Walmart ups the ante on sustainability by working with suppliers to green their supply chain.
Earlier this year, Walmart announced its intention to squeeze 20 million tons of greenhouse gas emissions from its supply chain by end of year 2015. It’s an ambitious goal, and it’s not the first time Walmart has focused on greening their supply chain.
In 2005 they implemented SEEP, a Supplier Energy Efficiency Program, to share their internal environmental learnings and successes with their suppliers as a way to help their suppliers reduce costs and benefit the environment.
Over the past five years SEEP has racked up impressive results.
GreenTech TV.com’s Deborah Warner spoke with Jim Stanway, Walmart’s Senior Director of Global Supplier Initiatives – Energy, to learn how the program works and find out more about their future goals.
Q_DEBORAH:
What was the original premise behind SEEP?
Q_JIM:
It started as a small experiment. We’ve done a lot of energy efficiency work in our own facilities for many, many years. In 2005 we announced further energy efficiency goals to make our buildings even more energy efficient. In the process of doing that we increased our level of conversation with our supply chain…taking a look at their energy efficiency.
We sent two to three of our engineers out to a small textile company in Georgia just to see what they would find. It really didn’t take us long…about an hour…to identify changes that cut resulted in a 60 percent reduction of their electricity bill.
That experience really got us thinking about the potential for helping other companies out there who don’t have engineers on staff because energy engineering isn’t their specialty.
Q_DEBORAH:
How well has the program performed?
Q_JIM:
It’s sort of good news, bad news story. The good news is that the projects that we do save a lot of energy and money for companies. Since we started SEEP we’ve completed roughly 20 projects, and have another 40 or so companies in the pipeline. Our focus with companies is on capital projects that really move the needle to a significant degree and require innovative technologies that we know, that we use.
With the economy over the last 2-3 years, companies have found it difficult to make the capital investment to upgrade equipment. Hopefully we’re coming out of that phase and we expect to see a lot more activity.
Q_DEBORAH:
Let’s talk about how the program works. How do you work with the supplier?
Q_JIM:
When one of our supplier’s approaches us we send highly trusted, third party engineers out to their facilities to perform energy audits and identify potential energy efficiency improvements. A proposal is given to the supplier with the pro forma savings and costs included. Obviously the program is totally voluntary, so at that point it’s up to the supplier to decide whether to go forward with the implementation.
Q_DEBORAH:
Beyond the expertise that you provide, how much does it help that you’re Walmart?
Q_JIM:
When we begin working with a company, it’s rare that our ideas have not been thought of before by someone or some group in the company. But Walmart brings a couple of things to the table that can make a difference. First, we add an extra voice. Now it’s a different person, potentially their largest customer, asking the question and that adds a lot of credibility to the conversation around energy efficiency. So maybe their engineering staff was saying it, but Walmart coming along adding our voice, saying, “You know they’re right,” tends to free up capital more quickly than would happen otherwise.
And secondly, Walmart invests in a lot of the equipment, the same equipment, so we get good prices that we pass along to the company. We get a different price than a small or midsize business would get if they did it on their own.
Q_DEBORAH:
What results are your suppliers seeing?
Q_JIM:
A good example is our first project with one of our children’s clothing suppliers. As a result of the SEEP facility audit the engineers suggested multiple operational changes and capital improvements that ranged from simple a retrofit of their lighting systems to routine cleaning of air-conditioning coils. Walmart helped them with lighting design and capitalized on relationships with lighting suppliers to secure the best pricing for their retrofit. As a result, they saw a 71 percent year-to-year reduction in energy costs and a simple payback 9of twelve months on the capital investment.
Q_DEBORAH:
Those results are amazing. Is that typical for SEEP implementations?
Q_JIM:
Although we don’t see 70 per cent reductions in energy every time, the success stories are relatively similar. That’s the nature of SEEP. It has a tight focus on specific technologies, engineering solutions, that Walmart uses. We worked with Intradeco Apparel, a vertical manufacturing company that supplies casual clothing and thermal underwear to major retailers, including Walmart. SEEP provided evaluation, design and implementation services to Intradeco that resulted in energy efficiency improvements at its Miami, Florida facilities.
They retrofitted their fluorescent systems and added occupancy sensor controls in the warehouse area, and will see a simple payback of 4.2 years. They also implemented HVAC controls and plug load management in office areas that will have a simple payback of 2.7 years.
So you can see, the results we’re seeing are significant in terms of the environmental benefit as well as the financial benefit the companies.
Q_DEBORAH:
How are your suppliers responding to your most recent announcement to reduce your supply chain greenhouse gas emissions by 20 million tons by the end of 2015?
Q_JIM:
With the new goals for the supply chain we get questions. They want to know how it will impact them, what it means for them. We get a lot of technical questions, but in the end it is generally very well received because Walmart’s approach to this is to do things that provide both an environmental and financial benefit. There has to be a financial benefit to the supplier, to the customer and to Walmart. You can’t do one without the other.
Q_DEBORAH:
Obviously Walmart is playing an important role as a thought leader and practitioner in the arena of energy efficiency and environmental sustainability. How do you perceive the impact that you’ve had?
Q_JIM:
Walmart’s focus on its own carbon footprint has elevated environmental sustainability in the minds of our supply chain so they are, without a doubt, thinking about energy efficiency in their own operations more and hopefully that’s translating into actions.
The suppliers who have participated in SEEP have seen significant financial benefit without exception. As a result, the environment has gotten better. And when our suppliers lower their costs, it lowers costs for our customers. At the end of the day it’s a win for the environment, for Walmart, our suppliers, and our customers. That’s what this is all about.