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WAL-MART STORES HAS BEEN TRUMPETING ITS SUSTAINABLE business practices since June 2004, when Rob Walton, an avid scuba diver and chairman of the company his father founded, organized a meeting between then-CEO H. Lee Scott and two environmentalists. Wal-Mart was facing a deluge of negative press and litigation over everything from alleged violations of the Clean Water Act and immigration law to sex discrimination, with the latter having produced the largest class-action suit in U.S. history.

Scott came to the meeting simply wanting to get the critics off his back, as author Edward Humes recounted in his 2011 book, Force of Nature. But the meeting with Jib Ellison, a white-water river expert and founder of San Francisco–based consulting firm Blu Skye, and Peter Seligmann, founder, chairman and CEO of Arlington, Virginia–based nonprofit organization Conservation International, changed Scott’s thinking about the future course of one of the biggest companies in the world in terms of revenue.


Within the walls of Wal-Mart’s one-story, starkly furnished headquarters in Bentonville, Arkansas, Ellison convinced the Joplin, Missouri–born chief executive that going green would buttress his company’s profits — and image. “Lee, the thing you have to remember is that all this stuff that people don’t want you to put into the environment is waste. And you’re paying for it,” said Ellison, as recounted in Humes’s book. “If you really want to know something cool about this whole environmental and social side of the equation, here it is: It’s a massive business opportunity.”

Ellison used laundry detergent to illustrate how waste hurts the bottom line. Back then, laundry detergent was often sold in 120-ounce containers that were about the size of a gallon of milk. But there was a concentrated form sold in a container about the size of a ketchup bottle. At the time, consumers bought a total of 1 billion bottles of detergent in the U.S. each year. If they were all ketchup-size bottles, transportation costs as well as waste would be reduced.

Scott hired Ellison soon after and pushed through those changes. To this day, Wal-Mart executives, store managers and sustainability experts are quick to cite this anecdote to describe a turning point in the company’s history.

Wal-Mart CFO Charles Holley neatly sums up how sustainability fits into the discount retailer’s financial operations. “Everyday low price starts with being everyday low cost,” he tells Institutional Investor . “Sustainability is a great way to save costs.” The most important priority for the company now, he explains, is to maintain its “productivity loop,” in which Wal-Mart leverages its scale to reduce operating costs, leading to lower prices for its customers, which in turn feed growth, starting the virtuous cycle anew. The company earned $16 billion on $447 billion in revenue in 2011, compared with $9 billion in profits on $256 billion in revenue in 2004, the year of Scott’s change of heart.