Walmart – Save CARBON. Live better.
The U.S. Food Retail industry is in my view a particularly important industry with respect to climate change, because its wide reach provides the opportunity to affect change across supply chains and to educate consumers. Observing the impact of climate change on the food retail industry, as well as studying the actions of certain players – here Wal-Mart Stores, Inc. (“Walmart”) – can provide valuable lessons for sustainability efforts in other sectors.
IMPACT OF CLIMATE CHANGE ON FOOD RETAIL
The expected impact of climate change on the food retail industry can broadly be categorized along the three main value chain constituents:
Food suppliers: A recent study conducted by PWC found that c. 95% of fresh food will be affected by climate change in the future[1]. While rising dioxide concentration levels can be beneficial for crop yields in the short-term[2], the resulting increase in temperatures is expected to lead to extreme weather scenarios (droughts, storms), causing the U.S. agricultural system severe damage and a potential overall yield loss of up to 70%[3],[4]. While in the near-term this will likely have a limited effect on food supply, this might amplify over the longer-term.
Food logistics: Climate change is expected to result in more frequent extreme weather events, these are likely to cause delays and disruptions in transportation networks in the future.[5] Because freight trucks, used to transport goods from suppliers to retailers, have contributed about 20% of U.S. transportation GHG emissions, this sector is also expected to experience increased regulatory scrutiny in the future, increasing costs per mile driven.[6]
Retailers: Caught in the middle between suppliers and end consumers, food retailers are severely impacted by climate change. As climate change decreases the availability of global food supply, food prices are expected to increase. Additionally, an increased occurrence of disruptions in transportation networks, will increase the number of stock-outs and/or holding costs (due to preventative stock-keeping). High energy costs associated with food refrigeration are likely to further weigh on retailers’ P&Ls. Heightened consumer-awareness around climate change will lead to higher demand for green products and expectations of environmentally-conscious behavior[7].
WALMART’S ACTIONS
Recognizing potential reputational and financial damages associated with climate change, Walmart has embarked on an integrated sustainability program in 2005. A selection of actions includes:
- Limiting energy intensity and carbon emissions in own operations: Walmart has pledged to reduce kWh-per-square-foot energy-intensity by 20% vs. 2010 level. This was achieved through investments in energy efficient building features and in a more efficient truck fleet. Additionally, Walmart is striving towards using 100% renewable energy. For this purpose, it has invested in solar- and wind-power stations. Additionally, Walmart has contracted over 2 billion kWh of renewable third-party energy projects[8].
- Discontinuing the use of HFC: Most refrigeration systems use gases known as hydrofluorocarbons (“HFCs”), which have a global warming potential of up to several hundred times as much as CO2[9]. In 2011, Walmart has begun using less HFC-intense solutions. By 2014, more than 200 stores had implemented this new technology.
Limiting energy intensity and carbon emissions in its supply chain: Walmart has established a common platform with its largest suppliers, representing 70% of food sales volume, to report GHG emissions, farm yields and water usage. The objective is to establish common expected baseline levels for these three measures, exchange best practices, and report overall progress towards Walmart’s target to eliminate 20 million metric tons of GHGs by the end of 2015 (goal was surpassed by 15.6MMTs).
BUT… HAS WALMART DONE ENOUGH?
Walmart has achieved great things, however, if Walmart wants to be a leader in fighting climate change, it needs to AT LEAST address the following:
- Walmart needs to close the gap with other retailers in using renewable energy: While approximately 25% of Walmart’s energy is sourced from renewable sources, other retailers such as Whole Foods, Kohl’s and Staples are already using 100%.
- Walmart needs to report all sources of climate pollution from its operations: Walmart, the largest importer of cargo containers into the U.S., does not report CO2 emissions from shipping activities. This is a major problem, because its sourcing practices have a major impact on global shipping volumes, which overall is expected to contribute 18% of emissions by 2050.
