Walmart’s private brand proving ground
The escalating war on plastics has a powerful ally in Bentonville, Ark.-based Walmart. Earlier this year, the world’s largest retailer imposed stringent requirements on its private brand portfolio and expects branded suppliers to do the same as it move toward a goal to create zero waste.
In early August the Greater Bentonville Area Chamber of Commerce held a panel discussion, "Technology Enabling Sustainability in Retail," featuring Walmart’s Senior Vice President of Global Sustainability Laura Phillips, who expanded on the retailer's zero waste goal.
“We know our biggest footprint for plastics is packaging,” Phillips said. “We are going to lead the way with our private brands. We want all of our private brands to be 100% recyclable, compostable and reusable by 2025. We are going to label all of our private brands with easy-to-understand consumer labeling so customers know whether something is recyclable.”
The move is consistent with three goals Walmart established nearly 15 years ago: to create zero waste, operate with 100% renewable energy, and sell products that sustain resources and the environment. What’s happened in the past 18 months, according to Phillips, is Walmart’s ambition to create zero waste has been applied with increased intensity to plastics.
“More and more, we are seeing the topic of sustainability increasing in importance to our customers, especially our millennial customers, as well as other stakeholders including governments and NGOs (non-governmental organizations),” Phillips said. “We are going to lead the way with our private brands and challenge our national brands. We will give them tools and resources, and meanwhile in our own operations do everything we can do to recycle what we can recycle and close the loop. It’s a big challenge. We are just getting started and there is more to do, but we are excited about the actions we are taking.”
Walmart began taking meaningful action on sustainability in the fall of 2005 when former CEO Lee Scott laid out what were seen at the time as audacious goals. In the intervening years, sustainability at Walmart has remained a high-level priority, despite changes in senior leadership that can lead to new strategic priorities. Walmart was steadfast in its approach, regularly chronicling its progress and taking cues from customers on an issue that has grown more prominent.
“Customers are really keen on this issue, and they are making decision about the product and the packaging. What is the product I am buying, what is the packaging it is in, and are there other options available?” Phillips said. “Plastic is a really important material, however, the problem is only about 14% of it is being recovered and recycled. The rest is, in many cases, ends up in the environment in places we don’t want.”
To address the challenge requires a circular mindset, which was a topic addressed by Phillip’s fellow panelists Ann Starodaj, senior director of sustainability with Optoro, and Debbie Krupitzer, innovation lead at SAP. Washington, D.C.-based Optoro is a software company that offers sustainable solutions for retailers. SAP, based in Germany, makes software to help retailers manage their businesses.
The premise of a circular economy – to minimize waste and maximize resources – is simple, according to Krupitzer.
“The circular economy is easily said but not easily done because we are changing core processes of how people do their work,” Krupitzer said.
It also requires leveraging data and technology to innovate around alternatives to plastics that have less of an impact but provide the same levels of versatility and performance, she noted. Failing to do so, or just not looking at the supply chain with a sustainability mindset, can damage a brand.
“Technology has connected customers and made them active,” Starodaj said. “A customer can buy something small online, it comes in a giant box with a ton of air bubbles, they take a picture, tweet it and tag your brand, and then there is a firestorm. Technology has enabled customers to push brands to be more sustainable.”
There is an element of common sense to sustainability, according to Walmart’s Phillips, who said, “If we don’t need plastic, let’s just not use it, or reduce it. And where we can, let’s make it recyclable.”
Picking off the most obvious opportunities around material reduction won’t get Walmart to its zero waste or other grand sustainability goals. As Krupitzer noted, it requires innovation and much of that innovation has to happen around processes, and consumers bear responsibility as well. For example, the advent of e-commerce, consumers’ desire for convenience and retailers’ willingness to accommodate irrational returns expectations, has created new carbon footprint and reverse logistics challenges. That’s the space where Optoro plays, operating a returns optimization platform that has become more important in a circular economy.
“Return rates for online shopping are up to 40% so retailers are focused on their reverse supply chain and are asking for a lot of the transparency, data and technology tools they have used in their forward supply chain and wanting to apply those to their reverse supply chain,” Starodaj said. “We have a returns optimization platform that identifies what’s coming back, where it is and why it is getting returned.”
Walmart gains much of its strategic transparency through a well-established performance measurement tool known as the Sustainability Index. Implemented not long after the company established its big three goals, the index tracks key metrics from suppliers across more than 100 product categories and uses the information to make better decisions and monitor progress, according to Phillips.
“We want our customers to trust everything they buy from Walmart and understand that we have done the hard work behind the scenes,” Phillips said.
Mike Troy is editor-in-chief and brand director for Retail Leader, Store Brands' sister brand.