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Doing laundry in America will never be the same again. In a massive operation starting this month, every big retailer and every leading manufacturer is switching to smaller bottles of double-strength liquid detergent – a shift that will reduce the use of plastics, water and fuel.
In Hawaii and California, engineers are meanwhile working to install 22 arrays of solar power panels that will together produce as much as 20m kilowatt hours of electricity a year, in one of the world’s largest initiatives to draw energy from the sun. On the other side of the world, Thai shrimp farmers have been upgrading their operations to meet new certification standards set by the Global Aquaculture Alliance. Behind all three changes lies the world’s biggest retailer – Wal-Mart.
It is two years since Lee Scott, Wal-Mart’s chief executive, announced that the company was embarking on a drive to improve its much-criticised reputation on issues such as its environmental impact, diversity policies and working conditions in its vast global supply chain. “Due to our size and scope, we are uniquely positioned to have great success and impact in the world, perhaps like no company before us,” Mr Scott declared, in a speech that set out ambitious specific targets including cuts in the waste it generates and the energy it uses.
Because of Wal-Mart’s sheer size and market share, most of its rivals have no choice but to follow its lead – and the company has found itself setting standards beyond those that regulators require. “They have so much market power that they could drive environmental change through 50,000 companies, something that Congress and the Bush administration has refused to do,” says Michael Marx of Corporate Ethics International, one of the first environmentalist activists to sit down with the retailer’s executives.
The greening of Wal-Mart continues apace, represented in its most banal form by the mini-sized business cards made from recycled paper that its executives now wield. The retailer, long accused of using its market power to lower standards, is setting and supporting the development of more demanding requirements on issues ranging from packaging to gemstone mining. Suppliers and activist groups that once duelled over government regulatory standards are battling instead to win over the Wal-Mart buyers who head its product-
focused “sustainability networks”.
Wal-Mart’s most vociferous critics say it is doing nothing more than “greenwashing” a fundamentally unsustainable business model. They claim the strategy is an attempt to split the alliance of US labour and environmental groups that has sought to slow Wal-Mart’s efforts to open new stores and has supported attempts to pass legislation that would hamper the company’s profitability.
Mr Scott, on the other hand, has presented the shift as an inevitable move to accept its responsibilities as global market leader and has unleashed the group’s reserves of apparently boundless enthusiasm on the field of environmental and social sustainability. Using its market clout, the company has driven down prices for products such as low-
energy lightbulbs. Its new enthusiasm for solar and wind power, say, or its support for a hybrid electric truck project, offers the developers of sustainable technologies the lure of a potentially large-scale customer base and associated economies of scale.
Wal-Mart’s buying power is also changing the way that other American companies and industries do business. In the mundane world of laundry detergent, the imminent shift to double concentrate came after Wal-Mart started indicating that it wanted to see its suppliers taking active steps to reduce packaging – with Mr Scott personally praising Unilever for developing a triple-
concentrate version of its All detergent. Procter & Gamble, Henkel and Church & Dwight took the hint and all the four largest producers will introduce the double concentrate at the same time – supported not just by Wal-Mart but also by its rival Target and the big US supermarket chains – a rare example of an industry-wide change being brought about without regulation.
Kert Davies, research director on climate change at Greenpeace USA, says he has seen signs of Wal-Mart exerting similar power in a drive to persuade its main suppliers, including the US dairy industry, to adopt full carbon accounting – an issue where US legislators have been loath to take action. “We spend a lot of energy trying to get giant corporations trying to move an inch and here we have the biggest corporation of them all shooting for the same targets,“ he says. “They’re acting as we would act ... to get full carbon accounting even before it is required by regulation.”
Liquid detergent concentration has been broadly supported by P&G and Unilever, which see long-term savings and other benefits for themselves despite the short-term costs of retooling their factories. But other initiatives have been less warmly received, such as Wal-Mart’s support for a European-style approach to removing potentially dangerous chemicals from consumer products.
Under its “preferred products principles”, the retailer named three chemicals, used in cleaning products and insecticides, that it said it wanted its suppliers to phase out – mimicking the approach of Reach, the European Union’s chemical control law. The embrace of EU-style precautionary principles was a deep shock to a global chemical industry that actively lobbied against Reach in Europe.
“I would say that the chemical industry is scared stiff,” says Mike Schade of the Center for Health, Environment & Justice’s “Be safe” campaign, who argues that Wal-Mart could also push its suppliers to adopt product safety standards set by the European cosmetics directive. “In the US our laws have failed to protect us from exposure to unnecessary and harmful chemicals in consumer products ... That’s why we really need actions from companies like Wal-Mart, in the absence of real reform from the federal government,” he says.
