An interview with Wal-Mart CEO H.

Lee
Scott
by Amanda Little
12 Apr 2006 10:53 AM
Last week, Wal-Mart joined leading energy executives in their startling call for
mandatory caps on greenhouse-gas emissions. The heart of this monolithic retail Grinch
grew three sizes that day -- or so it seemed to many environmental Who's.

Wal-Mart CEO Lee Scott.

For many enviros, the name "Wal-Mart" has always triggered a shudder. The world's biggest
retailer has been charged with exacerbating suburban sprawl, burning massive quantities of oil
via its 10,000-mile supply chain, producing mountains of packaging waste, polluting waterways
with runoff from its construction sites, and encouraging gratuitous consumption. (And those are
just the environmental complaints.)
But it's precisely Wal-Mart's size and reach that could make it a powerful force for good for the
planet, say market observers and a growing number of activists. The company controls so much
of the retail market, and has such sway over manufacturers, that any green initiatives on its part
have huge ripple effects. And it's certainly CEO H. Lee Scott's intention to make waves.
In October, Scott announced a preposterously ambitious goal to transform Wal-Mart into a
company that runs on 100 percent renewable energy and produces zero waste. Since then, he has
impressed greens with specific commitments to cut the corporation's greenhouse-gas emissions
by 20 percent over the next seven years, double the fuel efficiency of its truck fleet within 10
years, reduce solid waste from U.S. stores by 25 percent in the next three years, and double
offerings of organic foods this spring, selling them at prices more affordable to the masses.
Enviros hope Wal-Mart will have the same game-changing effect on mainstreaming
environmental strategies that it has had on reducing prices. "Wal-Mart's new commitments to
increase efficiency and reduce pollution and waste are important first steps for a company that
has such a profound impact on our environment," Sierra Club Executive Director Carl Pope said
in a public statement. "More companies should take these positive steps toward safer and
healthier communities."
Amanda Griscom Little recently spoke with Scott about his vision for "democratizing
sustainability" and listened to his pitch about how green strategies will help fatten Wal-Mart's
bottom line.

