Walmart’s Climate Ambition Signals a New Market Reality

Authors

• Eric Olson

  Former Senior Vice President, BSR

• Nate Springer

  Former Manager, BSR

When 196 of the world’s governments agree to a single direction, markets move. Last year’s Paris Agreement on climate change is an unprecedented shift that will mobilize trillions of dollars toward the low-carbon transition that the agreement defines. And when Wal-Mart Stores, Inc. (Walmart), the world’s largest retailer, announces ambitious climate goals to align with this move, corporate action accelerates.

On Friday, Walmart announced a goal to reduce its greenhouse gas emissions 18 percent by 2025 and engage its full supply chain in reductions 10 times that amount. That supply chain initiative is equivalent to eliminating 291 coal-fired plants for an entire year. While these steps are momentous by themselves, Walmart has further committed to 50 percent renewable energy and zero net deforestation from key commodities, also by 2025.

Walmart’s entry into this movement brings scale, ambition, and influence to corporate climate leadership, bringing into sharp focus that climate action is on today’s agenda for all business leaders—and a new market reality. Walmart joins nearly 200 companies committing to science-based targets, and hundreds more that have committed to other climate leadership actions. To respond to this market-defining shift, companies must understand how action by Walmart and others shapes the business agenda and then set their own course toward the low-carbon economy. To start, companies can take away three lessons.

• Walmart directs—and saves—billions of dollars in low-carbon spend. Walmart’s previous sustainability goals enabled the company, in the past 10 years, to double the efficiency of its transportation fleet and grow renewable energy to 25 percent of its power sources. To do so, Walmart worked closely with suppliers and partners that could provide innovative solutions. The company also saved billions, including US$1 billion from fleet improvements in 2015 alone (compared to a 2005 baseline). Walmart will continue to send a strong market signal by seeking low-carbon providers across the several million products across its massive supply chain. Walmart’s ambitious operational goal to grow the business while reducing its own emissions will deploy a suite of new efficiency, renewable electricity, advanced fuel, and refrigerant technologies.
• Walmart joins others in building the low-carbon market. The combined ambition of Walmart and the 650 other companies taking climate action will dramatically expand availability, slash costs, and build markets that all businesses can harness to reach their own goals. The national climate plans under the Paris Agreement already represent a US$3.9 trillion projected investment by 2030, according to the International Energy Agency. The growing number of companies taking climate action sends a clear market signal to business and investors to make low-emission or emission-neutral investments. And policymakers see new ways to create more jobs and industry through the rollout of their climate action plans.
• Companies need to understand these changes, then act. Every business must analyze and map these changes across its own value chain and then set a course, using a science-based framework that includes a long-term climate goal and emissions-reduction targets to reach that goal. In working on science-based target-setting and climate strategies with Walmart—as well as other BSR member companies such as General Mills—we have found it is essential for companies to build the business case, understand their internal and external position and practices, define potential pathways for direction-setting, and then create the tools and partnerships for success. This requires companies to revisit their assumptions about the future, understand a changing landscape, and join other businesses shaping a new “business as usual.”

The bottom line of the Walmart announcement? A new market reality is here. Companies that have already taken action know there are real business benefits to aligning with this unprecedented shift by growing revenue while reducing emissions. These leaders are driving implementation of the Paris Agreement and creating new opportunities for businesses, but we need more action by companies. Will your company accept this new market reality, and join in?