Walmart: A Case Study on Corporate Social Responsibility
Roy L. Gilmore III
ORG530 – Business Ethics and Corporate Social Responsibility
Colorado State University – Global Campus
Dr. Jamie J. Klein
May 13, 2018
Walmart: A Case Study on Corporate Social Responsibility
Walmart Inc. (Walmart) also referred to as “firm”, is the world’s largest retailer of consumer goods. It was founded in 1962 by Sam Walton. After his service in the military, Sam Walton married and opened a variety store in Bentonville, AK. Largely due to the success of his store, he built the Walmart, with the premise that all consumers wanted to purchase low priced goods and would see value in shopping at one location for all of their needs. And, he was correct! Walmart has worldwide brand recognition as it traverses national and socioeconomic borders. Walmart provides consumers general merchandise including, but not limited to: apparel, health ; beauty products, household items, electronics, toys, fabrics, crafts, lawn ; garden, jewelry and shoes. Additionally, the company has a pharmacy, automotive services, and photo processing center. They are in direct completion with CVS, Home Depot, Walgreens, Lowes, Target, and every other consumer goods retailer on the planet. Sam Walton created Walmart with three policy goals: respect for the individual, service to customers, and striving for excellence (Walmart, n.d.) and the firm continues to operate under these guiding principles. The firm has established a dominant position within the market and continue to look for ways to increase market share and offer good and services to consumers are increasingly competitive prices.
In fiscal year (FY) 2018, for the first time in the company’s history, Walmart’s revenues exceeded $500 billion. Sales topped $459 billion, which led to a total revenue growth of 3%. Net income was $ 9.8 billion, a $3.78 billion decline from 2017 (Morningstar, n.d.). Walmart employs approx. 2.3 million workers worldwide, with 65% of the workforce in the United States (Walmart, n.d.). Walmart employs .04% of the total US population. Walmart is the largest retail store in the United States, and is larger than any other retail chain in the world, according to annuals sales figures. Walmart has 11,700 retail facilities globally and recently acquired the #1 ecommerce retailer in India, Flipkart. According to Fortune, Walmart is the #1 global company for the fifth year in a row, their stock symbol is WMT, they are in the Merchandise Retailing industry, and their GSIC is Discount Retailer. They are headquartered in Bentonville, AR and their Chief Executive Officer is Doug McMillon (Fortune, n.d.).
Below are two charts outlining Walmart corporate ranking, credit rating, and Fiscal Year 2018 performance.
Fiscal year (FY) ends in January. USD in millions except per share data. 2018-01
Cost of revenue 373396
Gross profit 126947
Operating expenses Sales, General and administrative 106510
Total operating expenses 106510
Operating income 20437
Interest Expense 2330
Other income (expense) -2984
Income before income taxes 15123
Provision for income taxes 4600
Minority interest 661
Other income 661
Net income from continuing operations 10523
Net income from discontinuing ops Other -661
Net income 9862
Figure 1. Walmart Inc. Annual Report. This figure illustrates FY 2018 income statement.
Walmart Stores, Inc. Credit Ratings Metric Latest
S;P Rating AA
S;P Outlook Stable
Moody’s Rating Aa2
Moody’s Outlook Stable
Fitch Rating AA
Fitch Outlook Stable
Source: company reports; eMarketer calculations Figure 2. Walmart Inc. Credit Ratings. This figure illustrates Walmart’s credit ratings as of May 6th, 2018.
Walmart’s CSR Performance
Walmart’s CSR principle which they refer to as “global responsibility” is “Walmart aims to provide safe, affordable food and other products to people around the world and is outlined in their Global Responsibility Report (GSR). Doing so in a way that enhances economic opportunity, environmental and social sustainability, and local communities creates value for our business and for society” (Walmart, n.d.). There are three key elements to their CSR mission: Opportunity, Sustainability, and Community. Let’s take a look at each of these areas and review the firm’s performance towards their goals.
