Game Change: Environmentalists Advise WalMart on Sustainability
by Michael Connor
When the Environmental Defense Fund (EDF) first fought for a ban on the pesticide DDT more than 40 years ago, the non-profit organization went to court and fought hard. Back then, says Fred Krupp, the organization’s president, “the motto was ‘Sue the Bastards.’”
Times have changed. In its drive to combat climate change, EDF now assigns staff members to a place like Bentonville, Arkansas, corporate headquarters of WalMart, the world’s largest retailer. “I think we are the only national environmental group that has a staff stationed full-time in Bentonville,” says Krupp. “We walk in and out of the WalMart offices going to whatever meetings we want, really, to advise them on how to take their immense supply chain and get them to be greener.”
While the tactical makeover did not happen overnight, the environmental group still frequently has to defend this new business model for a non-governmental organization (NGO). “The whole idea is to change the world,” says Krupp. “If you want to change the world, it’s important to work with some of the big forces in the world.”
Impact on Supply Chain
Speaking at the The Economist Corporate Citizenship 2010 conference in New York, Krupp described how former WalMart CEO Lee Scott, concerned several years ago about the retailer’s image on labor issues, “recognized that the environment was a big issue and wanted to get ahead of it.”
To help educate Scott on climate change, Krupp says, he and Scott took a trip to the White Mountains of New Hampshire “to learn about global warming and how it was affecting maple trees up there,” as well as a separate trip to Kansas to visit with farmers. Along the way, according to Krupp, Scott “had this epiphany that getting ahead of these issues actually could be a good offensive strategy, and good for business.”
WalMart’s current sustainability initiatives are having a major impact on the retailer’s suppliers, according to Krupp. Flat-screen televisions are still sold at WalMart, for example, but now they are energy efficient. “WalMart has something very precious that these vendors want, which is shelf space,” Krupp says. WalMart and EDF are being “inundated” with phone calls from suppliers who say that if the new standards determine "whether or not we get shelf space, we want to know what we can do to meet or exceed expectations.”
EDF generated headlines in 2007 when it endorsed the purchase of TXU, the giant Texas utility company, by private equity firms Kohlberg, Kravis, Roberts & Co. and Texas Pacific Group for $45 billion. In return for that endorsement, KKR and TPG agreed to several conditions, including reducing the number of new highly-emitting coal-driven power plants to be built by TXU from eleven to three, as had been planned by TXU’s previous management. EDF’s relationship with KKR and TPG has grown since then, Krupp says, to involve other companies in the private equity firms’ portfolios.
McDonald’s and FedEx have also worked closely with EDF. The McDonald’s engagement first involved reduction of packaging but later addressed the issue of antibiotics in chickens used by the fast food chain in its sandwiches. Working with their suppliers and the pharmaceutical industry, McDonald’s was able to cut the volume of antibiotics it used by 90 percent, according to Krupp. FedEx worked with EDF to find ways to reduce emissions from its worldwide fleet of delivery trucks, resulting in 96% less soot and 50% more fuel efficient vehicles, Krupp says.
While EDF believes NGO-corporate partnerships can be productive long-term, they don’t always work out. An attempt to work with General Motors over a decade ago on environmental impact fell apart fell apart because “they weren’t ready at that time,” according to Krupp.
In the case of McDonald’s and antibiotics, Krupp says, “the beauty of it is that we didn’t have to go to Congress, we didn’t have to beg a politician to help us…When we have a huge outscale impact by working directly with a company, that’s the way to be truest to the people who donate money to us because we’re getting results without the vagaries that have been known to happen sometimes in Washington.”
EDF does not accept money from any of its corporate partners. “We thought it would be better for us, and better for the companies we work with, to keep our good name and reputation, and to be above reproach,” Krupp says. At McDonald’s, “we wouldn’t even accept a free hamburger in their restaurants.”
To accommodate the increased workload from the corporate engagements, EDF has grown from about 40 employees twenty-five years ago to more than 400 now. The current annual budget of about $120 million is funded through private contributions from foundations and more than 700,000 individuals; corporate donations total less than $500,000 annually, according to Krupp.
Asked which companies might be next on EDF’s target list, Krupp declined to be specific. “If you think about the biggest companies in the world, that have the most impact on climate,” he says, “those are the ones we want to work on…work with, and on.”