Wal-Mart says it consults with suppliers on standards. But its efforts to set higher environmental goals than those legally required mean that the retailer is attracting the kind of lobbying that would have previously been directed at central government, from both environmentalists and from industry.
For example, its declaration that it wanted suppliers to stop using PVC in packaging because of possible health concerns – following similar moves by Ikea and Hennes & Mauritz, the Swedish chains – brought a rapid response from the Vinyl Institute, the industry’s lobbying body, which was determined to change Wal-Mart’s position.
The Vinal Institute has been telling industry members of its efforts to persuade Wal-Mart to move away from its commitments. In a sign of the intense struggle taking place over the stores group’s position on this kind of issue, the institute has also said it was working to have a sympathetic expert installed on a panel advising the retailer on policy.
Similar efforts are being made by other industry groups to counter the efforts of environmentalists to steer the retailer’s direction, says Mr Marx at Corporate Ethics International. “When they saw how fast the leading big-box retailer was moving, various industries realised they needed to kick it up in terms of their lobbying effort, to get things watered down.”
Greenpeace’s Mr Davies wonders how tough Wal-Mart’s executives are willing to be, asking: “What happens when a major supplier doesn’t want to move?” Greenpeace, he points out, is campaigning against Kimberly-Clark, the consumer products company, over its paper pulp sourcing. “If they really stuck to their guns they wouldn’t buy paper products from Kimberly-Clark; they wouldn’t sell Kleenex.”
In addition to criticism from environmental groups if it continues buying from unco-operative suppliers, Wal-Mart also faces pressure when the new standards it does succeed in making stick set the bar too low. One example is in shrimp farming – Wal-Mart has pledged to sell farmed shrimp only from operations that have been granted certification under a process developed by the Missouri-based Global Aquaculture Alliance. But some activists argue that both the standard and its enforcement are inadequate, misleading shoppers who buy shrimp marked as being from supposedly “sustainable” shrimp farms.
John Hocevar, Greenpeace USA’s fisheries expert, says the GAA has improved as a result of a dialogue with activist groups encouraged by Wal-Mart – which wants a credible standard. But he still has reservations. “When a company the size of Wal-Mart is willing to endorse the GAA, that gives it a new level of credibility that may or may not be warranted ... It is going to make it harder for a more genuine or more eco-friendly certification to survive,” he says.
Jennifer Lash, of the Living Oceans Society, which works to protect marine life, says: “We’re very concerned that with Wal-Mart being such a huge driving force in the market, there will be a rush to meet the lowest possible standards in order to feed the Wal-Mart machine.”
The reservations reflect the enduring broader concerns of environmentalists over Wal-Mart’s business model. Last week, a range of activist environmental groups published a report highly critical of Wal-Mart’s overall sustainability drive – reflecting how this shift by the company has accentuated divisions between radical and moderate voices within the US environmental movement.
The coalition’s report complains that the company is operating a global supply chain that produces 40 times more greenhouse gas than it has pledged to eliminate. It also argues that Wal-Mart’s focus on cost-cutting contributes to problems including illegal logging and the exploitation of workers in its
supply chain. In addition, it highlights Wal-Mart’s funding of conservative
political candidates who have voted against moves to increase vehicle fuel efficiency or strengthen environmental protections.
“Wal-Mart can change to more efficient lightbulbs but that doesn’t change its carbon footprint or the enormous social consequences of its globally unsustainable business model,” says Ruben Garcia, of Global Exchange, a trade and economic rights group.
All sides are awaiting Wal-Mart’s first sustainability report, in which it has pledged to give an account of how much it has achieved and to set benchmarks for the future. Activists also await evidence that Wal-Mart is prepared to accept that some things may have to cost more in a world where it is committed to a range of sustainability issues.
“There’s a split within the environmental community around Wal-Mart,” says Mr Marx. “You have the large, moderate groups that are trying to seize the opportunity to make whatever changes possible ...and there are the more grassroots groups who are concerned that the changes give Wal-Mart good environmental cover but ultimately undercut the kind of changes that we really need to make.”
What is clear is that Wal-Mart has already won over many of its former critics with its readiness to pursue ambitious targets on issues such as energy saving.
Gwen Ruta, of Environmental Defense, which has worked closely with Wal-Mart on its sustainability efforts, says she expects the company “to bring new commercial technologies into the commercial marketplace through [its] gravitational pull” – both for customers and for other retailers. “I think we’re just seeing the tip of the iceberg of what they can accomplish.”
“I love that they just go for it,” says Greenpeace’s Mr Davies, who recalls Wal-Mart department heads setting ambitious and largely arbitrary targets for cutting greenhouse gases. “The energy-saving sits very well with their basic practices. It is the same reason you can buy your pair of socks for a nickel ... That’s what they do well.”