Opportunity -“We aim to increase economic opportunity in retail and retail supply chains” is the mission statement of the firms opportunity focus. In FY2018, $630K was paid to their employee bonus program. In FY18, approximately 230,000 U.S. employees were promoted, and the Walmart Foundation funded the training for small to medium farmers, valuing one million dollars. They also provided 1.5 billion in global giving campaigns. Employee compensation is an integral component of any firms CSR plan. Employees have many expectations from firm, which include providing competitive compensation plans, training, and advancement. As of March 2018, Walmart U.S. average full-time field hourly wage is $13.99 (Walmart, n.d.). They provide health benefits that start around $26 per pay period for single person coverage, which is about $1 less than the national average (Kaiser Family Foundation, n.d.). Walmart understands the value of diversity employing some 2.5 million workers worldwide. Therefore, recruiting, engaging and retaining a diverse workforce is a strong focus. According to their FY2018 GSR, they we recruit from a wide range of institutions, events and conferences. Some of these institutions include historically Black Colleges and Universities. They also use gender-neutral job descriptions and diverse hiring slates (Walmart, n.d.). These kind of initiatives must be supported from the top down in order for them to be effective and impactful. Walmart has four C-Suite initiatives to promote opportunity within the firm. These include Catalyst CEO Champions for Change, CEO Action for Diversity & Inclusion, Paradigm for Parity, and Pay Equity. As a result, Walmart and the Walmart Foundation also referred to as the “Foundation” have invested more than $80 million in grants, collaborated with leading nonprofits, employers, government agencies and educational institutions to identify and implement innovations aimed at increasing the economic mobility of retail and related-sector workers
Sustainability – “We aim to enhance the sustainability of operations and value chains” is the mission statement with guides the firm’s sustainability efforts. Walmart claims 28% of their energy consumption is from renewable sources. In 2017, 78% of global waste was diverted from landfills. 34 million acres of land committed to fertilizer optimization programs. $200 billion of their sales of US goods were from supplier that participated in the Sustainability Index. The Sustainability Index, is a science-based, third-party tool that was developed in collaboration with universities, civil society and suppliers, provides visibility into the social and environmental practices and outcomes for a large number of supply chains. The Index gathers data on key sustainability performance indicators for specific supply chains. Walmart uses the Index with our suppliers in over 125 product categories, ranging from socks to salmon. Last year, in these categories, over 70 percent of our assortment came from suppliers who participate in the Index (Walmart, n.d.). As a result of their science based focus on sustainability, they became the first retailer to set a science-based target for emissions reduction. According to the U.S. Environmental Protection Agency (EPA) Green Power Partnership, as of April 25, 2018, Walmart ranks #3 out of the Top 30 Green Power Partners for green power usage (EPA, 2018). In 2005, Walmart helped to establish the Acres for America program. The programs commitment is to purchase and preserve one acre of wildlife habitat in the U.S. for every acre of land developed by the company. According to Walmart they have protected an estimated 1.3 million acres of land. Walmart launched Project Gigaton in 2017. It is a sustainability commitment to reduce emissions from value chains by 1 billion tons, also known as gigaton. They expect to meet their aggressive goal by 2030. According to the firm’s GSR, “achieving this ambitious goal would be the equivalent of removing 211 million passenger vehicles from the road for a year, according to the EPA’s greenhouse gas equivalency calculator” (Walmart, n.d.).
Walmart’s sustainability program also focuses on the sourcing of human capital. Deplorable working conditions in many factories and farms continue to be an issue in emerging countries. In response, Walmart has employed nearly 190 Responsible Sourcing associates around the world. They are tasked with working with suppliers to make a positive difference for workers in the supply chain. Walmart audits provides them with important information they use to address potential issues and make a positive impact for workers and communities. In FY2018, in accordance with our approach of focusing on areas of higher risk, Walmart reviewed and assessed compliance with their Standards for more than 13,000 audits (Walmart, n.d.). As a result, all 700+ Alliance-affiliated factories have undergone independent inspections, 234 factories have completed their Corrective Action Plans. Across all factories, 85 percent of issues requiring remediation have been addressed, 80 percent of items that are most critical to life safety, such as reinforcing structural columns, installing fire doors and installing sprinkler systems, which are often the most costly and time-consuming to address, have been completed.
Community – “We aim to help strengthen local communities” is the mission statement for the third element of the firm’s global responsibility initiatives. Walmart understand in order to operate globally, they must establish a commitment to the global community. This commitment includes providing support to the community in which they operate. Last year’s headlines were dominated by storms that demolished and displaced entire communities. In an effort to provide well needed relief, Walmart and the Foundation gave more than 38 million for hurricane relief, increased their donation of food to 675 million pounds in the U.S., and U.S employees volunteered more than 850,000 hours. Additionally, Walmart and the Foundation provided over $44 million in preparedness and in response to disasters around the world (Walmart, n.d.). As a retail supplier of much of the food consumed Walmart’s U.S. associates have volunteered more than 100,000 hours toward hunger relief. In Canada, they provided a $2.3 million grant to Food Banks Canada. U.S. stores teamed up with our customers and participating suppliers to raise more than $19.8 million for Feeding America. Walmart Canada also ran its inaugural Fight Hunger Spark Change campaign helping to secure over 8 million meals for Food Banks Canada (Walmart, n.d.)
Walmart CSR approach is a part of their overarching Environment and Social Governance program. Walmart’s Environmental and Social Governance (ESG) is rooted in the company’s purpose to save people money so they can live better. According to their GSR, that purpose is the principle of shared value. They declare that they are maximizing the value of their business by addressing important needs in society and can transform society through our business. That through delivery of their purpose they create socioeconomic opportunity, positively impact the environment and strengthen local communities. There ESG approach has (6) key approaches: creating shared value, salient issues, whole-system change, business leadership, aligned philanthropy, collective action (Walmart, n.d.). Walmart urges employees not only to do something good for the environment, but also for themselves and to encourage others to participate. According to Gerlsbeck (2010), in an interview with company president, David Cheesewright, “employees should commit to something good, tell their co-workers about it and then keep them up to date on their progress. At Walmart headquarters, staff have filled a bulletin board with some of their goals: one pledged to buy a tankless water heater; another wants to quit smoking. Someone else vowed to stop drinking pop while another person promised to make her own cleaning products”.
