The Chinese government and people have the highest expectations of our company. We respect that and appreciate it. It’s Walmart’s goal to be a model retailer in China and around the world. This is especially true when it comes to being a more socially and environmentally responsible company.
When we held the Beijing summit four years ago, it was clear to us that the Chinese government was very focused on making progress in sustainability. We saw an opportunity to work with our partners in China to make our global supply chain more socially and environmentally responsible.
That day, we made a number of major commitments that have driven our progress with sustainability in China. We’ve already helped 195 factories improve their energy efficiency by 20 percent or more. As Greg mentioned, we’re making progress in our retail operations with reducing water use, our Direct Farm programs and energy-efficient stores. And, we’ve been applying our Sustainability Index to make products that we source here more environmentally friendly.
Of course we’ve done none of this on our own at Walmart. The support and leadership of the government has been strong and essential. We’ve been very pleased to work with suppliers who have answered the call and share our commitment to being more socially and environmentally responsible. And our academic and non-governmental partners have continued to lend their valuable expertise here, as they have with our sustainability efforts around the globe.
This progress is great. But it wouldn’t be like us if we didn’t ask: “Can we do more?” We believe the answer is not only ‘we can’… but ‘we must.’ There are now 300 million people in the Chinese middle class. That’s almost equal to the entire population of our largest market, the United States. Each and every one of these citizens – and the 500 million more to come by 2025 – aspires to achieve and maintain a high quality of life. And of course we all know China’s role as a global manufacturing center for consumer goods supplying all major retailers around the world.
At Walmart, we see very clearly the opportunity and responsibility for our company, other retailers and suppliers: work together to make a difference with China, and we will make a difference for our customers, our businesses and the world.
Today we’re here to strengthen and expand our sustainability efforts in China and around the world. But before I talk about how we’re going to do that, I’d like to take a step back and provide some context around one of our most important initiatives.
Three years ago, as Leslie mentioned, we launched The Sustainability Index. Our goal was to create a tool to measure the sustainability of our suppliers and products and to drive progress. At the same time, we helped found The Sustainability Consortium or TSC. It brings together academics, suppliers, retailers, governments and the non-governmental community to do the research and develop the reporting systems that power the Index. The TSC now has over 100 members.
We’ve made substantial progress with the Index and TSC. Over 500 suppliers have participated in the Index. Many of these are our largest suppliers, and together they represent an average of 70 percent of sales within the 107 product categories where we’ve applied the Index to date.
We are measuring the sustainability of one supplier against another, developing best practices for designing sustainability into products, and we are having meaningful conversations with our suppliers about adopting these best practices.
Let me give you a real life example of how this has worked.
One of the biggest challenges with the sustainability of laptop computers is energy use. With the Index and research from the TSC, Walmart’s merchandise buyer found that laptops with advanced power management tools use much less energy. Yet only 30 percent of laptops sold at Walmart had these tools and were shipped at the optimal energy-saving setting.
So for the Holidays this year, our buyer set a goal for 100 percent of the laptops she buys to have advanced power management. This will save hundreds of thousands of metric tons of greenhouse gas emissions and, of course, save customers money on their utility bills.
The next step is to institutionalize this process.
Can we scale it and broaden the difference we can make?
Can we play a role in bringing together leading Chinese retailers, suppliers, scientists and universities to make even more progress?
I strongly believe we can.
Today I’m announcing a series of steps and commitments that will make Walmart’s supply chain, here in China, and around the world, more sustainable.
First, I am pleased to announce that the Walmart Foundation is granting $2 million dollars to The Sustainability Consortium to assist its efforts in China. Under this grant, TSC China will independently research sustainability in China.
It will open an office here in this country and bring together domestic Chinese suppliers and local retailers with the best scientists, best academic researchers and best non-governmental partners in China.
TSC China will provide the local research and reporting systems to help China build more sustainable and more competitive businesses.
Our hope is that within two years other Chinese businesses will see the benefit of TSC’s work and support their efforts.
Walmart and others will use the knowledge and data TSC generates to enhance supply chain sustainability in China.
Second, by the end of 2017, we will buy 70 percent of the goods we sell in Walmart U.S. and in U.S. Sam’s Clubs only from suppliers, here in China and around the world, who use the Index to evaluate and share with us the sustainability of their products, if they produce goods in categories where the Index is available.
This will send a clear message to the Walmart supply chain that if you want to grow and partner with us for the long term, you will engage with us on The Sustainability Index.
Third, beginning next year, in 2013, we will use The Sustainability Index to influence the design of our U.S. private brand products. In other words, sustainability will be a bigger part of the product specs that go to factories that manufacture our products. We will start with toys, electronics and apparel and expand to more categories as the Index becomes available.
Fourth, we will change the way our key global sourcing merchants are evaluated so that sustainability becomes an even more important part of their day-to-day jobs.
Beginning in 2013, these buyers will join our key buyers in Walmart U.S. and Sam’s Club in having specific sustainability objectives on their annual evaluations.
With these commitments and the Walmart Foundation grant, we hope to bring about a new kind of knowledge loop.
TSC China will develop for suppliers, Walmart and other retailers the local knowledge and metrics to make products more sustainable. At Walmart, we’re going to feed that knowledge and those metrics into The Sustainability Index … to design our products better, make our global supply chain more socially and environmentally accountable and responsible, and to drive sustainability even deeper into our business through key sourcing leaders.
The impact will be global and make a difference with products we source everywhere in the world.
And what will these commitments mean for China?
We will drive progress faster and scale the work we all have been doing individually and together over the last few years to make factories more socially and environmentally sustainable … to reduce energy and water usage … and to eliminate harmful emissions into rivers and the air.
We will also have deeper insight into how we can make manufacturing more sustainable for people and communities in China.
Let me give one example of how this will work.
Our toy buyers recently used the Index on a trip in China to help them evaluate the performance of toy manufacturers. With the Index in hand, buyers were able to recognize that energy used in toy manufacturing is a significant opportunity in the product lifecycle. This insight now allows them to work with suppliers on targeted improvements plans.
The Index also helped them understand that suppliers can improve how they make the plastics used in toys in ways that will benefit the health of factory workers and their communities.
So as you can see, the Index is providing us with a full picture of the sustainability of products – from social to environmental issues … from the impact on workers to the impact on the planet. And it’s helping us work with our suppliers to drive progress and make a difference – whether it’s through energy efficiency plans, designing products to use alternative materials or improving manufacturing processes.
At Walmart, we’re so proud and grateful to be a leading retailer in this vibrant economy. And we’re just as excited to have so many partners who share a commitment to building a more socially and environmentally responsible supply chain.
Together, with the strong and essential support of the government, I believe we can and will make significant progress in coming years. And when we do so, we will make a big difference for our businesses… for this country and its people… and for our planet.
I’d now like to ask the CEO of The Sustainability Consortium, Kara Hurst, to come to the stage and share a few words about what this investment is going to mean to the TSC China. Kara just took on her new job at the TSC last month, and we of course wanted to make sure that we’re keeping her busy.