Saving Business. Business Sustainability A Competitive Strategy for Business Leadership in the 21 st Century. November 2006

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1 Saving Business Business Sustainability A Competitive Strategy for Business Leadership in the 21 st Century November 2006 Tyler J. Elm Corporate Strategy Wal-Mart Stores, Inc.

2 Today there are 6.3 billion people. In 2025 there will be 8 billion people. What will it take to provide for everyone?

3 Asymmetric Growth v. Resources Population + Economic G6 + BRICs 100,000 80,000 60,000 40,000 20,000 GDP of G6 vs BRIC Countries (US$ Billions) BRICs G

4 Q1: What would it take for our company, in every country, to continue growing at current rate for the next 20 years?

5 Of the world's 100 largest economic entities, 42 are now corporations, not countries - CSIS, 2004

6 Q2: What will be the role of business in the 21 st century?

7 Business Sustainability Economic benefits derived from improved environmental and social outcomes

8 To be supplied 100% by renewable energy Stores 25% more efficient in 7 years Fleet 25% more efficient in 3 years To create zero waste 25% reduction in solid waste in 3 years To sell products that sustain our resources & environment 20% supply base aligned in 3 years

waste 25% reduction in solid waste in 3 years To sell products

10 Business WMT It about the business, not just the corporation Is NOT an environmental initiative Is a business strategy that derives value from: Experiential Learning Enhanced Outcomes

11 The Growth Curve Leaders are Visionary High experimentation low systemization Mistakes expected learning happens Loose, informal organization High energy and passion Formative Period Goal = Find a business model that works

learning happens Loose, informal organization High

12 The Growth Curve Leaders are Builders, Growers, Managers, Administrators Systemization and policies Hierarchy/ title proliferation More formal organization, communications & relationships Diversity of ideas diminishes New contrary data is challenged or rationalized Normative Period Goal = Exploit the business model EDLP Supercenters Distribution efficiency

relationships Diversity of ideas diminishes New contrary data is challenged or

13 Transitioning to the New Growth Curve Leaders must flexibly span many time horizons take responsibility for this curve and the next understand and live with paradoxical ideas, feelings and organizational realities appreciate the creative tension of chaos CHAOS Transformative Period Future Goal = Exploit the new business model EDLP+ Democratize sustainability Goal = Lead both curves simultaneously

organizational realities appreciate the creative tension of chaos CHAOS Transformative Period

14 Sustainable Value Networks

15 Sustainable Value Networks Climate Waste Products Alternate Fuels Global Greenhouse Gas Strategy Energy, Design Construction & Maintenance Global Logistics Operations & Internal Procurement Packaging Textiles Electronics Food & Ag Forest & Paper Chemical Intensive Products Jewelry Seafood China Sourcing and Government Relations

Operations & Internal Procurement Packaging Textiles Electronics Food & Ag Forest

16 Sustainable Value Networks Derive economic benefits derived from improved environmental and social outcomes Develop a sensing organization that is aware of the external business environment, and able to incorporate this perspective into business decisions to create long-term value Transition from a transactional organization to an organization based on value-added relationships

environment, and able to incorporate this perspective into business decisions to create

17 Our goal is to reduce our 2013 projected Carbon Footprint by 25% Facilities 20% - 7 yrs Store Prototype 25-30% -4 yrs

18 What can you do? What can we do together? What future will we choose to create?

19 Global GHG Strategy Network Maximizing the revenue opportunities for the business, and value to the customer in a carbon-constrained economy by creating carbon markets and utility pricing structures that reward innovation instead of pollution Renewable Energy Procurement Program Policy and Regulatory Change Supplier Energy Efficiency Program Customer Energy Efficiency Program

structures that reward innovation instead of pollution Renewable Energy Procurement Program

20 One Compact Fluorescent Lamp Uses 80% less electricity. Saves $30-$80 on power bill. Prevents 500 pounds of coal or 1 barrel of oil from being burned. Keeps a ton of greenhouse gas (CO2) out of the air. Lasts 8 to 12 times longer > keeps 8-12 bulbs from the landfill.

21 One CFL For Each Customer During Just One Week + $3 billion saved on power bills billion pounds. of coal prevented from being burned. + 2 million cars worth of greenhouse gases kept out of our air. (100 million tons) + 1 billion incandescent bulbs kept from the landfill. **Numbers are over the life span of one CFL bulb in comparison to an incandescent bulb.

22 Summary 1. The role of business in the 21 st Century will be different than that of the past 2. Consider sustainability as a strategic source of competitive advantage along the value chain 3. Develop aspirational goals to create business opportunity 4. Collaborate with key stakeholders, including those previously seen as peripheral or adversarial 5. Build the organizational capacity and new leadership skills required to manage value chains and new sources of value

23 Every single pressing social and global issue of our time is a business opportunity -Peter Drucker

24 Appendix Business Sustainability A Competitive Strategy for Business Leadership in the 21 st Century May 2006 Tyler J. Elm Corporate Strategy Wal-Mart Stores, Inc.

25 Transitioning to the New Growth Curve Leaders are Visionary High experimentation low systemization Mistakes expected learning happens Loose, informal organization High energy and passion Leaders are Builders, Growers, Managers, Administrators Systemization and policies Hierarchy/ title proliferation More formal organization, communications & relationships Diversity of ideas diminishes New contrary data is challenged or rationalized Leaders must flexibly span many time horizons take responsibility for this curve and the next understand and live with paradoxical ideas, feelings and organizational realities appreciate the creative tension of chaos CHAOS Future Goal = Exploit the new business model EDLP+ Transformative Period Democratize sustainability Formative Period Goal = Find a business model that works Normative Period Goal = Exploit the business model EDLP Supercenters Distribution efficiency Goal = Lead both curves simultaneously

26 Sustainability The Business Strategy Sustainability Environmental, Health, and Safety (EH&S) Management - ISO 14001, Life Cycle Analysis, pollution prevention, compliance, EH&S reporting, - EH&S and legal/ technical Corporate Social Responsibility (CSR) -Social audits, SA8000, philanthropy, community relations, CSR reporting, - Corporate communications Business strategy - Value chain innovation, sales & marketing, organizational change -Business managers and supply chain partners

27 Business Sustainability Challenge: Mindset Must Have: leadership at the top swim up-stream mentality strategy/business model (live within business)

28 Value Proposition

GEMI Survey. EHS Metrics and Processes. April 2007. Mark Hause GEMI Benchmark Chair

GEMI Survey. EHS Metrics and Processes. April 2007. Mark Hause GEMI Benchmark Chair GEMI Survey EHS Metrics and Processes April 2007 Mark Hause GEMI Benchmark Chair Outline Survey Recap EHS Leading Indicator Metrics Metrics Process and Practice Future Benchmarking EHS Metrics & Processes