October 26, 2005
Wal-Mart Embraces Sustainability: Does the SRI Community Buy It?
by William Baue
Socially responsible investors cautiously applaud Wal-Mart for committing to social and
environmental sustainability, but remain highly skeptical about actual implementation.
On Monday, Wal-Mart (ticker: WMT) CEO Lee Scott surprised
company observers by embracing sustainability in a speech announcing
ambitious initiatives on "all the issues that we've been dealing with historically from a defensive
posture." The very fact Wal-Mart is addressing the issues it has so long avoided or
short-shrifted--such as greenhouse gas (GHG) emissions, waste reduction, product sourcing,
healthcare, wages, and diversity--sends a loud signal to the market from one of the world's largest
Observers in the socially responsible investing (SRI) community welcome
the potential changes while maintaining skepticism, noting that the company faces critiques on so
many fronts that achieving true social and environmental sustainability would require a radical
"Wal-Mart's environmental goals--100 percent renewable energy, zero waste,
and sustainable products--are extremely ambitious but also very promising; merely aspiring toward
the first two will have enormous ripple effects throughout their supply chain and reduce the
strains that the company places on the public sector," said Shelley Alpern, director of social
research and advocacy at Trillium Asset
Management. "Obviously, what kinds of products constitute the third goal will be open to great
debate, but the package-reduction goals will go a long way toward greening many product lines."
In his speech, Mr. Scott also proposed increasing truck fleet fuel efficiency by 25
percent over the next three years and doubling it over the next decade; reducing GHG emissions
worldwide by 20 percent over the next seven years; and eliminating 30 percent of energy use in
stores. On the social side, he proposed separating global factory certification from purchasing
functions and increasing independent monitoring; encouraging Congress to increase minimum wage; and
increasing the percentages of women and minority managers while disclosing data on this mix.
"In some respects, this has the feel of a preemptive strike against the growing visibility and
organization of its critics, but that doesn't negate how significant some of the announcements
are," Ms. Alpern told SocialFunds.com. "However, the jury is still out as to whether Wal-Mart can
or will become an acceptable investment for us."
Trillium's screens exclude Wal-Mart, but
as a separate account manager, the firm holds some Wal-Mart shares for clients so it can conduct
shareowner engagement with the company. The trend toward screening out Wal-Mart over concerns
about sweatshop labor, store siting, land use, and community opposition (among many other issues)
started in the SRI community in the early 2000s.
Vancouver-based Ethical Funds bucked this trend. As a
new member of the Interfaith Center on Corporate Responsibility (ICCR--a shareowner advocacy coalition) at the time, Ethical Funds
was inspired to hold its Wal-Mart position by the possibility of effecting positive change through
"In our Scorecard methodology for identifying companies eligible
for investment, we try to set the bar at a place that excludes incorrigible companies--companies
that just are not going to change--and frankly, we have never had 100 percent certainty that
Wal-Mart was a company able to change," said Bob Walker, vice president for sustainability at
Ethical Funds. "That uncertainty continues, but the developments going back to the early days of
our involvement with ICCR dialogues, the incorporation of freedom of association and the right to
collective bargaining in its supplier code this past year, improvements to the monitoring process,
expanded willingness to dialogue with ICCR members, improvements to health care benefits, and now,
a set of audacious environmental goals, suggest that maybe--just maybe--we were right to put our
money on Wal-Mart."
"Our hope is that by supporting ICCR dialogues, we have played a
small role in moving this company along," Mr. Walker told SocialFunds.com. "If all this does turn
out to be meaningful--that is, if Wal-Mart is truly on the verge of accepting its responsibilities
and making real changes--then the potential for positive impact on people and communities around
the world is awesome to consider."
Conrad MacKerron, director of the corporate
responsibility program at the As You Sow
Foundation that co-filed a shareholder re
solution along with Ethical Funds and many other shareowner activists asking Wal-Mart to
produce a sustainability report, sings a different tune.
"Even if Wal-Mart achieved 100
percent of its environmental agenda, it would be hard to see how a company facing serious
allegations of unequal pay, low pay, intimidation of union organizing efforts, and no limits on
store siting, sprawl and growth could get an SRI gold star," Mr. MacKerron told SocialFunds.com.
"It's interesting that none of the proposals announced so far would restrain their growth in any
way--in fact, they seem to be suggesting that their huge size and buying power will somehow bring
environmental and social justice."
Mr. MacKerron points out other high-profile corporate
sustainability commitments that alleviated criticism, but only temporarily.
"In the past
Home Depot [HD]
said it would stop using old growth lumber, Coke [KO] said it would use recycled
content in plastic bottles, and Time Inc. [">TWX] committed to recycled
magazine paper, yet all these companies reneged on their promises only to be re-engaged by
activists or shareholders," Mr. MacKerron pointed out. "The timing of Mr. Scott's speech seems
aimed at blunting the impact of Wal-Mart
Watch's 'Higher Expectations
Week,' a national week of protest aimed at Wal-Mart beginning November 13, when activist groups
will focus on a different aspect of their social and environmental problems each day and the
premiere of a movie critical of the company."
The impact of Wal-Mart's sustainability
commitment has already been blunted, as Wal-Mart Watch released an internal company memo today on the
new Value Plan healthcare that would reduce monthly premiums to as little as $11 for workers in
"The memo, which acknowledges that 46 percent of the children of Wal-Mart
employees in the US do not have health insurance or are on Medicaid, raises concerns about the
company's motivation in changing its benefit structure," said David Schilling, the director of
global corporate accountability for ICCR, which has been engaging with Wal-Mart on social and
environmental issues for some 15 years. "It appears that cost-cutting is more at the heart of the
new initiative than addressing human needs of employees, though we hope this is not the case."
The Value Plan faces other concerns outside those sparked by the memo for Ruth Rosenbaum,
executive director of the Center for Reflection, Education, and Action (CREA), who has conducted shareowner action alongside
Rev. Schilling at Wal-Mart for years. Sister Ruth worries that families earning the average
$17,500 of Wal-Mart workers will not be able to afford the $1,000 deductible after the mere three
doctors' visits allowed by the plan. However, Sr. Ruth is reserving judgment.
willing to wait and see? Sure," Sr. Ruth told SocialFunds.com. "But I'm going to watch and wait
and not be willing to give kudos for their announcements."
"Remember what our mothers told
us when we were kids--'actions speak louder than words,' she added. "I want to see them do it."