By Andrew Winston
October 10, 2012 - Walmart's efforts to
green its supply chain are about to get much more effective.
Sustainability will now play a role in its merchants' performance
reviews, which help determine pay raises and potential for future
promotion.
This is a big deal: these merchants are high-level managers
responsible for multibillion-dollar buying decisions. They're the
people who determine which products appear on the shelves of the
world's largest retailer.
Some quick background: Walmart deserves praise for its
industry-leading sustainability successes, such as improving its fleet fuel efficiency by 69% and
becoming the nation's leading commercial buyer of solar energy. The
company's most important sustainability initiative - the pressure
it puts on its 100,000 suppliers to improve their environmental
performance - has changed how thousands of products are made,
packaged and sold.
For the past five years, Walmart has built sturdy scaffolding
around what could be a world-beating green supply chain,
including:
But greening its supply chain has been a tough task. Suppliers
have repeatedly voiced one critical and legitimate complaint:
Walmart's merchants don't really take sustainability into account
when they make buying decisions. This flaw in Walmart's green
supply chain program has threatened to undermine the foundations of
a highly-touted and important initiative.
In essence, the suppliers and other stakeholders have told the
company, according to Walmart's Sustainability director Jeff Rice,
"It's great to ask your suppliers questions, but it only matters if
you do something with the information." In their view, the company
has continued to choose the products it sells primarily on
price.
But now, in addition to Walmart's long-standing,
laser-like focus on cost, its merchants will have to consider
sustainability in their buying decisions - or risk a weak
performance review. And all because of a simple shift in
incentives.
Jeff Rice gave me a great example of how this change is already
working, in the form of how Walmart selects the personal computers
it sells. Laptops use a lot of energy over their lifetime, and a
big driver of energy use is the default setting on power
management.
These settings determine how fast (if at all) the computer goes
to sleep or when the screen dims. Using the
index scorecards I mentioned above, Walmart's laptop buyer
identified energy use as the biggest determinant of the computer's
total lifecycle footprint and emissions.
The buyer then discovered that only 30% of the laptops sold at
Walmart ship with the advanced energy-saving settings in place. To
compound the problem, the company's research shows that most
consumers leave such settings at factory default.
So the laptop buyer set a new goal for herself: to increase the
percentage of laptops sold with the advanced power settings from
30% to 100% by this Christmas. This single product shift
will reduce CO2 emissions by hundreds of thousands of metric tons
and save customers money on their electric bills.
Rice told me that performance evaluations for buyers only
include a handful of targets, and all are discussed thoroughly at
annual reviews. Sustainability performance won't determine the
entire evaluation, of course, but it's high profile enough that it
should affect behavior.
Incentives matter and cultures shift over time. Hard-won
operational changes like modifying performance reviews may not be
sexy, but the results can be profound. And when it's the world's
largest retailer changing its buying criteria, the ripples will
likely be felt around the world.
This post first appeared at Harvard
Business Online and is reprinted here with the kind
permission of the author. (Sign up for Andrew Winston's blog,
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