Walmart's quest for low-cost and environmentally friendly food

Nearly a decade after setting a series of bold sustainability goals, Walmart has struggled to curb its climate pollution and buy more renewable energy. But the company has already changed the way food is grown around the world – curbing agricultural pollution, pushing healthier choices, supporting local growers and promoting transparency. And the world’s largest retailer (fiscal year 2014 revenues: $473bn) is just getting started.

This week, Walmart showcased food and agriculture during its latest sustainability summit, while saying little about energy and emissions. It’s easy to see why. The company remains a long way from being powered by 100% renewable energy, one of its aspirational goals.

Currently, it gets about 24% of its electricity from clean energy, and its fleet mostly runs on fossil fuels. That’s because wind, solar power and alternative fuels generally cost more than coal, oil and natural gas, and Walmart is all about delivering low prices to customers.

Nor has Walmart been able to reduce its greenhouse gas emissions. While the company has become more efficient, its absolute emissions are rising as Walmart grows its market share to satisfy Wall Street. This year, Walmart plans to open about 115 super centers (surrounded by vast parking lots, in most cases) along with 270 to 300 smaller stores. Tensions between its business model – which depends on selling more stuff to more people everywhere – and its environmental aspirations remain unresolved.

But when it comes to food and agriculture, Walmart has found a sweet spot, a place where its low-cost mantra is nicely aligned with the social and environmental need to deliver safe and affordable food to the world, using less land, less water and fewer chemical inputs to do it.

What’s more, the powers that be in the food industry – seed producers like Monsanto and DuPont, processors and traders like Cargill, and brands including Unilever, Coca-Cola, PepsiCo and Campbell’s Soup – are all ready to work with Walmart, which has the scale and convening power to drive change.

“It’s not like we’re pushing our way in here,” said CEO Doug McMillon during this week’s sustainability summit at company headquarters in Bentonville, Arkansas. “People are pulling us.”

What’s become clear is that unlike, say, global energy companies, the major players in food and agriculture recognize the threats posed by climate change and water scarcity, and the urgent need to make their businesses more sustainable.

“We have very bold aspirations for systemic change,” said Kathleen McLaughlin, senior vice president for sustainability at Walmart. “We’re not playing small here. This is a whole company, a whole industry, a whole system effort.”

The timing of all this is excellent. Walmart and its suppliers will be able to turn to an array of new technologies that are helping farmers become more efficient and bringing transparency to the food supply. There was talk at the sustainability summit about AdaptN, a web-based tool to manage fertilizer in the corn industry, and Harvest Mark, which traces food from farm to fork. Monsanto, a key partner, last year acquired The Climate Corp, which uses big data to help farmers increase crop yields, manage chemical inputs and increase crop yields.

So what, exactly, are Walmart and its suppliers doing? A lot of things, around not just the environment but affordability, access to food for poor people, health and obesity, safety and transparency.

This week, for example, Walmart announced a partnership with United Suppliers, a cooperative of nearly 700 agricultural retailers across the US that sells seeds, fertilizers and crop protection products to farmers. United Suppliers said it would extend the reach of a program called Sustain, which is designed to reduce soil and nutrient runoff and climate emissions, to farmers who grow corn, soybeans, wheat and canola on 10m acres – more acreage than Walmart’s better-known partners, like General Mills and Kellogg’s, have pledged to better manage.

“They can help a farmer go through their practices and say, you can do better,” explained Michelle Harvey, who leads Environmental Defense Fund’s on-site corporate partnership with Walmart. Walmart, she said, has convinced the world’s biggest food companies to focus on fertilizer which, when overused, pollutes waterways and needlessly increases greenhouse gases.

Other highlights from the summit:

Walmart will buy more local food in the US and around the world. The company is buying more produce directly from small and medium farms, eliminating the middlemen and the costs they add. Using a pilot program in Costa Rica as a model, McMillon said the company has found a way to “reach small producers and get them into our system”. He has taken a personal interest in the effort, visiting with farmers in Costa Rica, Ghana, Zambia and China.

Walmart will help its customers eat better. The company has reduced sodium by 13% and sugar levels by 10% in its private-label products, and created a “Great for You” icon to point consumers to healthier food options. Working with its foundation, Walmart will provide nutrition education to 4m US households.

Walmart will take a stab at protecting animal welfare by installing small cameras at pork production facilities. “We’ve asked our suppliers to put cameras on the farms so there is true visibility into the treatment of the animals,” McLaughlin told me.

Interestingly, McMillon made a point of saying that Walmart wants to reduce not just the price of the food it sells, but its “true cost”, which he said means that “we take into account things like greenhouse gases and how much water is used to produce a crop”.

“Parts of the system are priced in,” he said. “Other parts aren’t.”

The implication is that where markets aren’t working to encourage sustainability, Walmart intends to reward those farmers who reduce their emissions and water usage, or penalize those who don’t. That’s a big deal.

As Environmental Defense’s Harvey says: “You can’t drive change unless you create the right incentives.”

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