Intelligence and community for the low-carbon commerce era
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Intelligence and community for the low-carbon commerce era
Walmart Chief Sustainability Officer and EVP Kathleen McLaughlin
Image credit: Walmart
On September 27, 2023, Walmart Chief Sustainability Officer and EVP Kathleen McLaughlin spoke at the Goldman Sachs Global Sustainability Forum. You can view the full transcript of her session here.
McLaughlin’s session touched on each of the company’s four “shared values” priorities:
The full transcript is worth a read for detail on each of these topics. Below are highlights of the discussion of climate and decarbonization initiatives.
More than 100 global retailers have set science-based targets with the Science Based Targets Initiative (SBTi).
Walmart’s target is more aggressive than some, owing to its deadline (many companies are setting 2050 targets to reach similar outcomes) and the decision not to rely on offsets, which are increasingly viewed with skepticism.
This means Walmart will likely be prioritizing capital improvements focused on major sources of emissions within its control, like energy, heating and cooling, and logistics.
Decarbonizing its energy mix is something Walmart is likely to handle independently, but its approaches to heating and cooling and logistics could present impacts and opportunities for suppliers, especially in temperature-sensitive categories. Some large CPGs are already signaling plans to collaborate with retailers in these areas.
McLaughlin described the supply chain impacts of more extreme weather in terms of “surety of supply and shifts in yields and quality of commodities” and characterized them as “near and present things.”
In other words, there are already weather-driven cases where Walmart can’t be certain of what it will receive, or of what quantity or quality.
As retailers including Walmart work to manage risk and ruggedize their supply chains, more are investing in agricultural and production techniques that are more resilient or better insulated from climate impacts (like Walmart’s partnership with vertical farming company Plenty, for example).
Other strategies could include on- or near-shoring and diversification of its supplier base.
“We all know about the 80/20 rule.
In emissions, it’s like 99/1…you don’t need to measure every item to know it’s beef, it’s dairy, it’s electronics. We know what they are.”
Walmart Chief Sustainability Officer and EVP Kathleen McLaughlin at the 2023 Goldman Sachs Global Sustainability Conference
McLaughlin noted that many of the company’s “sustainability” initiatives don’t report directly to her, but instead are embedded in conventional functions with a dotted-line relationship with her team.
She pointed to the company’s EV charging station expansion as one example. Walmart already has more than 250 charging stations on-site at its stores and has committed to thousands more. She noted the trip-driving and basket building potential for this network and positioned it as a natural extension of the company’s auto care business.
“It is totally part and parcel of our long range planning process or annual operating planning process,” she said, “and it’s baked in to the guidance that we give all of you guys [equity analysts] about where we’re going to go with our earnings and our returns and our comp sales and so on.”
Scope 3 emissions, which represent the majority of a retailer’s emissions, were another focus. McLaughlin noted that, when the company set its zero emissions target in 2017, it didn’t know how to measure Scope 3 emissions–and neither did the Climate Disclosure Project, Environmental Defense Fund, or other partners.
At that stage, the company used the basic assumption that, on average in retail, Scope 3 emissions are ~20x Scope 1 + Scope 2. They multiplied the estimated 20 million metric tons of emissions from Scopes 1 and 2 and arrived at an estimated 400 million metric tons of emissions for Scope 3.
Walmart determined that the immediate priority should be to decarbonize its supply chains by focusing on the major concentrations of emissions in its business and engaging suppliers to work with them.
To that end, it launched Project Gigaton, an initiative to avoid one billion metric tons (a gigaton) of greenhouse gasses from its global value chain by 2030 through collaboration with suppliers. To date, Walmart has engaged more than 5,200 suppliers representing more than 70% of its assortment and avoided, sequestered, or removed 750 million metric tons of emissions, keeping it on-track for its target.
As part of the program, Walmart provides resources like playbooks, summits, knowledge exchanges, and advice in areas like energy and transportation, both natural starting points given their outsized contributions to emissions.
McLaughlin also highlighted efforts in customer-facing areas like product design, packaging, and waste reduction. In some of these functions, like packaging, Walmart is also setting aggressive targets for its own brands.
As efforts to decarbonize its value chain accelerate, Walmart will likely encourage suppliers to participate in more of these customer-facing initiatives.
McLaughlin views mounting pressure to report more comprehensive and granular emissions data as a challenge, stating that the industry is “probably decades away from having excellent information at the level that you can compare from one item to another, let alone one company to another.”
She noted that there isn’t a dataset covering the comprehensive Scope 3 emissions of the more than 400 million SKUs in Walmart’s assortment and questioned how useful for decisions it would be even if there were.
“We all know about the 80/20 rule,” McLaughlin said. “In emissions, it’s like 99/1. Like emissions are heavily concentrated in certain stages of the supply chain; it makes more sense to focus innovation on those. We know what those are top-down. You don’t need to measure every item to know it’s beef, it’s dairy, it’s electronics…we know what they are.”
McLaughlin also commented that shortcomings in prevailing approaches to calculating and scoring emissions and climate risk don’t necessarily reflect a company’s actual emissions or progress against reducing them, making it harder for investors and other stakeholders to monitor progress.
Still, product-level climate footprinting is a topic of growing interest among retailers, regulators, and venture capitalists.
Watch the replay or view a transcript of the session.
