Why Wal-Mart Has More Green Clout Than Anyone

Like a Supercharged EPA, Retail Giant Can Humble Mighty Suppliers Into Meeting Its Environmental Dictums

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ROGERS, Ark. (AdAge.com) -- Wal-Mart the retailer may not be the force it once was. Wal-Mart the eco-nanny has never been stronger.
Wal-Mart Stores CEO Lee Scott
Wal-Mart Stores CEO Lee Scott Credit: Thos Robinson

In a show of force no government likely could pull off, Wal-Mart Stores CEO Lee Scott summoned 250 CEOs to a Rogers, Ark., convention center Oct. 10 to outline his plans to hold them accountable for their "carbon footprints" and scrutinize away their excess packaging.

The need to pay homage kept many of them in town another day, as 600 supplier executives attended a $750-a-head seminar on Wal-Mart's favorite subject, sustainability, to support one of its pet projects, the Center for Retail Excellence at the University of Arkansas' Sam M. Walton College of Business.

'Sucking up'
In imposing its environmental dictums, Wal-Mart is proving it can still humble the mightiest supplier. Procter & Gamble Co. Chairman-CEO A.G. Lafley showed up for a talk-show-style sustainability chat with Mr. Scott on Oct. 11 wearing an Arkansas Razorbacks shirt under his jacket.

Mr. Scott said Mr. Lafley was "sucking up" both to students in the crowd and to Sam's Club, where he'd said he bought the shirt "at a great price."

"We are a marketing company," Mr. Lafley replied, drawing laughter.

Wal-Mart, on the other hand, has morphed into something else -- a sort of privatized Environmental Protection Agency, only with a lot more clout. The EPA can levy a seven-figure fine; Wal-Mart can wipe out more than a quarter of a business in one fell swoop, as Mr. Scott reminded his audience in a not-so-subtle exercise in passive-aggressive environmental regulation.

Enforcement
Wal-Mart's environmental scorecards are voluntary -- for now. But Mr. Scott made clear there's a stick coming to supplement the carrot.

"Two or three years from now," he said, Wal-Mart merchandising executives "are going to have to make choices." Marketers "who haven't done anything, who have products that really aren't very good for the environment," may lose access to Wal-Mart's advertising circulars, end caps or front-of-store displays, he said. That's if Wal-Mart is convinced consumers really want the products. If not, it just won't carry them.

That threat, however veiled, has Wal-Mart's suppliers lining up to drink the green Kool-Aid.

On a flight into Bentonville on Oct. 10, an agency executive struck up a conversation with a poultry supplier about what each was doing to foster Wal-Mart's sustainability efforts. Even Wal-Mart's law firms, gathered next door to the sustainability fest Oct. 11, got in on the act. Half their agenda was about sustainability. Two firms advertised their green credentials on placards -- including cafeteria silverware made from potato starch and two-sided copies.

Private sector power
Were any government body to get so pushy, the coffers of lobbying firms would swell overnight, and the effort could take years. But when the world's biggest retailer does it, the collective outcry sounds like this: "Would you like us to wax your Prius, too, sir?"

Consider liquid laundry detergent, the biggest and most tangible evidence to date of Wal-Mart's clout. P&G and others have had the technology to concentrate their detergents for years but didn't commercialize it until Wal-Mart last year said it would stop buying anything but super-concentrates. Suddenly, the risk of some marketers poaching by selling big, un-concentrated bottles at seemingly cheaper prices alongside concentrated ones disappeared.

While the consumer may be the boss per the marketing catechism at Wal-Mart and P&G, it's clear the boss on these initiatives is Wal-Mart. For consumers, such things as concentrated detergents are nice but are well down the needs hierarchy.

"The God's-honest truth is that [sustainability] doesn't yet work in the store," said Adam Werbach, former Sierra Club president turned consummate realist. He heads Act Now, serving as Wal-Mart's sometimes controversial frontman for sustainability. "This doesn't work for most consumers yet," he said.

Costs
Mr. Scott made clear that neither consumers nor Wal-Mart is willing to pay more for sustainability. Twenty percent of Wal-Mart consumers don't even have checking accounts, he said. And he pointedly raised a pen he'd picked up from the Embassy Suites hosting the conference, saying all Wal-Mart managers are supposed to pick up pens and notepads at any hotel or function they visit for use back at the office.

That focus on driving the costs out of environmental do-goodism is "why I think Wal-Mart is the ultimate agent for this," said Jib Ellison, principal in BluSkye Sustainability Consulting, who's plying a new niche created by Wal-Mart. "Pantagonia can sell all the organic T-shirts they want ... and they won't make even a remote systemic difference."

Mr. Ellison pointed to the very different ways in which Mr. Scott and Mr. Lafley seem to define sustainability. Mr. Scott speaks mainly in terms of the environment, he said, while Mr. Lafley speaks mainly about sustaining his company financially for shareholders.

It's pretty clear which prevails. P&G began shipping double-concentrates of detergent earlier this month at an upfront cost of at least $100 million, with so-far-uncertain financial payback deferred to future years.

Sustainability "is not about pleasing Wal-Mart, though that's not the worst place to start," said Saatchi & Saatchi CEO Kevin Roberts, another who made the trip to speak in Arkansas -- noting that he is professor of sustainable enterprise at New Zealand's University of Waikato.
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