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The Greening of Wal-Mart

1/27/2009 --

Retailer's marketing director of sustainability says company is on track to becoming a more responsible corporate leader.

ANN ARBOR, Mich.—Wal-Mart Stores Inc. executive Greg Chandler knows that the giant retailer doesn't have the best reputation among big corporations.

But things are changing at Wal-Mart, and customers and the public are starting to notice. As marketing director of sustainability and healthy living at the company, Chandler is charged with making sure Wal-Mart is living up to its words, and that the message resonates.

"I think the history of a company doesn't have to dictate what it becomes," said Chandler during a Jan. 22 address at the Stephen M. Ross School of Business, which was sponsored by the Frederick A. and Barbara M. Erb Institute for Global Sustainable Enterprise. "(For example), the relatively new emergence of sustainability as a widespread driver of change at Wal-Mart is a huge force shaping (our future)."

The "Wal-Mart as a small, rural American success story" phase of the company's history ended as Wal-Mart grew into the world's largest retailer, Chandler said. With massive growth came different leadership expectations---and criticism, much of it targeting management's approach to corporate social responsibility and environmental concerns. Chandler had not joined Wal-Mart yet, but was in the marketing field and saw the trend unfold.

Chandler said Chairman and Chief Executive H. Lee Scott Jr. started asking what it meant to lead in the 21st century. That included inviting in some of the company's critics. Eventually, the company saw that it had to become aware of unintended consequences of growth. The result is a more introspective company, working to be a leader in corporate responsibility.

"Sustainability has been essential to our emerging understanding and acceptance for what it means to serve our customers and lead in the 21st century," Chandler said. "I believe the future of Wal-Mart is still very much an American success story, one where despite challenging economic conditions and concerns like rising health care expenses, Wal-Mart can play a key role in bringing together the diverse groups needed to solve some of the biggest challenges we face in society."

With a company the size of Wal-Mart, however, even small initiatives can have a relatively big return.

But a key question was if Wal-Martís customers cared. The company was going to change some of its practices to reduce its impact on the environment. But given Wal-Mart's size, getting its customers to demand less impactful products would "accelerate the curve," Chandler said.

"The conventional wisdom was that it's an East and West Coast thing," he noted. "Well, we looked at some data."

The numbers showed people did want to buy products that had less of an environmental impact, but saw price as a barrier. That's significant for Wal-Mart, since low costs are its hallmark. Consumers also didn't know if products touted as sustainable really were better for the environment. They also didnít know enough about such products.

"The consumers told us, 'I feel like this is bigger than I am. I only hear about the problems. I don't hear about the things that are working.' They were telling us, 'We want help with this,'" Chandler said. "As marketers, how do we bring this all together in a way that would help 200 million shoppers act the way they were telling us they wanted to act?"

Wal-Mart and its ad agency crafted an ad campaign for Earth Week in 2007 that touted some common products such as detergent and light bulbs that either used less material or saved energy. The benefit and low price of the product were explained, as was the wider impact of the benefit if all Wal-Mart shoppers bought it.

The ads tested very well, with scores for likability, believability, and importance well above bench marks. That showed the company that its customers could help lead, and not just be brought along.

Chandler said the ads also were developed before Wal-Mart adopted the "Save money. Live better" slogan "so this helped shape the core of Wal-Mart."

Wal-Mart then invited its top suppliers that had more eco-friendly products in their segments to become part of a major campaign in April 2008. The blitz included store aisle displays, and a variety of media.

The effort has shown results. For example, one of Wal-Mart's top 50 brands Ė one that has been around about 100 years Ė was part of the campaign. Marketing research showed that consumers aware of the campaign gave the brand much higher scores than those who were not.

Chandler said the effort at Wal-Mart is about "really being sustainable instead of projecting ourselves as sustainable." So the company is asking itself some hard questions. One of the big ones is how a retailer that built its growth on traditional consumerism transitions to profitable growth on more sustainable consumerism.

The company doesn't know the answer yet. But it's taking steps to find out. It's demanding from its suppliers that they report where all of their products are sourced from by 2010.

Chandler also said current executives at the company won't have all the answers. More of the solutions will come from the next generation of corporate leaders. That's why the company has stepped up recruiting at the University of Michigan and the Erb Institute.

"Leadership on this will come from groups like this one today," Chandler told the audience.

—Terry Kosdrosky

For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich