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Walmart: Improving Supplier Energy Efficiency

June 1, 2010

The Challenge

In 2008, Walmart committed to improving the energy efficiency of its top 200 suppliers’ factories in China by 20 percent by 2012. With the aim not only to benefit the environment but also to help suppliers become more competitive, Walmart sought to replicate the success it has had in Europe and the United States in increasing supply chain efficiency. In China, however, the company found that its suppliers often prioritize overall growth over increased energy efficiency. As a result, operations managers commonly lack the necessary incentives and know-how to achieve efficiency improvements. An additional challenge in China is the lack of a developed professional energy-efficiency industry to provide equipment and data-measurement tools that make this process easier in other regions. To help overcome these barriers, Walmart enlisted BSR’s help.

Our Strategy

We focused our work on identifying and addressing suppliers’ needs that prevented them from taking advantage of energy-efficiency opportunities. The most common needs we found were buy-in and support from senior managers and performance incentives for staff. Therefore, we centered our initial efforts on launch meetings to educate executives about the business opportunities associated with energy efficiency. Each meeting involved more than 300 executives and representatives from technical service providers.

Next, the BSR expert embedded in Walmart’s global procurement headquarters in Shenzhen, China, created a data-collection tool that enabled factories to measure their energy use and a framework that allowed Walmart to verify the factories’ performance reporting. Our surveys of suppliers showed that many managers lacked the skills and knowledge needed to manage energy more effectively. To address this critical need, BSR’s China Training Institute in Guangzhou led practical workshops focused on energy management for suppliers. We also worked with partners such as the Environmental Defense Fund to educate suppliers about the “low-hanging-fruit” opportunities in their facilities.

Finally, to enable better access by suppliers to energy- efficiency technology, we improved communication between suppliers and technical service providers through joint workshops and a common auditing tool that allowed for easier comparison between providers.

Our Impact

By the end of 2009, more than 100 factories had improved energy efficiency by more than 5 percent, beating Walmart’s expectations. The company also reported that dialogue between suppliers and technical service providers improved.

This created new lines of accountability within supplier factories, leading them to pursue efficiency programs for energy and other resources in the future. And it put participants on track to profit from saving energy—the largest budget item for many companies—while playing a key role in addressing climate change.

Following the initial success of this commitment, in early 2010, Walmart unveiled a new, sweeping goal of reducing 20 million tons of greenhouse gas emissions in its supply chain over the next five years. Ultimately, these efforts set the stage for Walmart to expand its program to Africa, the Middle East, and South Asia, while providing an example of how other companies can leverage the power of their networks by building win-win efficiency programs with their suppliers.

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