Market-Based Solutions for Addressing Global Challenges

The Brookings Institution

By Doug McMillon, President & CEO, Walmart

November 01, 2011

The Brookings Institution

I suspect some of you are unfamiliar with us except for what you’ve read or heard on TV or read in a newspaper.

So, I’d like to start by telling you about my first day as a buyer trainee for Walmart. It wasn’t my first time to work for the company. I had previously worked a couple of summers unloading trucks in our warehouses and worked as an assistant manager at a store in Tulsa, Oklahoma, but it was my first day in the Home Office.

It was 1991, our founder Sam Walton was still alive, Walmart was doing about $43 billion in revenue and had less than 2,000 stores and we wouldn’t start our International business until the end of that year. I showed up, as requested, at 7 a.m. and was greeted by my new boss, a divisional merchandise manager named Ray Hobbs. Ray barely broke stride as he introduced himself and walked toward our cafeteria explaining what job I had been assigned.

By the end of our quick walk and 5-minute orientation that morning, he’d given me two pointers: 1.The coffee is hot so use two cups (this was 1991 before we had sleeves or discontinued paper cups all together) and 2. You’re responsible for everything. No matter what it is, if something isn’t right, it’s your job to fix it. There was a lot embedded in that direction:

• Ownership and accountability
• A bias for action
• “Doing the right thing”

Now, over the years, Walmart had to expand its mindset. In 1991, we were focused like lasers on two stakeholders: the customer and our associates (our term for employees).

We’re not sure when it happened, but there was a magical day when we went from being the up and comer, the Cinderella story, to being “big.” With the shift to “big,” societal expectations changed. We weren’t just the small U.S. retailer that was serving small towns with good prices on merchandise that they wouldn’t have otherwise had access to in their towns.

While we change every day, we went through a transformational change in the months leading up to October 2005.

In a nutshell, we learned after listening to some really smart critics of Walmart, that we could serve communities and the environment simultaneously and in an aligned manner with our two primary stakeholders of customers and associates.

We began to think differently about ways we could use our size and scale as forces for positive change.

 

Social Impact through Our Core Business

That brings me to our topic today: market-based approaches to solving global challenges.

Walmart today has a presence all around the world, and that gives us a unique view. In my travels and visit with customers, what strikes me is that we’re a lot more similar than we are different. We all want opportunity. We all want a better standard of living for our families.

At the same time, the world is changing in big ways. Our next generation customers are part of a rising global middle class, especially in emerging markets. Over the next 20 years, energy will cost more. The demand for food will double. Customer expectations will be higher than ever. And increasingly, they won’t want to choose between products they can afford and products that are good for their families.

As we’ve evolved as a company, we’ve recognized that our commitment to making a difference on these global challenges is not about a separate CSR program or philanthropy. It has to be embedded into our business. And we’re doing that in three ways:

◦       First, our stated purpose is to “save people money so that they can live better.” Yes, this means that we must manage our costs and pass on value but it also means that the ultimate purpose is that the people we serve literally have a better life…it’s about more than just the lowest price at all cost. Our core business model can help people in a more holistic manner.

◦       Secondly, we care about creating opportunity for our own associates and are also working through our supply chain to help everyone along the way. We link a global base of 200 million customers to suppliers, farmers and other producers. One of the most powerful things business can do to promote economic development is to create access for more people to the global marketplace, especially in developing countries. This is how we can build economic opportunity that is sustainable over time. Social sustainability is a priority.

◦       And third, we can make a positive difference on environmental issues and simultaneously reduce costs and run a better business. The concepts of low prices and preserving our environment aren’t mutually exclusive.

Over the last several years we’ve applied these principles in a series of commitments in environmental sustainability, hunger and nutrition, agriculture, and empowering women. We started with sustainability. As we got deeper into this work, one commitment led to another. And we now find they connect in a kind of virtuous circle, each strengthening the other.

I’d like to give you a few examples of how we can, and are, making it work.

Energy - LED lighting

When we put sustainability front and center for the company, we laid out three bold goals.

◦       To create zero waste

◦       To sell products that sustain people and the environment

◦       And to be supplied 100 percent by renewable energy

We didn’t quite know how we’d get there, but setting these aspirational goals made us ask ourselves a lot of questions.

Energy is one of our biggest costs and we are always looking for ways to be more efficient. Let me tell you the story about the LED lights in our parking lots.

We began by installing LED lights on one pole, in one store parking light in Rogers, Arkansas. We also partnered with GE to develop this technology and test it in real-life conditions.

This is a before and after picture of one of our parking lots in Guatemala. You can see how much better the lighting is in our parking lot. Not only did this system make the parking lots brighter and safer for our customers, the LED lights have a longer life and reduce our energy costs annually by up to 50%, while saving nearly half a million dollars. Now, LED lighting is in every country we serve.

