1. Walmart’s overall approach in achieving sustainable growth: Walmart was renowned throughout the world for its pioneering supply chain practices and it’s insatiable thirst for investing in resources that would help it further cut on its costs and thereby add to its competitive advantage.
However, sustainable growth as a means of leveraging profitability was not on the company agenda till 2004. Prior to that Walmart had always maintained a defensive position regarding environmental issues. However, the company’s scale of operations accentuated environmental impacts. For example, in its retail operations, the company was the biggest private user of electricity in the US and emitted more than 19.1 million metric tons of CO2 annually.
Because of these reasons, the company’s reputation among its customers was deteriorating and according to a McKinsey study around 2-8% of the customers had stopped shopping at Walmart. In the light of these facts, the company CEO, Lee Scott, initiated a review of the company’s challenges in 2004. During this review, he was intrigued by a particular idea given by Jib Ellison, founder of Blue Skye Sustainability Consulting. The basic idea was to employ an environmental strategy in order to (1) gain more acceptance, (2) differentiate Walmart from its competitors, and (3) cut costs.
During next six months, Walmart worked with Blu Skye, Conservation International and the Environment Defense Fund (EDF) and did impact assessment in five primary areas (greenhouse gas emissions, air pollution, water pollution, water use and land use) across 134 product categories. By June 2005, the top management at Walmart identified three key areas on which they would focus namely energy, waste and products. The management was very clear in extending the scope of these efforts to its entire value chain in order to successfully meet their strategic ends. Walmart committed itself to three aspirational goals: * To be supplied 100% by renewable energy.
* To create zero waste.* To sell products that will sustain the company’s resources and the environment. Sustainability was approached as a new responsibility for the existing employees and partners rather than creating an altogether separate organization. Walmart also followed a collaborative approach in which hundreds of external entities were asked to brainstorm on the existing operations and suggest new avenues for sustainable business.
Fourteen sustainable value networks were defined and an executive sponsor along with the network captain was allocated for each network. The networks were given the freedom to define their objectives and chart out their own action plan. the networks approached the task at hand in two phases: i. Identification of issues:
The networks followed a three-pronged strategy to begin with: a. Engagement, wherein a broader community (besides the traditional stakeholders) could provide ideas, expertise and other resources to help Walmart become a more sustainable business entity. b. Exploration, which included life cycle analysis of particular products and services from an environmental lens. c. Expansion i.e. looking in the value chain and identifying alternative courses of action.
ii. Development of future courses of action: Once the issues were identified, the networks developed pathways called sustainable pathways which facilitated their transition from the present to the desired future state. The three sustainable pathways were: a. Quick Wins: Initiatives that business and stakeholders could immediately go after.
b. Innovation Projects: Projects that spanned 1-3 years and had the potential to change the entire industries.
c. Game Changers: Initiatives that would be pursued on an ongoing basis and that would usher in radical and disruptive innovations different from the existing norms. Each network was asked to define six quick wins, at least two innovation projects, and one game changer. 2. Industry specific supply chain issues faced by Wal-Mart Seafood:
With inefficient fishing practices and depletion of many wild seafood species, the stocks of wild fish declined leading to large supply constraint. To meet the demand, seafood supplied was farm-raised. But it had increased health risks in the form of chemicals and antibiotics use to fight diseases in fish farming environments. Hence continuity of supply was the single greatest long-term issue facing in the industry.
The company also faced near term supply related challenges like difficulty in procuring adequate supply of fish if another buyer offered higher prices even when Wal-Mart negotiated an agreement. The other issue was regarding the quality of the fish procured as suppliers showed high quality samples but then delivered inferior products which led to markdowns and write-offs. Electronics:
The key supply chain issues in Electronics industry are defined under six key areas * Material Innovation: Working in collaboration with manufacturers to reduce environmental impact * E-waste: Recovery and safe disposal of electronics
* Legislation: Working with the government to affect policy and regulations related. * Green Engineering: Emphasizing the need for sustainability by making suppliers rethink the design and manufacturing processes of products * Metrics: Developing sustainability metrics and monitoring processes to access suppliers, associates and the network
* Training & Education: Educating the stakeholders about the potential implications and opportunities related to sustainability Another issue was that due to rapid changes in technology, inventory became obsolete in electronics industry but to promote sustainability Wal-Mart had to take the risk of ordering huge quantities from suppliers to encourage and motivate them. Textiles:
Wal-Mart took the initiative in pursuing organic products through its textile network as conventional cotton crops used chemical insecticides which are shown to cause cancer, birth defects and nervous system damages. While implementing the strategic plan, Wal-Mart faced two problems. First, the cost of certification which farmers have to follow to comply with standards of organic cotton farming and manufacturing processes were costly and secondly, organic farmers could not grow cotton in the same field for an extended period of time because it depleted the nutrients in the soil. Hence farmers were reluctant to pursue the idea of Wal-Mart and shift to organic farming. Chemical Intensive Products:
The chemical intensive products network was focused on identifying potentially harmful chemicals and motivating manufacturers to eliminate those from their products. Wal-Mart faced the following issues * Wal-Mart could not share the metrics based on which it identified the chemicals in certain products due to the fear of negatively affecting other chemical based products on its shelves. * It could not advertise the improvements to customers as it faced the risk that the substitutes could have negative health or environmental implications
Classification of Industry Specific Issues:Based on common characteristics/nature, we have classified the industry specific issues which were identified above. These are the issues which remain valid for all (or most) of these industries.