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Walmart has implemented several initiatives to reduce supply chain GHG emissions. These include the Sustainability Index, which aims to reward suppliers who demonstrate leadership in sustainability. The Supplier Energy Efficiency Program (US-based) and Supplier GHG Innovation Program (China-based) are both collaborative programs that involve on-site assessments to identify and implement energy saving opportunities within supplier factories. 

SCI Information

Activity types Supplier forums or coalitions, Reporting and Monitoring, Capacity building and implementation support, Audits
Organisation leading the initiative Walmart
Region from which the initiative is led

 

Supplier's location China, Global, United States
Supply chain sectors targeted Glass, Iron and steel, Non-ferrous metals, Non-metallic minerals, non-specified, Paper pulp and printing, Textile and leather, Wood and wood products, Petrochemicals

Cross sectoral. Walmart suppliers provide products ranging from foodstuffs to garden equipment and furniture to electronic goods.  Sectors of relevance to IIP include forestry, plastics, glass, metals and textiles.

Program or partnership linkages Applied Sustainability Center, CDP Supply Chain Program, Environmental Defense Fund, NRDC Clean by Design

Walmart worked with the Environmental Defense Fund (EDF) to set and achieve a target of reducing 20 million metric tons of CO2 from its products' life-cycles and supply chains between 2010 and 2015, through the Walmart Supplier GHG Innovation Program. Other advisers to the project include the Carbon Disclosure Project, and the Applied Sustainability Center (ASC) at the University of Arkansas. Together, the team works to identify projects at suppliers' premises, achieve and quantify reductions, engage suppliers and ensure proper procedures are followed. Walmart also participated in the Natural Resources Defense Council's Clean By Design Initiative for textile manufacturing. Walmart instructed one of its poor performing Chinese suppliers to work with NRDC and the Jiangsu Academy of Environmental Sciences to improve its energy efficiency. [*1]

Policy linkages None

No legislative or governmental requirements for buyers or suppliers to undertake this action, or links to government programs.
 

Objective Buyer objectives:

The  various programs are designed to help Walmart achieve its goals:

  • Reduce 20 million tonnes of CO2 from its global product life cycles and supply chains between 2010.
  • Produce zero waste, 
  • Be supplied with 100% renewable energy, and to improve product sustainability.

Walmart estimates that supply chain emissions account for 92% of its environmental footprint [*2]. The company is under increasing pressure from environmental NGO partners to address the fact that its carbon footprint is still expanding (due to growth and new store openings) [*3].



Supplier's drivers:
The objective for suppliers is to meet the expectations of one of the world's most powerful buyer companies. For example, as the single largest U.S. importer of Chinese consumer goods and China's eighth-largest trading partner, Walmart has the leverage to drive significant environmental improvement in China.
Date

Walmart Supplier Energy Efficiency Project (SEEP) launched in 2008. The Supplier Sustainability Index was launched in 2009.

Initiative Summary

Description of the scheme

Walmart's goal is to reduce 20 million tonnes of CO2 from its product life cycles and supply chains between 2010 and 2015.

Walmart has introduced three programs to engage suppliers in reducing GHG emissions:
   1) Supplier Energy Efficiency Project (SEEP)
   2) Supplier Sustainability Index
   3) Supplier GHG Innovation Programme

The SEEP and GHG Innovation Programmes are very similar in scope and structure, but have a different geographic focus. Following the success of the SEEP in the United States, the GHG Innovation Programme was introduced in China to effect similar improvements in Chinese suppliers.

 

Sustainability Index

Walmart requests all suppliers to report their sustainability performance to Walmart via the Sustainability Index launched in 2009. All 100,000 suppliers were requested to complete a brief on-line survey to self-evaluate their own sustainability. However this is not a mandatory requirement. Suppliers can go to the online supplier portal at any time and revise and update their answers. There is an incentive for suppliers to keep doing this as they improve their sustainability performance, as they can increase their score. The Supplier Assessment comprises 15 questions, across four categories (Energy & Climate, Material Efficiency, Nature and Resources, People and Community). Suppliers are asked to provide information the steps they have taken to reduce GHG emissions, on their GHG data, publicly  reported data and targets. For specific questions in the Energy and Climate category, see  [*4].

 

Supplier Energy Efficiency Project (U.S.)

