photo: D'Arcy Norman via flickr.
Walmart today announced a major supply chain greenhouse gas reduction commitment of removing 20 million metric tons of emissions by 2015. Very good, but what does that actually mean for the company's overall emissions, what areas of the supply chain will actually see reductions, and what's Walmart's motivation in doing this? I had a chance to ask Walmart's SVP of Sustainability Matt Kistler for a bit more information:TREEHUGGER: 20 million metric tons of greenhouse gases reduced by 2015 from the global supply chain. You say that's a number equal to one and a half times projected corporate carbon footprint growth in the same time period. What year's emissions does that actually bring you back to? Are we talking 2005 levels? 2003 levels?
WALMART: The 20 million metric tons we're seeking to reduce is a number taken from our supply chain. As a footprint of our company, we emit about the same amount on an annual basis currently. However, with our projected growth over the next four years, we estimate that we'll add approximately 14 million metric tons, based on our own operations, from our buildings, from our fleet. So, the announcement we are making will be about one and a half times our growth.
TH: Do you consider that level of emissions a sustainable level of emissions?
WM: This is a supply chain goal; we already have goals in existence for our own operations. Whether it be goals around our current stores, with technology and innovation driving a more energy efficient prototype, or in our private fleet improving the fleet efficiency, all of those reduce GHGs as well.
This is the first holistic, all-product supply chain goal we've made. We've had individual goals around certain categories of products. We made a goal around reducing the energy usage of a flat-panel TV, so that reduced GHGs. But this is the first global supply chain goal, potentially covering all products that we buy and sell.
Over the next five years we're going to be focusing on certain categories, certain businesses where the biggest opportunity exists, where it's the most efficient, and most cost-effective to remove that greenhouse gas from that supply chain. Whether it be in apparel, whether it be in food, whether it be in home line products, we're looking at the category of products where there's great opportunity, but where its at a low cost to remove.
TH: What areas are you going to focus on first?
WM: On our website we have a video called "The Secret Life of Sour Cream". In that video we detail our efforts working with one product. What that includes is an awful lot of work working with the dairy manufacturers. Whether it be milk, whether it be cheese, whether it be sour cream, whether it be yoghurt, we've be working in that business on reducing GHGs from that whole supply chain.
Another one is about apparel. Apparel is interesting because the biggest emitter of greenhouse gases is not in the manufacturing, but in the how consumer washes and dries the product. It's not only working with apparel manufacturers, it's also working with the laundry detergent manufacturers and the laundry machine manufacturers to make detergents and products that work together better to dry clothes in a cold water or no-drier-required realm.
Because we have ClearCarbon, because we have the Carbon Disclosure Project, because we have PricewaterhouseCoopers, and certainly our NGO partners, we have a good process in place. We have at least two sets of audit functions to make certain that numbers we're reducing are not only possible, but we have a good audit trail in place so we can substantiate it, but also replicate it in other supply chains.
Importantly, we already done this work in a couple pilot projects. I mentioned sour cream, but tomorrow you're going to hear from one of our manufacturers of DVDs on how we changed the supply chain, the manufacturing process, of DVD boxes. That was a relatively small, 28,000 metric ton reduction, but that was a one-year number. Times five and you're at a couple hundred thousand reduction. One couple hundred thousand reduction over our scale, it's an opportunity.
The process in place; we hope to accelerate it now, make it more automated. By involving more suppliers it won't have to be done completely by Walmart's managing. It will get the suppliers to get engaged with it.
How are you going to be influencing the suppliers? Is it going to be a mandate saying you have to remove x amount of greenhouse gases by a certain time, or is going to be more of a full collaboration and ongoing process?
It's going be much more collaborative. I think the reason suppliers will want to become engaged and do this is because it allows them to, obviously, make their product better for the environment, but two, carbon is a cost. If we can remove carbon from a supply chain, ultimately they become more competitive. If they can use less energy in the manufacturing of the product, or if the consumer uses less energy, they are certainly reducing their costs or putting dollars in the pockets of their customer. It really benefits everyone.
What we've seen by working with the suppliers we've started with, by making their manufacturing facilities, making their product design more energy efficient, it benefits them financially, as well as environmentally.
You've mentioned that all these reductions have to have a component of additionality, you have to show that the reduction would not have occurred without your participation. Considering the scale of Walmart's activities, how can you be assured that's going on? That the reductions aren't something that the company would have done on their own or aren't already covered by some future government mandate?
At the current time, at least in the United States there aren't mandates in this area, so whatever we do today benefits us from a business perspective, and also obviously from an environmental perspective. I think the process of doing this is good preparation for potential legislation that requires this on a broader scale.
We're asking our suppliers, though the assessment we announced in July, if they're tracking, or know what their greenhouse gas emissions are. We are educating our suppliers about this topic on an ongoing basis, and in doing so we are driving this within the supply chain.
Ultimately this about saving money. Certainly for a company which has made its reputation by focusing on price this isn't done out of altruism or out of environmental caring alone. I don't know if you have a figure or want to disclose a figure, but how much money is this going to save Walmart?
It varies obviously by product category. In the video, we mention a quarter of a billion dollars on the dairy initiative. Are there really dollars and cents, yes. But two, we're still learning where all these opportunities are in these major categories of products. We piloted several categories and realized this was possible. Then we looked at where the biggest impact area were. So are there dollars out there? Yes. But I can't tell you what a 20 million metric ton reduction will mean in dollars today.
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