well as by designing electronics that don't contain hazardous materials in the first place. Another objective is to increase the energy efficiency of its electronics. The network has encountered more challenges in managing e-waste because of the complexity of electronics design and sourcing, the difficulty of measuring the hazardous content of electronics, and the necessity of consumer behavior change to accomplish recycling and safe disposal of used electronics. In contrast, the network has more readily increased energy efficiency because this outcome is easier to measure and to market to consumers.

The sheer complexity of electronic products and the electronics supply chain makes certifying that they are free of hazardous materials costly and difficult. Most electronic products are made up of sophisticated components that are sourced through complicated, multilevel supply chains. In these supply chains, one set of suppliers sources raw materials, another set assembles those materials into components, yet another set aggregates these components into more complex parts, and so on. At each link in the supply chain, suppliers have technical expertise and proprietary information that Wal-Mart cannot access. When Wal-Mart cannot ensure that all components in a product are free of hazardous materials, the company cannot promote the product as eco-friendly to consumers.

For example, Wal-Mart wanted to be the first retailer in the United States to sell personal computers that complied with the European Union's Restriction on Hazardous Substances (RoHS). And so the retailer negotiated a deal with Toshiba to supply RoHS-compliant com- puters to Wal-Mart stores. In exchange for buying 12 weeks' worth of these computers (as opposed to making a typical four-week commitment), Wal-Mart procured the environmentally preferable PCs at no additional cost. Nevertheless, because the company had no way of guaranteeing that the computers did, in fact, meet RoHS standards, Wal-Mart decided to play it safe and not promote the computers' environmental benefits.

Another way to reduce e-waste is to encourage consumers to recycle their electronics. Yet recycling offers no immediate personal benefit to consumers, and instead requires additional cost and effort. Because changing consumer behavior without palpable benefits is extremely difficult, the electronics team has not gained much ground on the recycling front.

In the area of increasing energy efficiency, the electronics network has had more success – largely because Wal- Mart can easily test product performance. One organization that helped the retailer in this endeavor is the Green Electronics Council (GEC), a nonprofit that works with electronics manufacturers and other stakeholders to improve the environmental and social performance of electronic products.

With the GEC, Wal-Mart designed an Internet-based scorecard on which suppliers indicate how environmentally sustainable their products are. This scorecard includes measures of energy efficiency, durability, and end-of-life solutions. The GEC and Wal-Mart are also co-sponsoring a contest to design consumer electronics that excel on all of the scorecard's metrics. Wal-Mart will carry the winner's product in its U.S. stores.

The electronics network has learned that improving environmental performance depends not only on its network partners, but also on consumers. "What's always been difficult is to figure out the things that you can start with that are relevant to … the business or ultimately the consumer," explains Ruben. For example, consumers care about phantom load [the amount of energy a product consumes when it is on but not in use] because reducing phantom load results in electricity cost savings. Conversely, although recycling may be the right thing to do, it does not directly benefit consumers.

As a result, Wal-Mart has partnered with the GEC and other members of its electronics network to focus on a relatively small, manageable set of metrics with important benefits for both consumers and the company. Of particular interest are measures that could help reduce costs or create new revenue streams for the company. For instance, if the metrics on the company's electronics scorecard encouraged suppliers to develop upgradable products, Wal-Mart could sell the upgrades while delaying the disposal of the more durable goods. Implementing these changes, however, would take some time to accomplish.

A New Kind of Networking

At the heart of Wal-Mart's business sustainability strategy is a shift from generating value through price-based, transactional interactions toward generating value from longer-term, collaborative relationships with nonprofits, suppliers, and other external stakeholders. Through its sustainable value networks, Wal-Mart gains a whole-system perspective that helps the retailer find profitable ways to address environmental issues such as fishery depletion, climate change, and pollution. In exchange, nonprofit network members stand to make giant leaps toward their missions because of the scale of Wal-Mart's operations. And suppliers enjoy not only the stability that closer relationships with the retail giant brings, but also the assistance and guidance of Wal-Mart's nonprofit partners.

Although Wal-Mart's sustainability strategy appears to be off to a promising start, the company must proceed carefully as it seeks to sustain and expand its network approach. First, Wal-Mart must carefully manage its partnerships to avoid increasing its costs. The company's reputation is on the line as it makes ambitious promises – for example, to sell only MSC-certified wild-caught fish. Because Wal-Mart is dependent on suppliers in its networks to fulfill those promises, suppliers may try to leverage their improved position of power to negotiate higher prices, particularly in times of scarcity. More dependent on longer-term relationships with fewer suppliers, Wal-Mart might also lose its ability to buy products from lower-cost sources. In addition, as its ties with nonprofit organizations deepen, Wal-Mart may face pressure to reduce its environmental impacts in ways that increase production costs.