Becoming more energy efficient is good for our business and good for the environment.

An added benefit: most of these GE-produced systems are assembled in North Carolina, supporting jobs and communities there.

Waste Reduction

As we looked for more efficiencies, waste became a big opportunity. And the ideas and solutions are coming from the business.

In the U.K., our ASDA business has successfully redirected more than 90% of its operational waste, including all food, cardboard and plastic.

At the heart of the program are our regional recycling centers, which were built next to our distribution centers. When a truck delivers goods to our stores, we safely backhaul materials for recycling and then it goes on to the distribution center to fill up with goods for the next store. This allows us to backhaul without any additional creation of carbon.

None of our ASDA stores send food to the landfill. Instead, it is donated to charity whenever possible or transported back to the recycling center along with cardboard and plastic.

We’re doing the same in the U.S. This is a good example of how our work on the environment leads us to make a difference on other issues like food and hunger relief. By looking at good food that was being wasted in our stores, we realized that we could work with NGOs, like Feeding America, to deliver quality, fresh foods to people in need. We then realized that food banks often lack the cold supply chain to keep the food fresh, so we’ve donated refrigerated trucks and lent our logistics expertise to help their distribution system operate more efficiently.

Agriculture

We continued that virtuous circle through our global commitment to sustainable agriculture. We’ve pledged to sell $1 billion in food sourced from 1 million small- and medium-sized farmers by 2015. We‘re also training 1 million farmers – half of whom will be women – in sustainable farming techniques.

This commitment is about giving farmers more direct access to markets so they can get a better return. It’s about producing more food with less waste, and providing customers with affordable and locally grown produce.

Let me tell you about one farmer I met this year in Costa Rica. Her name is Jessica Ovideo. She built a greenhouse and she produces lettuce hydroponically. We have a program in Central America, called Tierra Fertil that has helped thousands of farmers and their families by providing more market access. Jessica was producing 500 units a week. Now, after receiving training from our agronomists, she’s producing four times that. And her income has increased from $155 / week to $640 / week. She’s looking into building another greenhouse and extending into other product lines for Walmart.

We’re taking what we learn in countries like Costa Rica to help farmers in other places like China and India. Technoserve is partner in all of this, and I’m glad to be on the panel with Bruce today.

The real impact here is the scalability of this work. We’re partnering with NGOs and government agencies for the long-term rather than just funding projects that end when the money runs out. For example, by providing our expertise in production standards, market intelligence and purchasing power we can help USAID put in place lasting, sustainable programs for farmers. We think this kind of collaboration strengthens both the development work many of you are engaged in and our business.

Empowering Women

I wanted to share one more story related to how we’re empowering women.

Two years ago I met Amandeep Kaur in one of our Best Price stores outside Amritsar, India. She introduced herself to me and said that she had been hired through our program at the Walmart Bharti training center. We partner with the Government of Punjab in India on social retail schools – they provide the buildings… we provide the curriculum. She said that if not for the program, she would have worked in the nearby fields for the rest of her life and would have been forced to marry someone at an early age. And instead she has a career and a future. She’s now pursuing her MBA. Her entire future has changed as a result of this program.

Empowering women is one of the most direct and effective ways to break the cycle of poverty and lift families into economic self- sufficiency. When a woman can live with dignity and earn a decent income, she raises the standard of living for her family. That’s good for communities and good for our business.

Women are a vital part of our business as core shoppers and associates and suppliers. And so we asked ourselves, how can we use our business, our supply chain and partnerships to support the economic empowerment of women? We listened to and learned from many partners, like Vital Voices and CountMeIn.

And in September, Walmart launched a major initiative to help empower women across the supply chain. We set a series of goals for the next five years, to open markets for women-owned businesses and increase training and career opportunities for women on farms and in factories and jobs that will give them greater economic security.

As part of the commitment, we will source $20 billion from women-owned businesses in the U.S. and double our sourcing from women suppliers internationally.

These are just a few examples of how we are embedding our commitments into the business. We have taken waste out and are helping address hunger. We have reduced our cost. We’re helping more people gain access to markets and economic opportunities, and we’re making our customers better off as well. We think all of this makes us a more successful retailer.  

Conclusion

Globally, this is a unique time. People around the world are struggling. They’re reaching for a better life.

It is crucial that we all come together – business and NGOs and government – and work to share data, break down silos and connect the work we each are doing.

During that period of transformational change that I mentioned earlier, we learned that if we opened up and let others help, we could make more progress.

We have an incredible opportunity. None of us can do it alone, but together we can address pressing social issues and create real change.

I feel privileged to be able to speak to you today about our company’s approach and perspective, and I invite your feedback and look forward to our discussion.