How Wal-Mart China should push “sustainability” into the next level

Research Conducted by Wal-Mart China and third parties found that customer satisfaction was most affected by the value perceived by customers. The Chinese market is known for its price sensitivity. Customers seem to be far more concerned with whether or not they are receiving the best price, then whether or not Wal-Mart China is committed to its sustainability initiative. This sentiment was illustrated by the disappointing sales of CFL bulbs in Wal-Mart China. CFL bulbs offer real energy savings which would benefit the purchaser in the long run, but they cost more the incandescent alternatives at the counter. The cost premium deterred many Chinese consumers.

However, according to Greendex 2012 (Consumer Choice and the Environment—A Worldwide Tracking Survey), the top-scoring countries are ironically developing countries: “The top-scoring consumers of 2012 are in the developing economies of India, China, and Brazil, in descending order. “[1] Whereas developed counties like American, Japan and Canada ranked among the least sustainable. Looking into the survey closer, it displays the positive correlation between how people feel guilty when they have negative impact on the environment and the Greendex scores. However, when we interpret the survey in terms of how people feel empowered to make a positive difference to the cause of sustainability, people with the lowest Greendex scores are, conversely confident about their ability to do so.

This is particularly true for upper middle class in China. They have strong awareness of eco-friendly issues but at the same time they do feel helpless in the face of environmental problems. All in all, the sustainability objective of Wal-Mart China can’t be accomplished by simply putting various projects together; meanwhile it requires a lot of intangible efforts like consumer education, community engagement and cooperation with government/non-profit organizations.

What makes Wal-Mart China’s distribution system unique is its ability to keep its supercenters in-stock rate significantly higher than the average industry competition. To accomplish this Wal-Mart China uses massive distribution centers capable of shipping out 330,000 cases per day to superstore centers or distribution centers. The system also allows for some products to be delivered straight to superstores from suppliers.

Additionally, Wal-Mart China goes to great lengths to ensure that their organizational sustainability strategy is reflected in their distribution system. Their distribute centers use energy savings lighting, air conditioning and heating recycling systems, solar energy, and wind powered generators, Wal-Mart China evaluates their suppliers using scorecards to make sure they meet Wal-Mart’s sustainability standards. In comparison to its DCs, Wal-Mart China had been much more limited in opportunities to design sustainability into its SCs. More sustainability focuses are put on the products they are selling. But progress in its SCs can be seen from small things like sustainable lighting usage, advocating of both-sided printing to nation-wide effort like the renewable shopping bag program.

Sustainability should be considered when selecting vendors, even in a rapidly industrializing nation like China. Wal-Mart China wants to prove that they are serious about sustainability. Not paying attention to the practices of their suppliers would put them at risk of being accused of green washing. However, vendors in China may lack the necessary resources to come into compliance with Wal-Mart China’s standards for sustainable business practice. That is why government and non-government organizations have urged Wal-Mart China to give vendors time to come into compliance, instead of dropping them completely. Wal-Mart china has many programs to encourage vendors to adopt its sustainability initiatives. The case gives the example of the major supplier collaboration group, which meets to share experiences, and learn best practices for sustainability efforts. However, this approach only works for vendors who are already interested in including sustainability principles in their business models.

For vendors who are not concerned with sustainability Wal-Mart China can still have a powerful influence. The larger and more successful Wal-Mart China becomes the more lucrative it is to become one of its suppliers. If vendors want to get their products on Wal-Mart shelves they need to meet certain sustainability standards. This is a powerful incentive towards compliance. Also by allowing vendors the opportunity to gradually work their way towards compliance, more vendors are likely to take up the challenge.

For improving sustainability in distribution it may be useful for Wal-Mart China to conduct a Life Cycle Assessment (LCA). An LCA measures the environmental impact of products and processes from the moment raw materials are extracted from the earth all the way to the point where materials are disposed of, recycled, or reused. This type of analysis would allow Wal-Mart China to recognize opportunities in the life cycle of the products they sell where negative impacts could be reduced. Such analysis would need to be conducted periodically as new technologies and methods may make further system improvements possible. But considering the restrictions they are encountering in China, a lot of initiatives would be cost-prohibited. Here, a practical way would be to have third-party involve in their chain of distribution. Especially at the last point of distribution, which is the “reduce, reuse and recycle” phase, if permitted Wal-Mart can make some financial or technology investments to the third-party companies they are working with.