Wal*Mart Saves Money by going green

General Electric ran TV commercial a few years back in which a young executive pitches improved energy efficiency to his corporate board.

"Why should we care about this stuff," his boss demands.

"Because it can save us 40 percent on our energy costs," he replies.

With that, Disneyesque animated birds and rabbits appear to playfully nuzzle board members who suddenly discover the joys of going green.
Something very similar — absent the animated birds — may have taken place four years ago in Arkansas. At a two-day conference, America's largest retailer, Wal-Mart, committed to a greener course.

It's taking suppliers like GE, as well as competitors and retailers, along on the journey.

The latest evidence of Wal-Mart's eco-evolution is its work to develop a universal sustainability index.

Appliance buyers can now get information on energy efficiency before making a purchase. In the future, Wal-Mart hopes consumers will base buying decisions for everyday products on labels detailing their environmental and social sustainability.

That's quite a departure for a company that once was known for low prices and scorched-earth capitalism. But Wal-Mart has proven that it can do well by doing the right thing.

Last year, it earned $12.7 billion. Those profits come not only from its traditional cost-cutting, but by savings from reducing packaging and improving energy efficiency.

The changes aren't just good for Wal-Mart; they're good for the environment, too.

In 2007, Wal-Mart made a commitment to highlight sales of environmentally friendly compact fluorescent light bulbs that last longer and use less electricity. Doing so meant suppliers like GE had to ramp up production.

Wal-Mart still sells more traditional incandescent bulbs. But the potential energy savings from compact fluorescent bulbs are staggering, especially with sales juiced by Wal-Mart.

In 2008, it began selling only concentrated liquid laundry detergent. The giant retailer says customers have saved more than 400 million gallons of water as a result. The switch also saves 95 million pounds of plastic resin that would otherwise have been used in packaging. And, not coincidentally, Wal-Mart saves more than 500,000 gallons of diesel fuel by not having to transport heavier, bulkier products.

A universal sustainability index has the potential to be even more important. It would let consumers see the true costs of wasteful packaging and products; they then might make better buying decisions.

Not all customers will take that into account. But where Wal-Mart goes, other retailers will follow. It's showing them that there's real money in going green.

My advice to small Wal Mart vendors; Get on board and use environmental sustainability as a competitive advantage as soon as possible. Larger companies are going to be slower to act (because of their size) which gives smaller companies a short term advantage. With the current category management standards at Wal Mart a minor brand could keep their distribution with this edge.