Walmart: Working toward becoming a “regenerative” company

| Interview

As the world’s largest retailer, Walmart is conscious of the catalytic role business can play in helping to create momentum for a bigger focus on sustainability—not only in the retail space, but in assisting communities, suppliers, and other stakeholders for the ultimate good of the planet.

Kathleen McLaughlin explains that Walmart has been aware of the importance of sustainability since it was founded more than 60 years ago. Yet, it was in the wake of the devastation left by Hurricane Katrina in 2005—when Walmart found itself simultaneously acting as a “first responder” providing aid, as well as being severely affected itself by the destruction—that it committed itself to leveraging its capabilities and international footprint to create measurable sustainability progress beyond its own operations.

Kathleen McLaughlin sat down with McKinsey’s Tony Hansen to discuss Walmart’s sustainability journey. She shares practical strategies implemented against the backdrop of examples of measurable steps taken, projects launched, and philanthropic investments made. An edited version of their conversation follows.

McKinsey: In 2020, CEO Doug McMillon committed Walmart to becoming a “regenerative company.” What does this mean in practice?

Kathleen McLaughlin: When Doug committed Walmart to becoming a regenerative company, he was articulating our ambition to have a net-positive impact on people and the planet through our business, which we believe has roots back to our founding over 60 years ago.

Throughout the 1990s, Walmart grew very quickly and critics were calling for the company to step up and play a bigger, more positive role in addressing social and environmental challenges in society. Walmart’s experience during Hurricane Katrina—of using our capabilities to assist beyond our day-to-day business—resulted in an inflection point and new aspirations that included working toward 100 percent renewable energy, raising wages, and enhancing sustainability. Doug’s aspiration for us to become a regenerative company is a natural extension of those earlier goals.

Our regeneration agenda prioritizes four key themes at the intersection of stakeholder needs and our business: creating opportunity (through jobs and sourcing), enhancing the sustainability of retail and product supply chains, strengthening the resilience of communities in which we operate, and upholding the highest standards of ethics and integrity as an international business.

We aim to use our business strengths in collaboration with others to help bring about positive outcomes in these four arenas for stakeholders and, therefore, our business. We collaboratively monitor and report on progress against an array of performance indicators—some quantitative (like emissions reduction) and some qualitative (like digital citizenship).

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McKinsey: Walmart has also committed to regenerative supply chains, including sourcing 20 commodities more sustainably by 2025. How are you going about this?

Kathleen McLaughlin: We aim to make the sustainable choice the everyday choice for our customers. This means identifying priority environmental and social issues, working collaboratively to rewire supply chains, and monitoring and reporting on progress. For example, one of our biggest goals relates to nature: seeking to conserve, restore, or more sustainably manage 50 million acres of land and one million square miles of ocean related to the production of agricultural and seafood commodities.

We have the benefit of being able to pilot initiatives through our private brands. Many of our private brand commodities such as coffee, tea, bananas, pineapples, and fresh and frozen seafood, have achieved—or are near to achieving—100 percent certification status with independent third parties such as the Rainforest Alliance or the Forest Stewardship Council; nearly 80 percent of our operational waste is diverted from landfill, and nearly two-thirds of our private brand packaging is designed to be recycled, reused, or composted. We have also reduced operational emissions by more than 20 percent since 2015 while growing our business, and nearly 50 percent of our electricity globally comes from renewable sources.

We take a holistic approach to facilitate systemic improvements in social and environmental outcomes, experimenting with regenerative agriculture and other innovative approaches in collaboration with farmers and their communities, suppliers, NGOs, and government agencies.

For example, we are working with ranchers across 748,000 acres in various states on a pilot beef project to promote regenerative grazing practices. And, in Arkansas, a regenerative pilot across nearly 10,000 acres is being implemented in the production of over 25 percent of Walmart’s private label long-grain rice—thus far, this is estimated to have reduced groundwater usage by approximately 800 million gallons and greenhouse gas emissions by 15 percent.

The company is also contributing to the improvement of sustainable sourcing standards for seafood. For example, we are a member of the Seafood Task Force, which addresses forced labor and illegal fishing in the seafood industry; we have fostered the development of vessel monitoring practices; and we have collaborated with The Nature Conservancy and the government of the Republic of the Marshall Islands on an innovative approach to more sustainable tuna sourcing.

Our numerous philanthropic investments include support for organizations such as the World Wildlife Fund. Since 2022, we have made over $40 million in grants to support sustainable supply chains—for example, a grant to Conservation International supports regenerative agriculture practices in the coffee industry in Colombia.

