Sales Job: Will Consumers Spend Green to Go Green?

Sales Job: Will Consumers Spend Green to Go Green?
H. Lee Scott, Jr., President and CEO, Wal-Mart Stores

Notes from the Wall Street Journal ECO:nomics Conference
Santa Barbara, California
March 12-14, 2008

If there was any debate whether CEOs cared about the environment, it was obviously clear that Lee Scott, CEO of Wal-Mart, did when he spoke the next morning. Scott, much humbler and softer spoken than I had seen him at the Wal-Mart CEO Sustainability Summit back in October, started by explaining Wal-Mart’s classic story -- the company continued to adhere to the mission set by founder Sam Walton who created the Wal-Mart Five & Dimes to support Americans in saving money while living better.

He described the Wal-Mart demographic, commenting that most of the conference audience had probably never been to a Wal-Mart. He communicated the statistic that 20% of Wal-Mart customers did not hold a bank account. Scott went on to explain that the company’s sales were actually affected on a monthly basis by consumer spending that was tied to a twice-monthly pay check cycle, demonstrating how Wal-Mart customers are living hand-to-mouth, paycheck-to-paycheck.

He also commented that there are things one can do as a business manager that are cost-effective, but that are wrong. We have to eliminate waste and it offers an appropriate way to reduce cost. Revenue generation will also come because people will want better products and will choose them – this is already being seen in stores in higher income areas where consumers are purchasing organics. Price sensitivity for the Wal-Mart customer is significant.

Scott reiterated Immelt’s position stating that a “carefully crafted” carbon program is inevitable and probably needed. But even with significant reductions, Wal-Mart will grow its carbon footprint by 8-9% per year just from new store growth.

Commitment at the Grass Roots Employee Level

Scott reported that 500K people (a third of the Wal-Mart work force) had taken the PSP, Wal-Mart’s Personal Sustainability Program. This was good to hear. Considering the payroll size, it’s difficult not to excuse the fact that a significant number of Wal-Mart employees are still unaware of the company’s “sustainability” commitments.

Visiting a store a couple weeks ago, I asked a number of Wal-Mart associates if they had experienced the PSP program. One person had heard of PSP but wasn’t sure what had happened to it. While Wal-Mart is now recognized as the largest distributor of organics, an associate stocking shelves in the food section could not identify whether they had any organic products and a manager quickly brushed off the question saying whatever you find on the shelves is what’s there.

None of the employees I spoke to had seen the company’s internal communications video that had been distributed to the supplier CEOs who attended Wal-Mart’s October Summit. The DVD provides an overview of what specific Wal-Mart businesses are doing about sustainability in their area. The DVD is called “Sustainability 101” and includes a short inspirational video called “Spirit of Sustainability” where Wal-Mart executives talk about how powerful an experience it is for Wal-Mart to be participating in impacting the “sustainability of life on earth”, empowered “to become leaders in sustainability.” Twelve “Sustainable Value Network Profiles” are presented in short videos covering:

• Greenhouse Gas
• Global Logistics
• Sustainable Buildings
• Ops & Procurement
• Packaging
• Chemical Intensive Products
• China
• Electronics
• Food & Agriculture
• Forest Products
• Jewelry
• Seafood
• Textiles

Certainly I can appreciate the challenges of reaching all Wal-Mart associates and addressing these remaining gaps. The PSP was developed as a voluntary mechanism to encourage awareness and support interested associates in personally incorporating sustainability into their lives by setting relevant personal goals such as weight loss, smoking cessation, recycling, etc. Wal-Mart still has a tremendous amount of work to do to get an organization of its size and scale mobilized to operate in a new paradigm, let alone to be aware of the work that the company is doing. Scott repeated a message I heard him say in Bentonville as well, “We are not green” we have a long way to go…

Sustainability As a Business Opportunity

During his interview in Santa Barbara, Scott reiterated that the business opportunity of sustainability was huge. With implementation of the Packaging Score Card this February (the first of more than 10 score cards to be implemented), Wal-Mart had already reduced packaging by 10-15%. Scott provided the example of the Nutrigrain Snack Bar that eliminated a cardboard insert without any impact on the stability of the product. The cardboard insert never actually served any real purpose – it was simply a waste that could be eliminated.