[1] “Walmart’s Assault on the Climate,” Institute for Local Self-Reliance, http://ilsr.org/wp-content/uploads/2013/10/ILSR-_Report_WalmartClimateChange.pdf
[1] “The Challenge of a Changing Climate”, PWC/ASDA report, p. 41, http://your.asda.com/system/dragonfly/production/2014/06/17/15_38_19_612_4234_Climate_Resilience_Campaign_a5_Brochure_v10.pdf
[2] https://climate.dot.gov/documents/workshop1002/workshop.pdf
[3]“Risky Business – A Climate Risk Assessment for the United States”, June 2014 p.5, http://riskybusiness.org/site/assets/uploads/2015/09/RiskyBusiness_Report_WEB_09_08_14.pdf
[4] “Climate Change, Global Food Security And The U.S. Food System,” p.109 http://www.usda.gov/oce/climate_change/FoodSecurity2015Assessment/FullAssessment.pdf
[5] “Climate Impacts on Transportation”, Environmental Protection Agency, https://www.epa.gov/climate-impacts/climate-impacts-transportation
[6] “Transportation and Greenhouse Gas Emissions,” Transportation and Climate Change Clearinghouse https://climate.dot.gov/about/transportations-role/overview.html
[7] “More than Two-thirds of Americans Buy Green Products,” Environmental Leader, http://www.environmentalleader.com/2012/06/05/more-than-two-thirds-of-americans-buy-green-products-services/
[8] Walmart 2016 Global Responsibility Report, http://corporate.walmart.com/2016grr/enhancing-sustainability/reducing-energy-intensity-and-emissions
[9] “HFCs? Curbing Them Is Key to Climate-Change Strategy,” LiveScience, http://www.livescience.com/38519-refrigerant-hfcs-devastating-to-climate.html
Word Count: 800
This was a very well written and interesting blog post, thank you! I was particularly intrigued with the part where you discuss how climate change will affect how much food can be grown and that the environmental limitations that are predicted to occur would lead to an increase in food prices in the future.
A thoughtful addition to the post, had you had a larger word count to elaborate, might have been to discuss the rise in innovative agriculture, for example, aquaponics, hydroponics and lab-grown food. All of these processes allow for the growing of healthy, organic food in urban environments and in small, indoor spaces. These innovative techniques in food production are growing rapidly and are creating a new segment of the agriculture industry where biologists, economists and business people are coming together to work to build a sustainable and profitable solution to the predicted food shortages in the future which you mentioned in your post.
To learn more about my comments above and where the information came from check out the ‘United States Department of Agriculture’ website and drill down to the ‘Alternative Farming Systems Information Center’. A link to that center is here: https://www.nal.usda.gov/afsic
This is a well written and interesting piece! I agree with you that food retail and agriculture are critical to the discussion on climate change. I thought the two points you brought up at the end were insightful. I was surprised to learn that some retailers are already using 100% renewables. I agree that CO2 from shipping emissions sounds like a looming problem. I wonder if they are ways Wal-Mart could recycle or reuse shipping containers in order to reduce emissions.
Given the size of the business I would argue that Kohls and Whole Foods are not an accurate comparison. In fact Walmart is the largest purchaser of solar energy and a top partner of the EPA programs on renewable energy.
See below links:
“Walmart once again took the top spot among America’s businesses in the electric generation capacity of its solar investments and number of solar projects. The big box retailer, based in Bentonville, Ark., boasts a robust 142 megawatts (MW) of solar photovoltaic (PV) capacity and has completed 348 installations”.
Source: http://www.seia.org/research-resources/solar-means-business-2015-top-us-corporate-solar-users
Source: http://corporate.walmart.com/_news_/news-archive/2012/01/31/walmart-no-2-on-epas-top-20-retail-list-of-green-power-purchases-in-two-biggest-states
With its leadership, scale, and experience implementing sustainability initiatives throughout its global operations I agree Walmart can do more. The past several years have been a lull in announcing new goals. This past weekend however, Walmart recently announced updated goals for sustainability.
“Specifically, the world’s largest retailer is committing to, by 2025:
– achieve zero waste to landfill in Canada, Japan, U.K and the U.S.
– be powered by 50 percent renewable energy sources under a plan designed to achieve science-based targets
– double sales of locally grown produce
– expand sustainable sourcing to cover 20 key commodities, including bananas, grapes, coffee and tea
– use 100 percent recyclable packaging for all private-label brands”
Source: https://www.greenbiz.com/article/inside-walmarts-2025-sustainability-goals
These goals are more specific and measurable than their original aspirational goals in 2005. The company from its first 10 years of sustainability programs now is more focused on where the major impact are in its supply chains and where it is positioned to move the needle.
One could argue that they are too narrow, however I hope this focus causes them to make significant and deep changes especially in the product categories they mentioned. In the past their approach to rate all products it sold caused a massive scientific exercise which resulted in disappointing end results in terms of on shelf customer communication (sustainability index)
We should continue to expect high standards from this company even as their leadership team changes and it competes to catch up online.
Millennials care more than previous generations about these standards and thus to stay relevant Walmart must continue to evolve and lead in this arena.