The SEEP helps suppliers in the United States learn from Walmart's own experiences of energy efficiency projects, and to identify and implement energy saving measures in suppliers' installations. Walmart undertaks assessment of a supplier installations and identify energy saving opportunities. Suppliers interested in joining the project can approach Walmart directly, or Walmart will select poor performing companies, according to the results of the Supplier Sustainability Index. The assessment typically takes two days, and examines different factory operations such as lighting, heating, ventilation and refrigeration. Walmart will then deliver a proposal to the supplier detailing the opportunities identified. Walmart expects that implementation of these measures should take place at the supplier's own cost within 6 months of the receipt of the proposal. The assessment was developed by Walmart and is carried out by Walmart engineers.

 

Supplier GHG Innovation Programme (China)

Walmart undertakes energy efficiency audits and carbon reduction projects with its suppliers in China via the Supplier GHG Innovation Program. More than 300 supplier visits have taken place since 2008. Walmart encourages suppliers to rethink the carbon lifecycle of these products, and Walmart's sustainability executives work with suppliers to identify measures to take. The costs of implementing measures identified are borne by the supplier, but Walmart says it will not recommend any measure with a payback period of greater than two years.

The program has three main components:  
1. Selection: Walmart focuses its efforts on the product categories representing the highest embedded carbon in Walmart's supply chain such as milk, bread, meat and clothing with the help of the Applied Sustainability Center (ASC) from the University of Arkansas [*12].

2. Action: The identification and action of a specific energy saving project. For a project to be included as part of this program, it must reduce GHG emissions from a product in the sourcing of raw materials, manufacturing, packaging, distribution, customer use or end-of-life disposal. Walmart must demonstrate it had direct influence on the reduction and show how that reduction would not have occurred without Walmart’s participation. For each project, a project team is created, consisting of a Walmart contact, a supplier contact, a researcher from consultancy ClearCarbon and/or the Environmental Defense Fund (EDF), and an assessor from PriceWaterhouseCoopers (PWC).
To accomplish the Walmart's GHG reduction goal of this program, Walmart can undertake three types of projects:
• Promoting the creation of and/or increase the sales of new 'lower-carbon' products
• Improving existing products and/or sell more of improved-version products, or
• Improving facilities or processes for a supplier

3. Assessment: Suppliers and Walmart can jointly claim the reductions in their annual reports. An external consultant performs a quality assurance review of those claims to ensure methodology, completeness and calculations are correct. When the claims meet the quality assurance check, a separate external consultant assesses the monitoring process used to measure the carbon emissions reductions.
All projects are supported by a 'Project Team', which includes a 'Walmart Champion' who is responsible for taking the lead for the project on behalf of Walmart, including documenting the project and quantifying the carbon reductions. The Champion supports the Supplier Representative in achieving the carbon reduction.

 