Six months ago you outlined long-term goals to make Wal-Mart a company supplied by 100
percent renewable energy, creating zero waste, and selling products that sustain our resources
and environment. Tell us what motivated you to set those goals.
I think two things happened. One, as we look at our responsibility as one of the world's
largest companies, it just became obvious that sustainability was an issue that was going to
be more important than it was, let's say, last year, and the years before. I had embraced
this idea that the world's climate is changing and that man played a part in that, and that
Wal-Mart can play a part in reducing man's impact. We recognized that Wal-Mart had
such a footprint in this world, and that we had a corresponding part to play in
sustainability. (FIGUREHEAD)
On a personal level, as you become a grandparent -- I have a granddaughter -- you just also
become more thoughtful about what will the world look like that she inherits. So I think it was a
confluence of both the personal side and the business imperatives that at least drew me to be
interested in it.
Were there bottom-line motives as well?
As I got exposed to the opportunities we had to reduce our impact, it became even more exciting
than I had originally thought: It is clearly good for our business. We are taking costs out and
finding we are doing things we just do not need to do, whether it be in packaging, or energy
usage, or the kind of equipment we buy for refrigeration in our stores, that there are a number of
decisions we can make that are great for sustainability and great for bottom-line profit.
Let's take one of these examples and drill deeper into the bottom-line opportunities. Do you have
to make investments on the front end that are eventually recouped?
Well, let's start with packaging. It does not require a big investment to reduce the amount of
packaging; what it does require is a different mind-set. We have reduced packaging on any
number of private-label lines, which in turn has caused us to reduce the number of containers, the
amount of energy that is used to create the packaging, and the amount of energy that was used to
transport the larger package into our stores. Likewise, there has been a mind shift in the purchase
of transportation equipment that may cost a bit more up front but pays energy-saving dividends
in the long run.
And these savings, in turn, translate to lower costs for your customers?
Yes. Wal-Mart has always prided itself on being the low-cost supplier to our customers, working
men and women. In some cases that carried over into decisions to buy equipment that cost less
from a first-cost standpoint but not from a life-cycle standpoint -- energy use and total
maintenance cost and so forth. So those really weren't good decisions whether you were focused
on sustainability or not. They were wasteful to the company and they were wasteful to the
environment.
What are the specific targets you've set for improving your environmental performance?
We will be investing approximately $500 million annually in technologies and innovation to do
the following: Reducing greenhouse gases at our existing store base around the world by 20
percent over the next seven years. Designing and opening a viable store prototype that is 30
percent more efficient and will produce up to 30 percent fewer greenhouse-gas emissions within
the next four years. Reducing solid waste from U.S. stores by 25 percent in the next three years.
Increasing our truck fleet efficiency by 25 percent over the next three years, and doubling it
within 10 years. If implemented across our entire fleet by 2015, this would amount to savings of
more than $310 million a year.
Do you have a time frame for the 100 percent renewable energy target?
What I wanted to lay out were not just incremental goals but aspirational goals. The technology
does not exist today to allow Wal-Mart or any company to achieve such goals in total. But we
want people to understand that this is the direction this company is going.
Is the size of your company an advantage or disadvantage in this pursuit?
Because of our size, it enables us to help create markets for clean technologies that exist today,
but don't yet have fully established markets. If Wal-Mart started using or selling those items all
of a sudden, there would be enough scale that those would be viable alternatives. So I'm always
asking, how do I work with people, whether it be Jeff Immelt at General Electric or John Browne
at BP, to use our scale to help propel an industry so that the production of that tech[nology] or
product is now affordable for other people? I ask, what happens to the solar-panel market if Wal-
Mart makes a large commitment to solar panels? What happens to the cost of compact
fluorescent light bulbs or green building materials? Wal-Mart is one of the largest construction
companies in the US, so if we start using a specific building material, does it then become more
affordable for everyone?
Not to mention organic products -- you are becoming one of the world's biggest distributors of
organics, right?
Yes, we are doubling our selection of organic products. I think we have the ability to allow
people who can't afford to pay more to participate in sustainability in a way that they can't
actually afford to today. The bigger theme here is democratizing sustainability. In some ways the
shift toward sustainable lifestyles has thus far been stratified based on income or education
levels.
Wouldn't Wal-Mart's shift toward sustainability require a substantial rethinking of your supply
chain, given that you have one of the most extensive supply chains in the world?
You know I think clearly there will be challenges there. But today I will tell you our focus is
more on the size of the products for the moment, which has impacts on the energy intensity of
our supply chain. So if you took a Unilever washing machine product and made it a third the size
that it was before, you reduce the number of trips by a third. Or take concentrated laundry
detergent -- you get more value in a smaller container. We call these VPIs -- volume-producing
items. We give the producers of VPIs confidence that we will give these products priority on our
shelves and help customers understand their value. So we're taking affirmative action to sell
more sustainable products.
Wal-Mart caused many a jaw to drop last week when it joined energy leaders in a public request
for climate-change regulations. What made you decide to take this stand?
Global warming is real, now, and it must be addressed. I have been out making trips to learn
about carbon sequestration, I have been in discussions about carbon trading and carbon caps, and
I understand the importance of a properly structured market-based system. I have advisors on all
these matters. But at this point I would tell you that I still have much more to learn than what I
currently know.
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Amanda Little, Grist’s former Muckraker columnist, is author of Power Trip: From Oil Wells to
Solar Cells—Our Ride to the Renewable Future. Her articles on energy and the environment
have been published in Vanity Fair, Rolling Stone, The New York Times Magazine, Wired,
Outside, and New York magazine.
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1.

2.

○ bookerly 1750
○ 13 Apr 2006 12:19pm 1144955952 1144981152
About Walmart and Green Things

The way in which Walmart would introduce lower prices in the organic sector is not by
using economies of scale, but rather by using its' size to make demands of producers. In
other words, when such a large customer says it will only pay so much a pound, then
that's what you get. Organic farming is generally more labor intensive than non-organic
farming, and thus costs more. Pay organic farmers less means that they get less profit,
and their workers get less. And may increase the temptation to cheat!
(One of the benefits of higher prices to organic farmers is it makes them WANT to be
organic, and careful not to cheat because they don't want to lose that lovely extra
income!)
The advantage of a Walmart is that it can control the market for a given product (if
Walmart says 23 oz. bottles of pickles instead of 12 oz. bottles of pick;es, by damn,
people will drop the 23 oz. bottles and use 12 oz. bottles.).
Before we get too excited by the idea of Walmart turning the world green, we should
look at their labor policies which force their workers to get health care paid for by the
state (since they can't afford anything else.). This is heardly the act of an "enlightened"
corporation. There green activities are likely to be similar. Beware the hand behind the
back!
Patrick
3.

