Published on: January 24, 2008Wal-Mart CEO Lee Scott, in what the New York Times called “a lofty address that at times resembled a campaign speech” to more than 7,000 store managers yesterday in Kansas City, Missouri, laid out an aggressive and ambitious agenda for the retailer’s future that included a number of initiatives linked to its environmental and sustainability goals.
According to the Times, “Scott committed Wal-Mart to creating a more socially and environmentally conscious network of suppliers around the world. He called on other major retailers to join a global network of retailers and consumer goods companies” that is being led by CIES to develop “socially conscious manufacturing standards.”
"Our customers want products that make them feel good about their purchases," he said. "They want to walk into our stores and be confident that the products on our shelves are safe and durable. They also want products that are made in a way that is consistent with their own personal values."
Scott suggested that Wal-Mart could one day find itself in the business of selling hybrid and electric cars, and could even have wind turbines and solar panels that would allow customers to recharge their vehicles in the retailer’s parking lots. Scott said that he has held talks with major automakers about moving into auto retail. “Maybe there isn't room for Wal-Mart in this right now,” Scott said in the text of the speech, according to a Bloomberg report. “But something tells me that there may be some role for us in the future.”
Also in the speech, Scott said that the company is requiring that its suppliers – especially in foreign countries – meet basic standards. “We will favor, and in some cases even pay more, for suppliers that meet our standards and share our commitment to quality and sustainability,” Scott said.
And, Scott said that Wal-Mart would not depend on industry-wide efforts to focus on sustainability. “Wal-Mart will in fact lead; we will move forward by ourselves,” he said.
The Times notes that some of Wal-Mart’s previous environmental efforts seem to bearing fruit, and that “Scott said Wednesday that Wal-Mart had sold 145 million compact fluorescent light bulbs, which he said had saved enough electricity to forestall the need for three coal-fired power plants in the United States.”
The Wall Street Journal this morning reports on Scott’s declaration that Wal-Mart plans to step “into the lucrative pharmacy-benefits arena, in a move likely to shake up a field that has been dominated by just a handful of players,” and how the company has begun a pilot program to help other employers “manage how they process and pay prescription claims.”
The Journal writes: “Pharmacy-benefit managers, or PBMs, are the companies behind the cards that insured patients present at drugstores in order to fill their prescriptions. Most U.S. employers contract with PBMs to provide prescription-drug coverage to their workers, and in exchange, the PBMs promise to negotiate lower prices from retail pharmacies and obtain rebates from drug manufacturers. PBMs also may own their own mail-order pharmacies, and increasingly make much of their profits from big markups on generic drugs.”
Such a move by Wal-Mart would bring it into direct competition with CVS Caremark, Medco and Express Scripts, which between them generated close to $140 billion in sales last year, and processed or filled 387 million prescriptions just during the third quarter of 2007.
According to Bloomberg, Wal-Mart “will contract with a group of other employers to manage payment and processing of their prescription drug programs, a move Scott estimated would save the companies $100 million this year.
“It's also working with doctors to boost by fivefold the number of prescriptions its pharmacies fill electronically this year, to 8 million. That move will save money and cut medical errors, Scott said. Wal-Mart will also try to convert its workers' health records to electronic form by 2010, Scott told managers.”
The Times concludes that “with the new commitments, Wal-Mart is trying to cement its reputation as a leader in areas where it was once known as a laggard. The initiatives are the most visible sign to date that Wal-Mart, which spent much of the past decade defending itself against criticism of its business practices, has gone on the offensive.”
And in his speech, Scott aid: "It is important for all of us to understand that there are a number of issues facing the world that will profoundly affect our lives and our company. I am talking to you about issues like international trade, climate change, water shortages, social and economic inequities, infrastructure and foreign oil. Wal-Mart can take a leadership role, get out in front of the future, and make a difference that is good for our business and the world."
- KC's View:
- One of MNB’s enduring beliefs is that retailers need to get ahead of the issues in a more aggressive way, rather than whining about too much government intervention.
It strikes me that this is exactly what Wal-Mart is trying to do, in some very specific areas. There were some analysts who suggested yesterday that the idea of Wal-Mart selling electric cars and then selling the electricity with which to power them was somehow silly or absurd. But I don't think so. I think that this is a real vision of how the future could change certain basic assumptions about both retailing and energy, and shows a real commitment to the sustainability issues upon which Lee Scott is hanging his legacy.
Some companies talk about “outside the box” thinking, but Scott actually is doing it. (Besides, if the government won’t let Wal-Mart get into businesses like banking, Scott has to find other ways to broaden the company’s portfolio. This seems like a natural, unless the nation’s automobile dealers hire a lobbyist able to convince Congress that Wal-Mart getting into the car sales business somehow will bring about Armageddon.)
There are also those who say that Wal-Mart’s efforts in the health care and prescription drug arena are a convenient feint designed to take people’s attention away from “questionable business practices.” But that demonstrates a level of cynicism to which I am not willing to descend. I have to believe – or maybe I just want to believe – that Wal-Mart is simply trying to find another, better way to approach these issues. Some would prefer that the company simply raise its pay scales and benefits offerings, and that might, in fact, be the easier approach. But Scott seems to prefer the harder road – he wants to change the world.
I use that phrase advisedly. I recently had a conversation with another retailer on a different issue, and he said to me, “I’m not just doing this for my company. I want to change the world.” I find that to be both a compelling phrase and a magical notion.