Capacity building and implementation support

  • Walmart also released a Supplier Sustainability Assessment Webinar to help suppliers better understand the objectives and processes behind the Assessment. While Walmart aims to have all its direct suppliers sourcing 95% of their production from factories receiving the highest ratings, Walmart also recognises that at times factories may have problems and fall below the expected level. The company has therefore made transparency the cornerstone of the program and offers suppliers the commitment that Walmart will work with them to resolve issues as long as they are honest about problems.
  • In 2008 Walmart held a Beijing Sustainability Summit, which more than 1,000 Chinese suppliers attended. At the summit, Walmart set a goal to partner with suppliers to improve energy efficiency by 20 percent per unit of production by the end of 2012 in the top 200 factories in China from which it sourced directly (2007 baseline). By January 2011 140 factories had improved energy efficiency by more than 10%, and 119 factories had demonstrated a greater than 20 percent improvement.
  • In November 2010 Walmart China held an eco-packaging fair, inviting more than 500 suppliers. The event highlighted best practices and innovations in the area of sustainable packaging.
Requirements on or activities undertaken by the target group
  • SEEP requires suppliers to provide access to their facilities for auditors, and if they decide to undertake measures proposed they should do so (at their own cost) within six months of the measures being identified.
  • The Sustainability Index requires suppliers to answer the survey and report on a regular basis.
  • Companies who are engaged in the Supplier GHG Innovation program must elect a supplier contact, who will work with Walmart and its consultants to implement the identified carbon reduction activity. This responsibility will include providing data to quantify the reductions achieved. The supplier must fund the reduction activity itself, and agree to monitoring and verifying the resulting energy savings. Walmart also operates 'Retail Link', an electronic data interchange platform that all suppliers must join, and which facilitates the sharing of information.
Verification/certification
  • Sustainability Index: Responses to the Supplier Sustainability Assessment are taken on good faith, although suppliers are warned that violation of that good faith will be taken very seriously by Walmart.
  • SEEP: third party engineering experts undertake the energy audits and propose energy saving measures on behalf of Walmart.
  • GHG Supplier Innovation Program: ClearCarbon (owned by Deloitte and headquartered in the US) will perform a quality assurance review of those claims for all suppliers who implement energy saving measures as part of the programme, to ensure methodology, completeness and calculations are correct. When the claims meet the quality assurance check, PriceWaterhouseCoopers will assess the process and methodology surrounding the measurement of the carbon emissions reduction claims for use by Walmart management.
Tools and resources (includes use of external platforms for capturing suppliers' data)
  • Sustainability Index: suppliers are provided with a guidance document [*7] explaining Walmart's objectives, the benefits to suppliers of improving supply chain sustainability and suggestions of actions to take to begin the journey. Walmart also released a Supplier Sustainability Assessment Webinar to help suppliers better understand the objectives and processes behind the Assessment.[*8]
  • Supplier GHG Innovation program: a guidance document is provided (and is available online) [*9] that provides an explanation of the program, implementation methodologies and assessment approaches. The project team (including representatives from ClearCarbon, the Applied Sustainability Center at the University of Arkansas and PriceWaterhouseCoopers also provide input on identifying and achieving projects.
  • SEEP: Walmart will provide a free assessment to identify energy saving opportunities, on the proviso that the supplier then implements those measures identified. If the supplier does not implement the measures it pays the cost of the assessment.
  • Walmart also operates 'Retail Link', an electronic data interchange platform that all suppliers must join, and which facilitates the sharing of information. Suppliers use Retail Link to submit information as part of the Supplier Assessment.

Impacts, Costs & Benefits

Costs

In the SEEP, the cost to the suppliers of the initial assessment is null if they decide to go forward with the energy saving projects proposed by Walmart. If the suppliers choose not to go ahead with the proposed measures they must cover the cost of the survey to identify energy saving measures, which typically ranges from $5,000 - $10,000. Walmart recommends to budget $2 -3 per square foot of facility for a comprehensive retrofit. It estimates a simple lighting retrofit would cost about $1 per square foot. [7]

 

GHG Impact

In the Supplier GHG Innovation Program, more than 300 factory visits have been completed since 2008.  According to Andrew Hutson from EDF, who worked with Walmart on greening the supply chain,  “The opportunities for improvement are even larger than we envisioned—it’s not unusual for us to find savings of up to 60 percent in many factories—and the payback periods for upgrades are absurdly short. We never recommend a project with a payback period longer than two years, and many of the recommendations we make have simple returns on investment of less than six months.” [*5]

Benefits

One of Walmart's suppliers in China, a toy mill, implemented simple energy efficiency improvements recommended via the Supplier GHG Innovation Program, and reduced its energy use by 47.8% since September 2009. That’s a nearly 50% reduction within one year, and best of all, these savings came from  simple fixes, not dramatic changes." [*6]

As an example of successful implementation under the SEEP, Walmart approached the VonDrehle Corporation, a paper manufacturer in the United States, and undertook an energy audit of its lighting and air conditioning. Following the audit Walmart replaced the existing lighting with more efficient fluorescent lights (paid for by VonDrehle Corporation), and installed motion sensors on 50% of the lights. As a result the supplier realised savings of approximately $37,000 a year. The measure had a payback period of less than four years for Von Drehle. Underwear supplier Dana Undies based in Georgia, USA, reported that it saved 71% on its annual energy bill as a result of participating in the SEEP program.

Intex Industries (Xiamen) Co. Ltd., a supplier of sporting goods, leisure and entertainment inflatable products, joined the program in 2009, and established a task force for monitoring energy-saving measures, created an incentive program to recognize employee engagement and installed meters to measure and analyze energy data. The company has installed more efficient lightbulbs through its facility; installed an automated frequency switching converter system; and replaced diesel with natural gas. As a result, that year the factory reduced coal consumption by 11,854 tons, equivalent to the elimination of 29,553 metric tons of CO2 emissions. In 2010, the company invested another RMB 7.75 million (USD $1.2 million) into 16 energy-saving projects. [*11]

 

Footnotes & References