Scott jokingly commented as he lifted the plastic water bottle that was given to him to drink while on stage at the super posh and palatial Bacara Resort & Spa, “I am surprised that this conference should have bottled water.”

Pricing for Sustainability

Scott challenged business to address pricing to allow for sustainable choices, stating that it used to be that organic or sustainable items were higher margin, but the price needs to help the consumer make the better choice. Scott also provided some specifics about how the company intended to use end caps [shelves located at the end of store isles] to provide higher visibility and sales support for sustainable products. Wal-Mart also intends to use point of purchase displays for “story telling” about sustainable choices.

Scott believes you “don’t have to make [financial] tradeoffs” for sustainability. He also stated “there are certain chemicals that just shouldn’t be products”. A similar statement is made by Ray Anderson, CEO of Interface Carpets, in an excepted movie clip from The Corporation. See blog posting titled “Addressing Negative Associations with term 'Sustainability'"
on this site.

Scott said his managers were approaching this work by reflecting on their own experience, and looking to the future generation of management and asking what would they want us to have done.

Scott acknowledged Wal-Mart suppliers for doing the work involved in addressing the sustainability of their products. It’s commonly held in the consumer products industry that Wal-Mart tends to make what many suppliers consider "unreasonable" demands on price and value. This was not reflected in the first question taken from the audience. The CEO of a Wal-Mart supplier from China was the first to comment.

What About Consumer Education?

Ellis Yan, CEO of TCP out of China, the largest global producer of CFLs, spoke about his company’s adoption of Wal-Mart’s PSP program - a wonderful case study to be investigated and evangelized within Wal-Mart. Apparently Wal-Mart actively supported the work that led TCP to eliminate 80% of their waste. Ellis also proudly stated that TCP was now recycling 95% of their glass, the most significant material component the company works with. At the same time, Ellis challenged Lee Scott, in such a nice non-confrontational Chinese way, in regard to addressing consumer education and awareness.

Scott’s response was that the company’s focus was on the customer base. He commented that the work of sustainability “takes everybody” and that the NGOs have been wonderful resources to push Wal-Mart further than they were comfortable. He mentioned that they were doing an Earth Day tab [a newspaper advertising insert] but that they were still struggling with how to approach in-store signage. Controversy about what to communicate was leading the company to hold out on communicating messages that may be misleading or contradictory to new information that might become available in the future. Figuring this out is part of a process that Wal-Mart is currently engaged in.

Sustainability Integration

The last phase of RVN’s Sustainability: Where to Begin Methodology, involves the “Integration” of sustainability into a continuous improvement process. This is particularly important now as we don’t have a clear picture of what a sustainable company looks like. In this context, companies have more impetus than ever to keep pushing the boundary further and further in their work, experimenting and adding new technologies and processes as they come online, finding new and more creative ways to conserve, reuse and restore so that business (and now life) can be sustained.

Ideas for Wal-Mart

In regard to the challenge of reaching consumers, Wal-Mart might expand its sustainability-minded approach even further and consider how its current available resources can be tapped to address this issue. For example:

• Each Wal-Mart has a large TV aisle that could be used for running targeted audio visual communications that reach both customers and the remainder of its million and a half employees.
• Wal-Mart could partner with not-for-profits at the retail level who could answer questions or host information booths in the stores.
• Green Jobs Program information could be hosted in stores, combining sustainability education and new economic development in Wal-Mart communities, leading to more sales for Wal-Mart. Reference Van Jones’ work at http://ellabakercenter.org/page.php?pageid=5

About the author; Revi Schlesinger heads RVN Consulting, a network of experts aligning to support the success of large-scale corporate sustainability integration initiatives. Continue the conversation at www.ReviSchlesinger.com/blog.html