This past summer, I was part of PepsiCo’s Leadership Development Program on the Walmart Customer Team. Shuttling between Plano, TX, and Bentonville, AR, I experienced first-hand how Walmart is accelerating its “green” agenda and what this means for key suppliers and, ultimately, for consumers.
I am hardly what you’d call a typical environmentalist. In fact, it was impossible for my LVI rep to convince me not to use a new Styrofoam cup every day for my morning coffee. Suffice it to say, at the end of my RC year, I really only had a vague understanding of the term “sustainability.” What’s more, it made no sense to me when I was told that my summer objectives would involve driving growth for PepsiCo by advancing the Sustainability agenda at its biggest customer: Walmart.
Equipped with only this vague deliverable and a map of the North Texas area, I arrived in Plano, TX to start my summer internship in PepsiCo’s Leadership Development Program in a Sales role on the PepsiCo Walmart Customer Team. I certainly had a keen appreciation for the sheer scale of Walmart and conceptually understood the tremendous influence that it exerts on all its suppliers. But the extent to which this organization is already shaping the world’s environmental fate was news to me, and has left me with a renewed sense of how impactful big business can be, particularly when driving towards new, collaborative solutions to big problems.
Walmart embarked on its Sustainability agenda less than two years ago when CEO Lee Scott gave his famous “21st Century Leadership” speech to an auditorium filled with Walmart’s 60,000+ suppliers. The call to action was simple: retailers and suppliers must work together to solve the problems of environmental sustainability, not only because it’s the right thing to do, but also because there is a tremendous business case for taking cost out of the holistic supply chain. It’s our collective imperative to go and “light-weight” Pepsi bottles, concentrate Tide liquid laundry detergent, design energy-efficient light bulbs, create biodegradable Doritos bags, etc. Scale these impacts up by Walmart’s 200 million shoppers, and we’re talking about astronomical savings of fossil-fuels, landfill space, and (crucially) dollars across supplier and retailer P&Ls.
As I began to understand Walmart’s aspirations with Sustainability, I came to appreciate the fact that PepsiCo, as a key supplier, would have to incorporate a new mindset in the product commercialization process. I worked broadly across the organization to help bring the right products to Walmart, involving R&D, Marketing, Consumer Affairs, Legal and, of course, Sales.
Over the course of the summer it became clear that Sustainability represented a domain where even Walmart – famed for its heavy-handed approach with suppliers – would work more collaboratively to “co-innovate” sustainable product solutions. In mid-July, this evolving approach became very apparent when Walmart hosted a Sustainability Milestone Meeting in Bentonville, Arkansas, for select suppliers. The retailer made it clear to suppliers that developing and successfully commercializing sustainable products would not be a “black box” process and, in fact, called on its key suppliers to show “one ounce of leadership” in coming up with solutions that demonstrated authentic Sustainability-based progress. It was at this point that Walmart described its massively successful collaboration with GE to develop the compact florescent light bulb (CFL), the spiral-shaped bulb that burns longer and more efficiently.and saves consumers money as a result. The development of the CFL was a project that had long been underway at GE, but Walmart’s support proved instrumental in solidifying the business case. Apparently, Walmart had asked GE how many bulbs it would need to sell in order to generate an attractive return. GE threw out the bogey of 100 million light bulbs. Walmart execs, so taken by this “game-changing” Sustainability-based innovation, agreed that they could make this happen across Walmart’s footprint of 3,600 stores in the U.S. Over the next year, Walmart sold 137 million GE CFL light bulbs.
At this meeting, Walmart also made it very clear how it would start taking Sustainability “to the consumer” with a month-long promotion in April 2009 that featured hundreds of sustainable products from its supplier base. During this promotion – “Earth Month” – Walmart would heavily promote products that were making a difference. Suppliers knew well what this meant: huge sales volume lifts enabled by Walmart’s strong backing for selected products. Moreover, Walmart told us that they wanted these product submissions back in four weeks!
Needless to say, the next month was a whirlwind in pulling together our very best submissions for Earth Month across all of PepsiCo’s operating divisions, including Frito-Lay, Pepsi-Cola, Quaker Foods, Gatorade and Tropicana. In many cases, this involved reaching out far into the R&D pipeline to understand Sustainability-based initiatives in-flight and to accelerate them where needed, and then connecting R&D to the commercial functions to create our “selling story” back with Walmart. It was throughout this process that I experienced first-hand the organizational resistance that can come with “forcing” change, particularly on an insane timeline.
Through a careful combination of a fact-based quantification showcasing the top-line boon from Walmart’s support for these types of products as well as the internal support of senior executives, I was able to come back to Walmart with dozens of sustainable product ideas for promotion in 2009.
Having aligned things internally, all that remained was the slight challenge of getting Walmart buyers to provide strong feedback on our sustainable products. During my customer interactions, several ideas were well-received and others utterly shot down. I learned a valuable lesson: even with Walmart so strongly advocating a new agenda, true change will be a gradual process, and the key from a supplier perspective remains a full and robust pipeline of ideas.
It was during one particular customer visit after the Earth Month process was behind me that I truly came to appreciate the tactics behind Walmart’s vision. The customer told me that they would unveil a Supplier Sustainability “Index” in February 2009 that would measure the total lifecycle impact of suppliers’ products. The Index will rate all suppliers and convey suppliers’ scores to consumers via point-of-sale merchandising displays, on-pack logos, etc. Suppliers that score better will get preferential treatment and support. What’s more, Walmart was working with dozens of academics and NGOs as well as other competitor retailers to come up with just the right metrics and wanted PepsiCo to offer up its leading lifecycle analysis experts to help shape the agenda.
I was stunned. Walmart was now working with its competitors and typical critics such as Conservation International and the Sierra Club on the Sustainability front? Studying the preliminary set of metrics that Walmart aimed to track, I was quickly convinced that this is going to be a huge undertaking and will bring about a new level of consumer-facing transparency in the marketplace. What is even more remarkable is how this supplier indexing is not viewed as proprietary, but rather a collaborative process. Walmart has realized that it does not have all the answers in this domain and thus is using its scale to create a powerful consortia of experts. Walmart is, in effect, shaping a “retail regulation” process and thus almost serving as a proxy for government-like intervention. I suppose when you’re the biggest retailer around, people listen.
Looking back on the summer, I am convinced that Sustainability must be in the consideration set for managers of consumer products companies in the future. Sustainability is not just a “nice-to-have” when times are good and managers can allocate resources/energy to the topic in the spirit of corpo
rate social responsibility. Ironically, Sustainability is something that managers will have to consider particularly when times are tough and input costs are rising. But the good news is that a huge customer will actually reward such an effort.
More importantly, however, no one – including Walmart – has quite cracked the code on making Sustainability entirely consumer-relevant. Given the organizational energy that Walmart is putting behind the Sustainability agenda, I’m confident that it will eventually figure this out and bring the balance of retail along for the ride. In the end, I hope that that means we’ll see products that are good for business, good for consumers’ wallets, and good for the planet.