Walmart’s CSR Rank
Walmart ranks #51 according to CSRhub.com for sustainability efforts in various categories. Safer Chemicals, Healthy family upgraded Walmart’s rank from a B- to an A+ after reviewing their progress towards making their products safer to use. Both of these rakings are consistent with the amount of time and resources the firm has put into a well-diversified sustainability effort. Walmart sources information and collaboration from Non-Government Organizations (NGO) to help guide the program. The Environmental Defense Fund (EDF) provides valuable assistance to Walmart. According to Plambeck and Denend (2011), EDF invests substantial resources in helping Walmart. In exchange, they get the opportunity to influence the company in the adoption of aggressive sustainability goals. EDF is helping the company achieve the target by working with Walmart’s top 200 suppliers in China. This collaboration is an effort to improve the energy efficiency of their factories.
Strengths –Walmart has a well-established Global sustainability effort that encompasses the global community. They have created strong partnerships with government, community, and Ngo affiliates to realize their lofty CSR goals. They continue to leverage stakeholder feedback in an effort to improve and guide their CSR strategy. The scale of the operation gives the firm the opportunity to participate in sustainability efforts across the globe and socioeconomic communities.
Weaknesses –· As a result of their global presence, the must spend a lot of money on global outreach programs. This effort could result in expenses that exceed the organization’s revenues. The firm has many moving parts with suppliers coming from all over the world. The opportunity for a supplier to negatively impact the firms CSR efforts in significant. The same is true for employee relations as Walmart continues to expand its investment portfolio and opens new locations throughout the world. They must remain vigilant and ensure employees are engaged and bought into the plan.
Opportunities –Walmart has the opportunity to create a more sustainable operation with its logistical operation. There are a lot of efforts within how they are responsibly sourcing, but there is not a clear indication on how they are reducing their global carbon emission from the transport of those good. They should invest in technologies that will allow for the “green” transport of goods.
Threats – The demand on the firm to remain socially responsible can be taxing on the firm’s bottom line. In order to remain competitive and be seen as a socially responsible firm, they will have to continue to invest in costly improvements to the way they operate. Because they rely heavily on their brink and mortar stores for revenue, there is a greater impact to carbon emissions and waste. Competitors like Amazon, have a strong digital presence that enables them to reduce the overall impact their operation has on carbon emissions and waste. If they want to remain completive and relevant, they will have to build their digital infrastructure.
Overall, the case for Walmart as a socially responsible organization is a good one. They a very detailed and value added plan of global social responsibility. Where many global organizations tend to focus on their home country’s needs, Walmart has programs that are positively impacting the socially responsible consumption and production of the good from all of their suppliers. It is increasingly impressive that they are working alongside of NGOs and put a lot of focus on the development of their employee population. While they face scrutiny in the eyes of the world population for how their operation may negatively impact local business owners, they are ensuring that they are actively pursuing positive outcomes for the firm and the community in parallel.
CSRHUB. (n.d.). CSR information for Wal-Mart Stores, Inc. Retrieved from https://www.csrhub.com/CSR_and_sustainability_information/Wal-Mart-Stores-Inc
EMarketer. (n.d.). Wal-Mart Stores, Inc. | Credit Ratings. Retrieved from https://retail-index.emarketer.com/company/data/5374f24d4d4afd2bb4446614/53baadb4404bea08f8cc1261/ltst/false/wal-mart-stores-inc-credit-ratings
EPA. (2018, April 23). Green Power Partnership Top 30 Retail. Retrieved from https://www.epa.gov/greenpower/green-power-partnership-top-30-retail
Fortune. (n.d.). Walmart. Retrieved from http://fortune.com/fortune500/walmart/
Gerlsbeck, R. (2010). Getting green. Canadian Grocer, 124(6), 15-19,21-22. Retrieved from https://csuglobal.idm.oclc.org/login?url=https://search-proquest-com.csuglobal.idm.oclc.org/docview/750914015?accountid=38569
KFF. (2017, October 11). Average Annual Single Premium per Enrolled Employee For Employer-Based Health Insurance. Retrieved from https://www.kff.org/other/state-indicator/single-coverage/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
MorningStar. (n.d.). Walmart Inc. Retrieved from https://www.marketwatch.com/investing/stock/wmt/financials
Plambeck, E., & Denend, L. (2011). The greening of Walmart’s supply chain… …revisited. Supply Chain Management Review, 15(5), 16-23. Retrieved from https://csuglobal.idm.oclc.org/login?url=https://search-proquest-com.csuglobal.idm.oclc.org/docview/903785104?accountid=38569
Safer, Chemicals, Healthy Families. (2017, November 14). How does Walmart rank on toxic chemicals? Retrieved from https://retailerreportcard.com/retailer/walmart/
Walmart Inc. (n.d.). Company Facts. Retrieved from https://corporate.walmart.com/newsroom/company-facts
Walmart Inc. (n.d.). Related Links. Retrieved from http://stock.walmart.com/investors/financial-information/annual-reports-and-proxies/default.aspx