To resist upward pressure on costs, Wal-Mart can become still more efficient. It can also continue to partner with nonprofits to develop and implement innovations. And in its relations with suppliers, it can keep prices for green products low by committing to purchase greater quantities on the front end, rather than paying price premiums on the open market.

Wal-Mart must also pay careful attention to the balance of green and conventional products in its stores. In the past, Wal-Mart narrowly focused on its customers' immediate desires when planning product assortments. Now the company is taking on the additional responsibility of offering eco-friendly products, as well as of educating customers about these green alternatives. At the same time that green products help attract new customers, they also cannibalize sales of conventional products.

Moreover, with fewer suppliers from which to choose and more nonprofits offering their input, Wal-Mart might overlook opportunities to stock innovative or desirable products that are not necessarily green. For example, many nonprofit partners advocate against the use of polyvinyl chloride (PVC) plastics, which may have negative effects on human health. Yet some suppliers argue that the negative effects of PVC are unproven. They also say that customers demand the strength and flexibility that only PVC can provide.

Wal-Mart's job is to manage these tensions, weighing the demands of customers against the concerns of network partners. To offer a profitable mix that includes more green products, Wal- Mart can retire conventional products in favor of green alternatives, work with governments to test materials and provide toxicity data to consumers, and seek government incentives for green products.

A final risk that Wal-Mart's sustainable value networks must proactively manage is losing its nonprofit partners. Because of the high numbers of nonprofits participating in the networks, individual groups may be unable to claim credit for a specific, measurable reduction in environmental impact.

Over time, groups' inability to prove their impact may cause problems with fundraising, as donors increasingly demand performance data.11 And despite the current optimism about Wal-Mart's efforts, donors might gradually balk at paying for environmental programs that are profitable for Wal-Mart – especially because Wal-Mart pays some of its sustainability consultants but others work for nothing. And although unpaid nonprofit partners presumably retain more leverage to criticize and influence Wal-Mart, their donors may worry that this leverage will erode as the nonprofits' relationships with Wal-Mart deepen.

Eventually, problems with fundraising could cause environmental nonprofit organizations to withdraw from the networks. Wal-Mart might avoid this issue by relying less on paid environmental consultants and ensuring that each nonprofit partner can point to its own measurable contributions to sustainability. More than anything else, Wal-Mart's network approach must remain profitable if it is to be sustainable in the long run and achieve Scott's environmental goals.

1 Marc Gunther, "The Green Machine," Fortune, July 31, 2006.

2 Pallavi Gogoi, "What's With Wal-Mart's Sales Woes?" BusinessWeek, Nov. 29, 2006.

3 Lee Scott, "Twentieth Century Leadership," Wal- Mart, Oct. 24, 2005.

4 Much of the material for this article, as well as all quotations unless otherwise cited, is drawn from the Stanford University Graduate School of Business case study titled "Wal-Mart's Sustainability Strategy" (GSB No. OIT-71) and associated teaching notes by Erica L. Plambeck and Lyn Denend.

5 For more information on supply chain management practices, see Erica L. Plambeck, "The Greening of Wal-Mart's Supply Chain," Supply Chain Management Review, May/June 2007.

6 "Science Study Predicts Collapse of All Seafood Fisheries by 2050," Stanford Report, Nov. 2, 2006.

7 Erica Duecy, "Darden, Wal-Mart Ride Seafood Sustainability Wave, Buoy Advocates," Nation's Restaurant News, Feb. 13, 2006, p. 8.

8 Ibid.

9 Seeraj Mohamed, "Dumping Electronic Waste in Developing Countries," The Society for Conservation and Protection of the Environment, April 24, 2002.

10 Matthew Brodsky, "The RoHS Revolution,", March 3, 2006.

11 "Conservation: Peering at the Future," The Economist, June 19, 2004.

ERICA L. PLAMBECK is an associate professor of operations, information, and technology at the Stanford Graduate School of Business and a senior fellow at the Woods Institute for the Environment at Stanford University. She received the Presidential Early Career Award for her research on relational contracting in supply chain management.

LYN DENEND is a research associate at the Stanford Graduate School of Business, where she partners with faculty members to develop case studies in a variety of fields.

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