Following the example of his counterpart in China, Wal-Mart Brazil president H?ctor N??ez asks suppliers to respect principles of sustainability and humanitarianism
Posted on Green Advantage: July 13, 2009 10:56 AM
In the last month, what event had the greatest potential for changing business as usual forever? If you said the passage of the climate change bill in the U.S. House of Representatives, it would be hard to argue with you. But I'm going to make the case for another event as the most influential (or at least a very close second): the Wal-Mart Sustainability Summit held in Sao Paolo, Brazil.
Following the model of the historic meeting Wal-Mart held for its Chinese suppliers last year, the President of Wal-Mart Brazil, H?ctor N??ez, decided to hold a similar event for his suppliers. (Full disclosure: I was hired to give a keynote about the greening of business for larger context setting, but I have no consulting relationship with Wal-Mart).
Speakers at the event included the Brazilian Minister of the Environment and the director of Greenpeace Brazil, an organization that just a few weeks ago produced a damning report titled "Slaughtering the Amazon" that points the finger at the cattle industry as the primary cause of deforestation (growing soy is another leading cause). I had an interesting talk with Hector about his conversations with the aggressive NGO. He commented that "when you talk to Greenpeace, it's hard to argue with what they're saying."
But, I thought, arguing with the environmentalist perspective is exactly what business leaders normally do. But the world is changing—fast. In fact, Hector's speech at the summit, with its soaring rhetoric about global environmental damage, made him sound more like a Greenpeace activist than a hard-nosed manager.
At the Summit, Wal-Mart announced significant goals and mandates to tackle some of the thorniest environmental and social problems in the world. Wal-Mart Brazil will now, in essence, ensure that its supply chain uses...
No companies that employ slave labor; "forced" labor (read, slavery) is a rampant problem in developing countries.
No soybeans sourced from illegally deforested areas; 20% of the world's carbon emissions (and 70% of Brazil's emissions) come from burning down trees.
No beef sourced from any newly cleared Amazonian land; globally, deforestation emits more carbon than all vehicles. Brazil and Indonesia are at the heart of this enormous challenge.
Wal-Mart also dropped some more tactical goals on their suppliers, such as a 70% reduction in phosphates in detergent by 2013 and a 50% reduction in plastic bags by 2013 (which they co-announced with the government's nationwide, very funny campaign that roughly translates to "A Bag is a Pain in the Butt"—see my other blog for more on that initiative).
But here's where the event took a radical and historic turn. Wal-Mart Brazil managed to get twenty major suppliers onstage to sign an agreement to meet all of these goals (and more). On very short notice, the company corralled the presidents of the Brazilian operations for major corporations such as Cargill, Johnson & Johnson, Kimberly Clark, PepsiCo, P&G, Sara Lee, and Unilever. Twenty top executives stood on stage and signed these aggressive agreements. Many of these companies have been environmental leaders for years, but it was hard not to wonder why they hadn't made these commitments already.
This meeting will change how business is done in profound ways, but nobody knows it yet. Here's one critical question: How long will it take NGOs, consumers, or other pressure groups to realize that the Brazilian operations of these multinationals just agreed to source no products that damage the Amazon? How long before they ask the U.S., EU, or global operations why they haven't set the same goal?
Or another one to ponder: How long before retailers ask suppliers to ban other practices or sourcing strategies? Imagine demands for no hormones or antibiotics in meat or dairy, or for production methods that are water-net-neutral (take no water from aquifers that isn't returned), or for proof of equal pay for women...who knows what will be on the table soon? Forcing change in one part of a multinational organization creates ripples around the globe. Innovators will embrace these commitments or get ahead of them.
These kinds of pacts will radically change the economics for certain production methods and sourcing strategies. For example, Amazonian-sourced beef will soon become much less valuable. On the flip-side, non-Amazon products will find their value rising.
So back to the giant elephant in the room. It's common practice in the sustainability world to place a lot of caveats around declaring Wal-Mart a sustainability leader. So here it goes: Yes, the company has many challenges in areas from health care to pay. Yes, the tracking and transparency challenges of implementing these goals are substantial. Yes, nobody knows what sustainable consumption looks like and whether Wal-Mart's model can fit it at all. But we're not going to stop global consumption, so we better figure out how to get sustainable with the biggest players, not in spite of them.
Who would've imagined Wal-Mart as the answer to some of the toughest questions around? Brazil is facing heat globally about its forests, and it struggles daily with how to manage competing economic and development needs. It seems almost unimaginable that the solution may come from market pressures and from a giant retailer. But now we can picture a world where everyone stops buying beef from cleared land.
It's time to stop denying a major fact: Wal-Mart is changing the world for the better and is setting the new pace in corporate sustainability. The rest of the business world—let alone the politicians still debating action on climate—can only try to keep up.