How The World's Largest Company Thinks About Social Responsibility

How The World's Largest Company Thinks About Social Responsibility

 “As the world’s largest producer of laundry detergents, Walmart has challenged laundry manufacturers to reduce 25% of the water content in every dose of detergent in North America by 2018. For P&G alone, a 25% water reduction in every dose of liquid laundry detergent means over 45 million gallons of water saved in the U.S., fewer plastic bottles, and less waste,” explained Kathleen McLaughlin, president of theWalmart Foundation. We discussed how McLaughlin came to this work, her goals and vision for this role, a wide range of global sustainability efforts, their women’s economic empowerment initiative, measuring success, and much more.

Walmart employs 2.2 million associates globally, including approximately 1.3 million in the United States, and is one of the largest private employers in the U.S. and Canada. For the fiscal year ended January 2014, Walmart increased net sales by 1.4% to $473 billion and returned $12.8 billion to shareholders through dividends and share repurchases. Walmart ranks first on the FORTUNE 500 list of the world’s largest companies by revenue.

Rahim Kanani: Tell me a little bit about your position at the Walmart Foundation, and what you hope to achieve in this role?

Kathleen McLaughlin: I serve as the president of the Walmart Foundation and the senior vice president of corporate affairs at Walmart. In my role I lead corporate giving efforts and am responsible for the company’s global sustainability, women’s economic empowerment and food and nutrition initiatives.

I came to Walmart after a career with McKinsey where I worked on global development as well as retail/consumer issues. What became clear to me over the years is that the social and environmental challenges we face in society are too big for any one institution or sector to address on its own.  Business exists to serve society, in many ways – first and foremost, by serving customers with products or services of value, but also by providing employment and opportunities for suppliers, paying taxes to support the common good, and providing returns to investors, including pensioners. We need to unlock the full potential of business to help resolve today’s toughest problems, collaborating with each other, governments, and with civil society, drawing on distinctive capabilities including talent, technology, physical assets, institutional skills, and relationships, to name a few.

In my position at Walmart, the world’s largest company, I have the privilege of working with the business teams as well as the Walmart Foundation to enhance the sustainability of global supply chains in food, apparel and general merchandise; to help create economic opportunity for individuals and to foster economic growth; and to strengthen the resilience and cohesion of local communities through local philanthropy and disaster preparedness/relief.

Sometimes we can make the biggest difference through company initiatives; sometimes through the Foundation. For example, in our work on the global food chain, our merchants and our sustainability teams are working with suppliers on optimizing agricultural inputs to reduce greenhouse gas; while the Foundation invests with grantees to train hundreds of thousands of farmers in emerging markets. The business and the Foundation work together to strengthen the food bank system in the U.S.: the business provides food and logistics know-how, while the Foundation supports Feeding America and other organizations with grants to strengthen their programs.

Looking ahead, our biggest opportunity is to draw on our unique business and philanthropic capabilities, in collaboration with suppliers and other partners, to create real systems change across the supply chain— meaning how products are grown and made, how they’re transported and sold, and how we touch the lives of people along the way.

Kanani: Looking at Walmart’s global sustainability efforts more broadly, what kinds of things are you focusing on, and what kind of impact have you had thus far?

McLaughlin: With respect to sustainability, we are guided by three aspirational goals – to be supplied by 100% renewable energy, to create zero waste and to sell products that sustain people and the environment.

The first two goals speak to the environmental footprint of our own operations. Today, we’re the #1 largest onsite green power generator in the U.S, and we have more than 300 renewable energy projects underway around the world. Between our own new projects and renewables from the grid, we satisfied 24% of our electricity needs worldwide from renewables in 2013. By the end of 2020 we will increase our use of renewable energy globally six-fold and we will reduce the energy use in buildings around the world by 20%. This could save the business $1 billion annually while also reducing greenhouse gas. We’re also on our way to doubling our U.S. fleet efficiency since 2005, having achieved an 84 percent improvement since 2005.  Walmart U.S. has also cut waste to landfills by more than 80%.

Our goal to sell more sustainable products really means making the entire supply chain more sustainable for people and planet, end-to-end.  Our priorities are to ensure that we bring safe, affordable food, apparel, and general merchandise to people in a way that is sustainable for the planet and people all along the product supply chain.

There are two principle ways we try to do this: first, by working with the Sustainability Index, category by category; and second, through special projects. In both cases, we collaborate with suppliers, NGOs, customers, governments and multilaterals in order to drive change. The Sustainability Index was developed by The Sustainability Consortium (TSC).  At Walmart, we have rolled out the Sustainability Index to more than 700 of our product categories and we expanded the index to international markets. A great example of impact here is Walmart and P&G’s recent announcement to further compact laundry detergent. As the world’s largest producer of laundry detergents, Walmart has challenged laundry manufacturers to reduce 25% of the water content in every dose of detergent in North America by 2018. For P&G alone, a 25% water reduction in every does of liquid laundry detergent means over 45 million gallons of water saved in the U.S., fewer plastic bottles, and less waste.

In addition to working with suppliers on products through the Index, we also pursue a number of special sustainability projects with environmental partners such as EDF, CI and WWF, as well as suppliers and other stakeholders. For example, we just signed a commitment with eight food suppliers to bring 8 million incremental acres into sustainable agriculture practices, to reduce greenhouse gas emissions by 6 million metric tons.

Sustainability will remain a priority because it makes us a stronger business.  It reduces waste, lowers costs, drives innovation in merchandise, and helps us lower prices. It also energizes our associates.

Walmart Foundation President Kathleen McLaughlin

Kanani: In terms of women’s economic empowerment, why this is a priority area for Walmart, and what have been some of your efforts to advance this issue?

