A disappointing debut with too many gaps

Wal-Mart has published its long-awaited first sustainability report. US-based reporting specialist Kathee Rebernak provides some thoughts on its scope and value

Wal-Mart’s inaugural sustainability report is full to bursting point with facts and figures that highlight the company’s vast size and scope.

It is, after all, the world’s largest retailer, the largest purchaser of organic cotton, and the largest consumer of electric power in the US, among other superlatives. As the company admits, its sheer scale means that even one small change in company operations could have an enormous impact across the global supply chain.

Readers of the report will no doubt be left with the impression that Wal-Mart does indeed care about making its business more sustainable. Its Sustainable Value Networks, which bring together academics, consultants, regulators and managers, each focus on a specific area of operations and have implemented myriad programmes designed to help the company and its suppliers operate more sustainably.

In addition, Wal-Mart’s decision to take responsibility for the carbon footprints of not only its suppliers but also its customers means that, as the company says, it ‘could have a net negative effect on absolute carbon.’

Yet the report often raises as many questions as it answers. Despite numerous programme descriptions, stated goals and statistics, careful reading reveals a surprising lack of context, undefined metrics, and goals that often turn out to be meaningless. These mis-steps go well beyond those typically committed by first-time reporters, and it is arguable that Wal-Mart should know better, especially given the cadre of sustainability experts it has engaged. Unfortunately, the lack of attention to context and specificity invites the question whether Wal-Mart’s systematic lack of clarity is intentional. It certainly provides critics with useful ammunition.

Many metrics are stated in absolute figures only, so that readers must get out their calculators to understand them in context. In addition, Wal-Mart obscures its performance by leaving out clear definitions for certain metrics. The diversity section, for example, presents the numbers of women and minority ‘officials and managers’ without clarifying these titles. Is an assistant store manager a manager for these purposes? How many women and minorities occupy executive offices?

What’s more, boldly stated goals for reducing energy consumption appear less ambitious upon closer inspection. Wal-Mart says it is ‘committed to reducing greenhouse gas emissions by 20 per cent in its existing stores by 2012’. But 20 per cent of what? While it states elsewhere in the report that it has established a 2005 baseline for reporting on its carbon footprint, the report does not clarify whether this same baseline will be used. Another goal is even murkier: ‘By 2012 we are committed to reducing our total CO2 emissions by 25 per cent compared to what they would be without our sustainability efforts.’ While such a target may appear ambitious, it is in effect no goal at all.

The report also declines to discuss the company’s failings as openly as its successes, although this is common among reporters. In discussing its diversity performance, for instance, the report omits to mention an ongoing class-action lawsuit, filed in 2001, that alleges that Wal-Mart discriminates against women with regard to pay and promotions.

Lack of clarity is a general problem; statements often verge on incomprehensibility. For example, the company states that ‘we can play a unique role in aggregating compensation for carbon reduction and passing the value of that compensation onto our customers’. One can make assumptions about what this means, but readers should have Wal-Mart’s intentions defined in clear, accessible language rather than having to rely on guesswork.

The report is largely silent on stakeholder concerns, and shows little evidence of engagement with interested parties. Future reports should include stakeholder input and demonstrate the company’s responsiveness.

Wal-Mart could have avoided this and other problems simply by applying the ten reporting principles in the Global Reporting Initiative’s Sustainability reporting guidelines, which it did not. Used by well over half of the Fortune Global 250, these could have helped Wal-Mart improve the quality, relevance, and reliability of its report.

As chief executive Lee Scott says, ‘in the end, this report is just a step’. Even this step alone by Wal-Mart is a positive one and could signal a move toward greater sustainability in the marketplace. But stakeholders will be expecting strides, rather than steps, from Wal-Mart in the future. With its power to influence thousands of suppliers and millions of people the world over, Wal-Mart truly has the potential to be a force for positive change. By judiciously applying the right tools, its communications efforts can be effective as well.

Kathee Rebernak is chief executive of Framework:CR, a consultancy specializing in CSR reporting. A version of this article also appears at www.sustainablelifemedia.com