○ atreyger 1759
 ○ 13 Apr 2006 1:34pm 1144960461 1144985661
Not trueI cannot see how the previous post is true, since in a free economy, those
producers will go to the highest bidder, not the biggest bidder. However, if it is more
feasible for the organic farmers to produce more at a lower price (which may or may not
be true), then they will get the economies of scale benefit and sell to the biggest bidder if
they are making the most money off of that deal.
By the way, organic does not mean machine free, so that you could have less workers on
the farm, so it is hypothetically possible to have a larger output without more labor.
4.

○ jwebb 2175
○ 13 Apr 2006 11:57pm 1144997878 1145023078
Land IssuesI am stunned no-one has brought up one of the main issues behind the
SprawlMart's of the world: Land.
First they have to rezone the land to build. Usually the site is not the best location for the
environment, but to see from the highway. These stores pop up next to residential and
basically brings in more surrounding businesses outside of a community center.
Second, the sheer size of the footprint (same for Lowe's, H.D., Sam's Club). These are all
single level layouts, minimum landscaping, and tons of parking that they won't share with
other businesses. All of that impervious surface leads to increased runoff when they only
have to design for maybe a 10 year storm, with more land set aside for drainage basins
that promote mosquitos and invasive species.
Third, when they want to expand they just move a 1/2 mile down the road and build a
bigger super center. Their land holdings on old building space is growing every year.
A bit off the subject is that 'Ol Sam's dream of everything being made in America has fell
to the greed of his grandchildren. You speak about produce, but how much of what they
sell does that account for? We should be more worried about the fact that WalMart is
China's biggest exporter. Saving energy once merchandise arrives here is only half the
battle, and I refuse to buy a DVD player that basically says we don't care if small farmers
lose their land or have their health degraded for us.

~Jared
5.

○ trisha 11216
○ 18 Apr 2006 2:13am 1145351630 1145376830
Is this a cruel joke??are you KIDDING me??? Wal-Mart? is this a cruel joke? when i
saw this, i nearly spat out my fair-trade, organically-grown tea!!
how can you write a glowing article about one of the WORST environmental villains of
our time? does the word "GREENWASH" mean anything to you? when you left the
interview, did you notice that someone had taped a "kick me" sign to your back?
and what's with all the softball questions?
"what motivated you?"

"you're selling organics, right?"

targets? timing? rethinking?

thanks, katie couric. now back to the real news. blech! how do you EVEN call yourself
a journalist, ms. griscom little?
wal-mart can make all the changes they have outlined without breaking a sweat and
without altering their business model. (and apparently while getting RAVE reviews from
short-sighted greenies like you.)
they will continue to build more stores on the outskirts of towns, leading to more
development, more sprawl, more driving, more pollution, etc. this is their business
model. they drain the life-blood out of small towns and kill small, independent
businesses. this is their business model. and don't get me started on their labor practices.
why didn't you ask mr. wal-mart about health care for his employees? it's non-existent.
THAT is their business model.
grist - you have really let me down. unless you come up with a rebuttal and redeem
yourselves, i don't want to read your little publication any more. do your freakin'
homework!!! how about interviewing some of the people whose lives have been
destroyed by wal-mart? how about doing the math on how much acreage they have
wiped out all over the country? how about really looking at their supply chain? how
about rampant consumerism for cheap crap made by child labor in third world countries?

how about acting like grist? a beacon in the smog, my arse. if i want glowing stories
about how wonderful wal-mart is i'll watch Fox News.
...read more
Free economy, the myth

It is suggested that in a free economy producers will go to the highest bidders. Sounds
good, but that is not how business works in practice.
If you make 100 widgets and someone will pay $20 a widget but they only want 10,
while someone else says they will pay you $15, but they want 98, you sell to the person
who wants 98 at $15 most of the time.
Because Walmart controls so much of the retail market, they are most producer's
biggest customers, which allows them to dictate the price they pay for goods, as well as
things such as package size and shape.
In truth the so-called free market is a monopoly market dominated by buyers for most
producers. That is why farmers make such a low portion of our food dollars.
Maybe captive market is a better term than free market.