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Walmart exec says retailer seeking 'fundamental transformation' of supply chain

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According to Market Intelligence, December 2022

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Walmart exec says retailer seeking 'fundamental transformation' of supply chain

➤ Walmart Inc. has enlisted more than 2,300 of its suppliers, including The Unilever Group, Johnson & Johnson and Fruit of the Loom Inc., to cut greenhouse gas emissions.

➤ The retailer is working to recruit more suppliers to take action in six focus areas: energy, waste, packaging, agriculture, forests and product use.

➤ The company is working with suppliers to decarbonize supply chains, restore land and essentially rewire the way Walmart and its partners do business.

Walmart's efforts to combat climate change date back more than a decade, with the Bentonville, Ark.-based retailer announcing renewable energy goals in 2005 and publishing its first sustainability report in November 2007. Ten years later, Walmart announced ambitious goals to eliminate 1 billion metric tons, or a gigaton, of greenhouse gas from its global supply chain by 2030 as part of its Project Gigaton program.

The retail giant's efforts appear to be paying off. In its 2020 Environmental, Social & Governance Report released in August, Walmart said it has avoided a cumulative total of 230 million metric tons of emissions since 2017, more than 20% of its goals for Project Gigaton. The company currently powers an estimated 29% of its own operations with renewable energy, with the goal of 50% renewable power generation by 2025. On Sept. 21, the company announced plans to achieve zero global emissions across the company's operations by 2040.

Kathleen McLaughlin, Walmart's chief sustainability officer and executive vice president, spoke to S&P Global Market Intelligence about the retailer's evolving ESG strategy. The following is an edited transcript of the interview.

Listen to an interview with McLaughlin on the latest episode of "ESG Insider," an S&P Global podcast, on SoundCloud, Spotify or Apple podcasts.

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Kathleen McLaughlin, Walmart's chief sustainability officer

Source: Walmart Inc.

S&P Global Market Intelligence: Walmart's suppliers avoided 136 million metric tons of emissions just last year. When you look at that 136 million number, what is your first reaction to that?

Kathleen McLaughlin: I feel good about it. Cumulatively, we're at over 230 million [metric tons] so that's pretty exciting almost a quarter of the way there, and we have 10 more years to go. What I would say though is our aspiration is to decarbonize the supply chains, so food systems and other product supply chains. And as you know from looking at the report, there are six different arenas for action where we are trying to encourage people to work. And I think our opportunity is to get people to engage with the same intensity across all six. In the early days, for a few years, people attempted to focus more in the energy arena, so renewable energy, energy efficiency, in product design. Our opportunity is to lean in more to the nature arena. We have an opportunity to encourage action in landscapes that would include not only improving use of the land, productivity, the crops and so on, so that you get more food production or whatever the commodity is per acre of land, but to do that production in a way that is also addressing carbon sequestration, or avoiding emissions.

What kind of concrete steps did Walmart take to avoid emissions?

For Scope 1 and 2 [emissions] the major initiatives are energy efficiency across our stores and [distribution centers] and other facilities, so that's things like LED lightbulbs or more energy-efficient HVAC equipment, as well as continuing to work on our fleet efficiency. We own our own long-haul trucks, which is a bit unusual. Not everybody does that, some people just outsource that. We've managed to double our fleet efficiency in terms of items delivered per gallon of fuel over a 10-year period through very specific initiatives that include giving drivers feedback on their driving speed and fuel efficiency of drivers, changing the engine design, changing the cab design, changing the way we pack up the trucks, how many items can you fit on the truck, route optimization for fuel efficiency. The second big area has been renewables. We have introduced new-generation capacity to the grid in the U.S. through our power-purchase agreements of over 1.2 gigawatts. Then we come to Scope 3 [of Project Gigaton and make a] call to action for suppliers to get them engaged and interested and raise their ambitions around their own climate targets, with their CEOs, with their leadership team.

With more than 2,300 suppliers participating in Project Gigaton, is Walmart looking at adding additional suppliers?

Ultimately, we want every single company that is engaged in producing food, apparel, any product in our sector, anything that we would sell, to be decarbonizing their supply chain and rewiring the way they source product to be circular, meaning any resource that we use we're recycling back in and ideally beyond that, regenerative. We're at the point now where we have to do more than just limit the footprint. We actually need to go back and restore landscapes that we've degraded.

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Can you talk a little bit about the challenges that any retailer faces when they have goals like this?

Yes, we are talking about fundamental transformation of systems, which means policies, practices, power dynamics, resource loads, narratives and mindsets, culture, all of those things with systems that involve many many actors at different stages of supply chains and value chains. There are consumers and retailers and suppliers and farmers and people who run fisheries and government people, so that is a higher ecosystem of people, and the way things work has to transform. When it comes to ESG, a lot of times companies just focus on metrics and issues that affect their current earnings or they might focus on metrics and issues that affect risk and that's it. That's not how we approach it; I mean, we certainly do that, that's an important part of our, I guess, fiduciary duty. But we go way beyond. We are trying to change the underlying system, that's a different thing. And so that's what we need to do, and it is hard.

Companies like Amazon.com Inc., Walmart and others are increasing their environmental data transparency. Talk a little bit about Walmart's efforts in the transparency arena. Has it been a progressive process in some ways for Walmart?

Yeah, it is for all companies. One of the challenges that companies have is to build out the infrastructure to validate numbers at the same level of rigor and substantiation as we have in the financial metrics arena. That's just beginning to happen in the ESG arena. Different companies are at different stages, so we are trying to build that out too, and every year we get better at that, and we're enhancing and increasing our disclosures.