McLaughlin: Empowering women is a priority for Walmart because it’s the right thing to do, and because it will make our business and our world stronger.  When you lift up women, you lift up families and whole communities and economies. The majority of our 245 million customers are women and women control more than $20 trillion of annual consumer spending globally.

Through our Women’s Economic Empowerment initiative, launched in 2011, we are focusing on two areas: sourcing and training. We aim to source an incremental $20 billion worth of goods from businesses owned by women in the US, and double our sourcing from women-owned businesses in our other markets. We are also trying innovative approaches like Empowering Women Together, a destination on Walmart.com that connects small women-owned businesses around the world with customers who are looking for products from women-owned businesses. With respect to training, we have committed to training 1 million women – 800,000 in emerging markets, and 200,000 lower-income women in the US, to help them secure better jobs. Through the Walmart Foundation, we have funded or have funding in place for roughly 750,000 women.

And, we recently joined forces with the Women’s Business Enterprise National Council (WBENC) and WEConnect International to launch a logo that helps consumers easily recognize products from women-owned businesses.  This new “Women-Owned” logo can be used by certified women-owned businesses on their products in our Walmart stores, Sam’s Clubs and other retailers around the world. Our research has shown that 90% of our female customers in the U.S. would go out of their way to purchase products from women because they believe they offer higher quality. The logo is a great tool for the consumer and a real boost for women-owned businesses.

All of these external efforts are in addition to the opportunities we create for women in our 2.2-million-strong workforce. We are proud that in the U.S., for example, about a third of our officers (executives) are women, and that 45% of our management associates are women.

Kanani: When it comes to healthier food initiatives, what kind of work is being done and how are you measuring the success of your efforts?

McLaughlin: We believe that every family should have access to affordable, sustainable and healthier food choices. In 2011, we committed to making healthier eating easier.  Since then, we have made significant progress saving customers more than $3.5 billion on fruits and vegetables in the U.S. We launched a simple front-of-package “Great for You™” icon backed by nutrition criteria to highlight more nutritious items in our assortment.  We’ve reduced sodium in our Great Value™ brand and national food brands by 13 percent, keeping us on track to meet our goal of a 25 percent reduction. And in FY2012, we reduced sugar by over 10%, surpassing our goal. Walmart has also opened 224 stores in food deserts in the past few years.

Kanani: In implementing these sustainability efforts worldwide, what kinds of challenges are you running up against, given that Walmart has over 11,000 stores in 27 countries, and employs 2.2 million people?

McLaughlin: We need to move faster, but large-scale change does not happen overnight. It’s hard work. You have to be committed to making sustainability sustainable in good times and in bad. And your employees and partners have to stay fully engaged because they help drive the best ideas forward.

Food is one area where we need to move faster and innovate more. One approach is to address hunger in communities before it even starts. In 2010, Walmart and the Walmart Foundation launched a $2 billion cash and in-kind commitment to fight hunger in the U.S. By working with local food banks and hunger relief organizations, we actually delivered on that commitment this spring, a year ahead of schedule.

But we also want to look at the entire food system. The global population will grow to 9 billion in the next 40 years. How will the world produce enough safe, affordable and nutritious food, in a way that is environmentally and socially sustainable? This is a food system challenge and we are working with suppliers, NGOs and other partners to figure out where the gaps are and where we can do more. We are working on reducing food waste, and piloting technologies that can enhance crop yields, while reducing fertilizer and pesticide usage. We’re also collaborating with ranchers, farmers and fisheries to prevent deforestation and preserve fish stocks.

Kanani: At the same time, with such scale, changes in global policy of any kind can create tremendous change.

McLaughlin: That is correct – and with that in mind, we are working to make a big impact around the world. One example: our plan to purchase energy-efficient LED ceiling lighting fixtures for new supercenters in the United States, stores in Asia and Latin America, and ASDA locations in the United Kingdom. The new fixtures will use 40 percent less energy than lighting sources historically used in stores, and will help further our goal to reduce the kilowatt hour (kWh) per square foot of energy required to power Walmart’s buildings globally 20 percent by 2020. This marks our largest purchase of GE LED lighting to date, and the most recent example of leadership from Walmart and GE to find and scale innovative, energy-efficient lighting solutions.

With the main sales floor lighting representing approximately 90 percent of the total lighting usage in each building, this implementation will reduce energy use per store by more than 5 percent in the U.S. alone—and that change is tremendous.

Kanani: How would you define a responsible company in the 21st century, and has that definition evolved in recent times?

McLaughlin: A responsible company recognizes that it exists to serve society. Walmart’s mission has always been to save people money so they can live better. That mission in and of itself creates tremendous social good, but we go beyond that. As the world’s largest retailer, and the world’s largest grocer, we can use the strengths of our business to help others – to enhance sustainability, create opportunity, and strengthen local community. We’re building a model for how business can address large issues in a systemic way, all across the supply chain. And the really powerful thing is that strengthening society makes our business stronger too.

Kanani: So finally, is doing good, good for business?

McLaughlin: Absolutely. Ultimately, there is no conflict between being a responsible company and a successful company. Our customers, associates, suppliers, NGO partners, and other stakeholders expect and trust us to do the right thing – it is just part of doing business, and makes us stronger.

As we reduce our energy consumption per square foot every year, we are doing the right thing for the environment and we can reduce our energy bill by an estimated $1 billion by 2020, savings we can pass on to the customer. As we work with suppliers to make products more sustainable, we drive merchandise innovation and transparency for our customers, while ensuring we will still have resources to produce products tomorrow. And with every farmer we source from and help train, we’re helping to sustain the food chain for people and planet for the current generation of farmers and customers, and for those to come.