Charity towards trades unions begins – but not at home
Renato Pambid is a Filipino lawyer working with the Workers Assistance Committee, a local labour group, in the sprawling Cavite export processing zone outside Manila. His work has recently included representing employees at the Korean-owned Chong Won Fashion factory who had been sacked after forming a union.
Picketing workers have been attacked by local security staff and by armed masked men wearing military fatigues.
As the dispute started to escalate last year, Mr Pambid and others visited the Manila office of Wal-Mart, which sells clothing produced at the plant by one of its suppliers, One Step Up. “At the start we were not expecting that Wal-Mart would intervene,” says Mr Pambid. With polite understatement, he adds that the US retailer has a reputation for “not being amenable to union formation”.
But in what he says was a first, Wal-Mart set up a joint meeting with the management and the union in an effort to work out a compromise.
It subsequently commissioned its own report into the dispute and then demanded that the management reinstate the sacked workers. No compromise resulted. So this year Wal-Mart and its suppliers cut their links with the factory.
Labour activists in North America who were involved in efforts to resolve the dispute say it could have done more. “It took Wal-Mart nine months to get to the point of confronting the management with the fact that the workers’ right to freedom of association had been violated. They could have moved in a much more timely manner,” says Bob Jeffcott, of the Maquila Solidarity Network, a Toronto-based labour rights group. David Schilling, supply chain specialist at the Interfaith Center on Corporate Responsibility, also says that Wal-Mart’s response was flawed.
But both men welcome the retailer’s efforts to try to resolve the dispute. “The company stayed longer than it has been the practice in the past ... They reached out to discuss issues on the ground, which in the past they have been pretty reluctant to do,” says Mr Schilling.
For most labour activists, Wal-Mart’s low-cost mantra has made it the ultimate symbol of the abuses created by a global supply chain that pits factory owners in China or the Philippines against each other in a desperate battle for contracts. In 2005, for instance, activists tried to sue the retailer in the US over abuses such as excessive working hours and unpaid wages at factories in
five different countries.
Many anti-sweatshop campaigners remain dismissive of its efforts to step up the monitoring of its vast supply chain in order to reduce abuses. The International Labor Rights Forum, which backed the attempted legal action, dismisses Wal-Mart’s latest ethical sourcing report, saying the group’s focus on low prices “all but ensures that it will make little progress in respecting workers’ rights”. It also highlights the clash at Chong Won, saying Wal-Mart’s monitoring had failed to expose the problems at the factory.
But Wal-Mart’s latest account of its ethical sourcing efforts also shows how it is changing in ways that could theoretically prevent the kind of crisis seen at Chong Won. In particular, the company says it wants to reinforce factory monitoring with efforts to create a “a new company-supplier relationship” that would involve a shift to “longer-term commitments” – a fundamental shift from the ultra-competitive, price-focused approach so bitterly criticised by the ILRF and others.
Wal-Mart also says it is beginning to look at how its own behaviour – such as demanding short lead times or last-minute design changes – can put undue pressure on suppliers and result in issues such as unpaid working or excessive overtime. “The overarching goal is to fully integrate labour compliance and social responsibility into all purchasing decisions,” the report says.
The approach mirrors steps by companies that have taken a lead in efforts to improve their supply chains, such as Gap and Nike. But it raises questions over whether Wal-Mart’s cost-focused buyers, the people who make the hard purchasing decisions, will listen to the ethical sourcing message. “We need to see evidence that the approach is being really integrated,” says Mr Schilling.
Wal-Mart’s proposed new approach also presents another challenge to a fundamental element of its corporate culture – its strongly anti-union record in the US. Gap, Nike, Marks & Spencer and others are starting to work with international unions and labour rights groups on efforts to educate their suppliers about workers’ rights, arguing that an engaged workforce is the best monitor of what is happening in a factory. But the main text of Wal-Mart’s ethical report contains only one mention of working with unions or local labour groups.
Wal-Mart’s record at home has also complicated its efforts to draw up an international code of practice for suppliers, a move backed by Tesco, Carrefour and Metro, the European retail groups. The initiative includes standards far more ambitious than Wal-Mart’s own corporate code of conduct.
It recognises, for instance, that “workers have the right to form trade unions of their own choosing”, sets shorter maximum working hours and has comparatively strong language on the need to pay adequate wages.
Human Rights Watch in New York and the Clean Clothes Campaign in Europe have both pointed out that the code sets standards for Wal-Mart’s suppliers, on issues such as trade union membership, that are at odds with the company’s own anti-union attitude in the US. According to Maquila’s Mr Jeffcott, Wal-Mart’s domestic stance on unions can make it harder for the retailer to convince hard-pressed suppliers round the world that it is serious about the rights of their workers.
“It could be that a supplier doesn’t really believe that Wal-Mart is serious ... given its own history on the issue,” he says.