Wal-Mart has spent the last year making grand promises about its commitment to the environment. Talk about green initiatives and supplier changes grabbed the attention of environmentalists and financial analysts alike. In press conferences and company meetings, Wal-Mart executives agreed with what others had been saying for years: For better or worse, Wal-Mart has a massive environmental impact.
The company launched a major public relations campaign on the issue, marketing "green" products to specifically targeted demographics. While the company made many promises about new initiatives, it was less clear how or if the company really planned to implement those changes. Yesterday, after months of unexplained delay, on the heels of the departure of Harriet Hentges, and the reassignment of Andy Ruben, both key players in the sustainability effort, the giant retailer released a report on the progress of these environmental initiatives.
Much of the report reads like a promotional pamphlet for Wal-Mart. A half-page picture of CEO Lee Scott grins at readers from the first page, but it's not until page 41 that the issue of "the environment" is formally addressed. What's in those 41 pages? It includes everything from the company's charitable donations to profiles of its executive board to an outline of its employee health care plan. The subjects are so scattered, in fact, it seems like the purpose of the report is not to explain the company's environmental initiatives, at all. It almost seems like the company is trying to pacify its critics on a wide range of issues by refusing to talk about just one.
This is a wise approach given that a recent public opinion poll shows that more and more consumers are staying away from Wal-Mart's stores because of the company's business practices. That poll also showed the company's reputation for poor employee treatment and environmental damage is inhibiting its ability to expand in new markets. These issues mean big problems for Wal-Mart. The company's stock has been flat for years and domestic sales numbers are declining. Wal-Mart badly needs people to like it.
The company has been struggling financially for some time, and dealing with its reputation issues are a major factor in its hopes to turn a profit. In the past two years, the company has spent upwards of $30 million dollars on a professional public relations campaign dealing primarily with its reputation issues. Rather than dealing substantively with these image problems by addressing its business practices, Wal-Mart opted for a public relations effort. Wouldn't the money have been better spent on real action?
An environmental campaign seemed like a great idea to Wal-Mart because the company could save money and improve its image at the same time. And it's true that if implemented, many of Wal-Mart's eco-initiatives would lower costs. But the company continues to cut costs in other ways that only serve to harm its reputation: exploiting employees, passing off costs to local communities, shifting production overseas, ignoring human rights violations and squeezing suppliers. Wal-Mart's cost-slashing practices ultimately do more harm than its public relations and "green" policies can salvage.
The public relations game just isn't paying off for Wal-Mart. Our research shows that Wal-Mart's business practices, including its treatment of workers and environmental impact on communities along with a host of other issues contribute to the image problems facing the company today. The company's sustainability report attempts to address these issues, but the company's words are drowned out by its actions.
As popular perceptions of the company broaden to include political concerns about the company, Wal-Mart's favorability and profits diminish. For Wal-Mart to truly become sustainable, rather than just implementing some public relations initiatives, Wal-Mart's leadership must be willing to make substantive changes to its business model.
David Nassar is the Executive Director of Wal-Mart Watch