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Big Climate Goals Can Align with Positive Financial Outcomes: Q&A with Walmart’s Joby Carlson

Last November, Walmart became the first retailer to set a Science Based Target. The company committed to reducing its own emissions 18% by 2025 from 2015 levels, and to cutting 1 gigaton of emissions from its value chain by 2030.

As the largest retailer in the world, Walmart’s move was seen as a turning point for the initiative, which champions emissions reduction targets as a way to limit global temperature increases.

“It’s the first time we’ve had the ability to understand what we need to do to be in alignment with what climate science suggests should be done,” says Joby Carlson, director of energy and operations sustainability for Walmart. Carlson, who is participating in a keynote session at the 2017 Environmental Leader Conference in June, spoke with us about how the company approaches environmental initiatives while seeing a positive financial return.

What sustainability trends are you seeing?

The lead up to COP 21 and ultimately the Paris Agreement made 2015 the year of climate in many ways. We saw an alignment across governments and businesses saying there’s a real business benefit to acting on emissions, climate change, and sustainability in general. It can’t all rest on the government. Businesses can take action.

The biggest thing that came out was the Science Based Targets initiative. Leading NGOs and the UN got together to develop a methodology to recognize companies and organizations that set reduction targets in line with what scientists tell us is needed to keep global temperatures within 2 degrees Celsius. Finally there’s a common measurement. Before, you never knew if a company was doing enough to be in line with that the planet really needs.

Companies can sign up to the ambition of the Paris Agreement. It’s more top-down, where your part is defined. Then you have to figure out a way to get there. You see a lot of major companies trying to understand if it’s right for them.

 

How does Walmart approach environmental initiatives?

We try not to do anything that doesn’t have a good financial return. Sustainability has to hit the balance among the economics, the environmental, and the social side. Energy efficiency has been our bread and butter. We are a low-cost retailer so we are sensitive about the cost of operations. Optimizing and reducing our energy demand has translated into millions and millions [in savings]. In the case of the trucking fleet, we’re saving a billion dollars a year based on fuel efficiency compared with 2005.

We’re getting to the point in some of our markets where we’re done with the low-hanging fruit on energy efficiency. Now we’re pushing the envelope. How can we do things differently? What is the role of data systems? How do we engage our equipment manufacturers in thinking about the complete lifecycle of equipment in terms of energy efficiency? That all has direct business value.

We’re also number one in the country for the number of facilities with solar energy on the roof. Our onsite solar program is about 15% of our renewable energy portfolio, but those systems allow us to have consistent, stable energy costs. In many cases they’re actually saving us money over conventional energy.

Are there any hurdles to expanding renewable energy?

The energy policy in the United States is complex. Each state has a different way of treating it. We advocate for certain principles around customers’ access to choice and to low-cost options for clean energy. We go state by state and evaluate which ones have the best opportunities to do renewable energy. There are states that have rules preventing third-party contracts. We joined collective corporate organizations to overcome some of these challenges, and push utilities and states to be more progressive.

We’ve looked at doing the same thing internationally as well. In certain markets it’s nearly impossible to do any kind of renewable energy even though there are plenty of renewable energy sources available. It’s a matter of forming policies that enable companies and organizations to do the right thing.

What are the biggest challenges involved in pursuing sustainability targets?

We’ve grown our sales and operations since the beginning. When you have an absolute emissions reduction, you have to overcome new growth at the same time. For instance, we had a goal in 2005 to reduce our carbon footprint of existing buildings 20% by 2012. We accomplished that, but it’s hard to show because we also grew the company by almost 50% during that time — and that overshadowed the reduction we were getting from existing buildings. Reducing the total emissions while you’re trying to grow means you have to do twice as much.

While we are investing in energy efficiency that has a good payback, we have to think about upgrading our data systems, expanding our trucking fleet, remodeling or building new stores. The push and pull between business growth and spending money on improving the efficiency of existing assets is a challenge.

What advice do you have for other companies working to balance those priorities?

You’re trying to find the sweet spot. We focus on locations that have the highest cost of energy, but make sure we’re doing it in areas that have the most emissions as well. Finding a balance between the business return and the environmental return is a good way of approaching it.

We’re also using our scale to drive down costs. We have retail operations in 28 countries. Historically all of them were responsible for buying light bulbs or negotiating costs. But we can gather our collective demand, and we did this a few years ago with a global bid for LED lighting, which ultimately sent a signal to the market. We were able to get a reduced cost for that equipment. That made it possible to go after a technology that wasn’t financially feasible before.

What commitments has Walmart made?

We aim to reduce our own direct Scope 1 and Scope 2 emissions by 18% by 2025, based on 2015 levels. And because the majority of the footprint is in our value chain, including Scope 3 emissions, we set an ambitious goal of reducing 1 gigaton — 1 billion metric tons of CO2 equivalent — up and downstream of our operations by 2030.

We can’t do that alone because it requires innovation from manufacturers that produce the equipment for our stores, our trucks, and the millions of goods we sell. The Scope 3 reduction will also take collective effort from a variety of suppliers across industries, looking at what we can do together to address issues deep in our supply chain, on the farm, in the field, in the forest.

Which trends do you think will emerge in the next few years?

Measurement and transparency are key. One thing we struggle with in our supply chain is having true traceability. We’re working hard on that. There are innovative technologies we’ve started to pilot like blockchain with IBM. We’re at the cusp of thinking about that for sustainability — what are the practices used to produce this item, whether it’s agricultural, apparel, or something else?

We will continue to see a focus on climate. I think you’ll see companies that have led on climate and energy topics continue to do that. It doesn’t seem like it will get easier, but people will still hold to their original aspirations on global issues. That’s what we’re seeing in the industry.

Joby Carlson will be speaking at the Environmental Leader Conference in Denver June 5-7, 2017. His closing keynote session, The Path Forward for Environmental and Energy Management: New Solutions in a Swiftly Changing Corporate Landscape, starts at 3 pm on June 7.

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