November 16, 2011

Walmart’s Sustainable Agriculture Goals: A Critical Review

Mia Cellucci

Mia Cellucci

Guest Blogger

Center for a Livable Future

“Sustainability is a business strategy. It’s not a charitable giving strategy.”

I wasn’t surprised to hear this from Beth Keck, Walmart’s Senior Director of Sustainability, who spoke on the role of the private sector in sustainable agriculture at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, DC late last month. Indeed, I’ve heard Gary Hirshberg, Chairman, President and CEO of Stonyfield Farm and author of Stirring it up: How to Make Money and Save the World, call on sustainable producers to harness the power of big business. Ms. Keck echoed this sentiment: “What we’re concerned with is how our business processes and our business decisions make a difference in the supply chains we interact with.” Unlike Mr. Hirshberg, though, Ms. Keck could not provide a real definition of “sustainability.” Walmart does not have its own definition, but “often cite[s] the original concept of leaving the earth in the same shape that you have found it or better—trying to be neutral or add back.”

In 2005, Walmart announced three sustainability goals, one of which is to sell products that sustain people and the environment. During her talk, Ms. Keck presented this goal in three parts:

  • Support local farmers and their communities
  • Produce more food with fewer resources and less waste
  • Sustainably source key agricultural products

Almost 50 years after the first Walmart opened in Arkansas, the corporation operates 9,700 stores in 28 countries, with $419 billion net sales in fiscal year 2011. Walmart has the world’s largest food supply chain, with food comprising around $200 billion—almost half of its revenue. As the world’s largest corporation, Walmart is uniquely positioned to make a significant investment in sustainable agriculture.

But there might be a snag. While Walmart customers tend to have a “high interest in sustainability,” Keck said, they tend to be very cash-strapped and unwilling to pay more for sustainable production. “Suppliers and customers both need to be winners of the price negotiations.”

So, how’s Walmart doing? Here’s how Ms. Keck reports on its progress:

Support local farmers and their communities

 In emerging markets, Walmart has pledged to sell $1 billion (about 0.5 percent of Walmart’s food revenue, and less than 0.3 percent of the corporation’s net sales) in food sourced from 1 million small and medium farms, provide training to 1 million farmers and farm workers in areas like crop selection and sustainable farming practices, and raise the income of the small- and medium-scale farmers it sources from by 10 to 15 percent by the end of 2015. In the US, the corporation will double its sales of locally sourced produce, accounting for 9 percent of all the produce it sells, and increase its purchase of select U.S. crops by the end of 2015.

To help small and medium producers gain access to markets, Walmart promises to implement a more efficient supply chain. How? Ms. Keck deferred to her colleague Tres Bailey, Walmart’s Senior Manager of Agriculture and Food—an audience member, not a co-presenter—to answer questions about the plan to support small- and medium-scale farmers in the US. In addition to working with farmers to improve production practices, Walmart plans to provide packaging to smallholders at wholesale prices and incentivize some large growers to take on some of the packaging and processing of smallholder products. Ms. Keck was quick to cite examples in which Walmart has kept prices down by sharing the costs of packaging with producers. The main example she gave, though, was the design of more efficient packaging for toilets—not broccoli (and how much packaging does broccoli need, anyway?) The cost-sharing plan for fruits and veggies sourced from small and medium farms remains unclear—and is perhaps undecided.

When asked for more details on Walmart’s strategy to support small- and medium-scale farmers, Ms. Keck responded that while the corporation would like to work with growers of all sizes, “We need partners to help farmers get ready to come into this system.” While Walmart’s definition of a small farm as 20 acres or more is realistic given the corporation’s scale, it leaves me wondering about the average acreage of medium farms—and whether they might include large-scale corporate farms, hardly the farming constituents that need additional assistance.

 Produce more food with fewer resources and less waste

 For the first time, Walmart will ask its suppliers of top crops like potato, avocado, and citrus about the inputs—water, energy, fertilizer and pesticide—they use per unit of food produced. In addition, the corporation will invest over $1 billion in its perishable supply chain and reduce food waste by 10 to 15 percent, globally, by the end of 2015.

 While I was pleased to learn about Walmart’s efforts to reduce food waste, I still have some questions about producing “more food with fewer resources.” Using fewer synthetic fertilizers and pesticides is good, yes, but what about other inputs? Sustainable agriculture is often more labor-intensive than conventional agriculture, and according to some experts, food prices are already artificially low—in other words, they do not reflect the impact of production practices on the environment, human health, or animal welfare. There is a reason that sustainably produced greens and meat cost more than their conventional counterparts. Walmart’s plan to use “fewer resources” to produce more food without defining “sustainable” and, presumably, without raising product prices, remains unclear.

 Sustainably source key agricultural products

By the end of 2015, Walmart will require key agricultural products to be sustainably sourced in all of its private brand products globally. Note that the “key” is subjective here. The corporation has chosen to focus on two of the major contributors to global deforestation by sourcing sustainable palm oil for all Walmart private brand products and only selling beef that does not contribute to the deforestation of the Amazon rainforest, globally, by the end of 2015.

Ms. Keck guessed that there is palm oil in 40% of the products Walmart sells, and was quick to show the audience a photo of the first product in North America with RSPO certified sustainable palm oil: cellophane-wrapped banana bread. But a true investment in sustainability, many argue, would be no palm oil at all. Southeast Asia has the highest rates of deforestation in the world, thanks to palm oil plantations, and South America and parts of Africa are not far behind. RSPO certified or not, palm oil is a monoculture crop produced in regions with great potential for carbon sequestration. And like other cheap oils, it could easily be omitted from many common products.

To Sum Up

How Walmart will meet its sustainable agriculture goals without increasing costs for suppliers or customers, hurting the corporation’s bottom line, or defining “sustainability” is still a bit hazy. When asked about the corporation’s strengths, Ms. Keck responded with a laugh, “What we do well is issue a purchase order. That’s our number one competency.” That won’t be enough, of course, but if the corporation really changes the way it does business, it has the potential for great impact. Producers will have to modify their practices if they want to participate in Walmart’s supply chain—the largest food supply chain in the world.

2 Comments

  1. Mia Cellucci

    Posted by Mia Cellucci

    Good question, Dave. Ms. Keck did not mention any third-party auditors during her talk. While Walmart consulted with suppliers, universities and NGOs (including World Wildlife Fund, Conservation International, Rainforest Alliance, The Nature Conservancy, the Field to Market Alliance and Environmental Defense Fund) to develop its sustainable agriculture goals, from what I can tell there is no plan to involve these third-party organizations in evaluating the corporation’s progress. Walmart authors its own Global Responsibility Reports and has released the first of three phases of its Sustainability Index, which aims to “create a more transparent supply chain, accelerate the adoption of best practices and drive product innovation and ultimately providing our customers with information they need to assess products’ sustainability.” Judging by what has been released so far, the Sustainability Index calls for a good deal of self-reporting from producers rather than third-party audits.

    From the looks of its political contributions, Walmart is not walking the talk: Since launching its sustainability campaign in 2005, 40 percent of the $3.9 million it has given to members of Congress went to candidates who routinely vote against the environment (http://bit.ly/sDlPPs).

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