McKinsey: How is Walmart working to decarbonize its supply chains?

Kathleen McLaughlin: In 2017, we launched Project Gigaton—our initiative to decarbonize the retail product supply chains that account for our “Scope 3” greenhouse gas emissions (those not directly under our control). This is part of our Science-Based Targets initiative (SBTi). The goal is to engage our suppliers to reduce, avoid, or sequester one billion metric tons of emissions from product supply chains by 2030.

There are six key arenas for action: energy, transportation, nature (primarily regenerative agriculture and deforestation), product design, packaging, and waste. In each arena, we provide support to suppliers to set SMART goals, as well as playbooks, webinars, and trainings to accelerate progress through best practice insights.1 The platform enables suppliers to access third-party resources, such as packaging innovation companies and access to financing and aggregate power purchase agreements. Importantly, the platform also supports integrated reporting tools on carbon disclosure, packaging, responsible recruitment, and forest practices or certifications.

To date, we have engaged with over 5,200 suppliers, and 750 million metric tons (MMT) emissions reduction or avoidance has been reported.

Project Gigaton is about more than just emissions reduction; we also utilize this platform to address nature, waste and circularity, and responsible recruitment goals. Some recent examples relate to agricultural commodities, where we engaged suppliers and NGOs—like The Nature Conservancy, World Wildlife Fund, and Environmental Defense Fund—to identify best practices and key performance indicators for commodity production.

Our ambition is to rewire product supply chains for sustainability so that customers do not have to make a choice between an affordable product and a sustainable one.

Kathleen McLaughlin

McKinsey: How do you connect Walmart’s work in sustainability to your customers, and have their expectations changed over time?

Kathleen McLaughlin: Our data suggest that customers increasingly care about sustainability, but that they sometimes feel overwhelmed and generally are not willing to make tradeoffs of time or money. Therefore, our ambition is to rewire product supply chains for sustainability so that customers do not have to make a choice between an affordable product and a sustainable one. While we aim to make our overall assortment more sustainable, we also want to simplify choices for customers where possible.

For example, we created Built for Better shopping icons that denote items with certain sustainability certifications on our e-commerce shopping site. We have asked suppliers to adopt the on-pack How2Recycle label to help customers figure out how to recycle their packaging, and we have worked with others across the industry to simplify date labeling for freshness and food safety.

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McKinsey: What roles can the private sector play in helping implement the Global Biodiversity Framework?

Kathleen McLaughlin: As I mentioned earlier, Walmart and the Walmart Foundation have set a goal to conserve, restore, or more sustainably manage 50 million acres of land and one million square miles of ocean. Based on a high-level analysis done with Conservation International, this is roughly equivalent to the land and ocean area required to produce priority commodities for Walmart customers. We aim to strengthen the resilience of product supply chains for generations of customers, farmers, and other producers while helping protect and restore the vital ecosystems on which we all depend.

We use multiple strategies to make progress on this goal. For example, we identify and assess nature-related dependencies, impacts, risks, and opportunities in our operations and product supply chains based on perspectives from leading science-based NGOs, suppliers, and other stakeholders. We foster more sustainable production of commodities through our sourcing standards, supplier engagement, best practice sharing, and capability building.

As a company, we also are transitioning operations toward more regenerative practices, and support the conservation and restoration of critical ecosystems through philanthropy. We advocate for and invest in enablers of systemic change, such as public policy, measurement tools, certification programs, and capacity of organizations to accelerate the adoption of better practices. To keep track of what we are doing, we govern our progress internally, and externally we communicate through our environmental, social, and governance (ESG) issue briefs and related reporting.

McKinsey: Based on your experience at Walmart, what suggestions do you have for other business leaders who are committed to making sustainability or regeneration (or both) core to their business?

Kathleen McLaughlin: What I’ve learned is that you have to listen first—to customers, employees, suppliers, community leaders, policy makers, and scientists—to gather their views on challenges they face and their expectations of how your company can help. It’s also key to take a “shared value” perspective—develop strategies that address sustainability issues in ways that also create business value, including not only mitigating risk but also innovating to address cost, revenue, quality, and resilience. Early action should be focused on those initiatives that create business value as well as accelerate impact on environmental and social outcomes; that will create momentum and inspire others to act. And last but not least, be transparent about the challenges as well as the victories—to drive innovation and focus on overcoming bottlenecks to progress.

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