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Force of Nature

HarperBusiness

Chapter One

Bentonville, Arkansas
Spring 2004
The biggest company in the world had a problem.
The problem wasn't lack of business: the company had at
that time 176 million customers—a week. It wasn't an inability to find
talent: only the People's Liberation Army of China, the United Kingdom's
National Health Ser vice, and the massive Indian Railways
employed more people. And it certainly wasn't money: with annual
revenue that year of $285 billion, it was not only the biggest company in
the world; if it were a country, it would rank ninth among nations, just
behind China and ahead of Russia, Korea, Australia, and Saudi Arabia.
The problem was the company had become a big, fat, and not
particularly well-liked target, attracting more lawsuits than any other
corporation in the world. The year was 2004, and there were endless bad
press, protests, political opposition, investigations, labor problems,
health insurance problems, zoning problems, and, more than ever,
environmental problems.
That year Wal-Mart—with its 12,000-mile, computer-controlled
supply chain feeding 7,022 stores, its immense fleet of 7,200 trucks
in constant, diesel-belching motion, its continual bulldozing and
construction, and its voracious demand that suppliers cut costs at any
cost—had become a poster child for global warming, mass extinction,
smog, and urban sprawl. Many observers believed the bad rep to be
deserved. The CEO, H. Lee Scott, was sick of it—and the threat it posed
to the company's bottom line. And he knew that, despite Wal-Mart's
unmatched wealth and power, the threat was real, one that could not
be dismissed by the usual tactic of attacking the critics as snobbish
elites who had no sympathy for customers trying to save a few hard-
earned bucks. An internally commissioned study, eventually leaked to
the press (much to Scott's irritation), showed that as much as 8
percent of Wal-Mart's customer base had stopped shopping there because
of the company's increasingly bad reputation. On Wal-Mart's scale, 8
percent represented millions of customers and hundreds of millions in
revenue—the margin between a successful fiscal year and a disaster.
Scott cast about for a solution to a straightforward question, the
gist of which summarizes how just about every U.S. CEO thought
about environmentalists' complaints at the time: What do I have to do
to get these guys off my back?
Scott adopted what he would later describe as a defensive
mindset. Attacked—unfairly, he felt—he wanted to hit back at the critics
wherever they could be depicted as unreasonable or incorrect. He also
thought it prudent to shield the company from further criticism by
identifying some positive green gestures Wal-Mart might undertake
to placate environmentalists and heal the PR wounds—or, at the very
least, to limit the company's "exposure." That was the term Scott used,
exposure, and it was a telling word choice, a common corporate term
used to describe business behavior that, if publicized, might threaten
the company's bottom line or a CEO's job security. The term had been
appropriated years before from the legal community, where it was used
to quantify the risk of being sued or prosecuted, and the lawyers had
in turn lifted the concept from the military, where its true meaning
remained refreshingly clear: the opposite of "cover." Limiting
exposure, whether in the military, legal, or corporate sense, has nothing to
do with reform or change or "going green" and everything to do with
staying out of the line of fire. Scott's goal, then, was to take cover and
get past this distracting image problem so the company could continue
with business as usual: selling more stuff at lower prices to more
customers than anyone else in the world.
Toward that end, Scott was willing to embrace some reasonable
environmental philanthropy, even if he felt coerced. That would enable
Wal-Mart to point proudly at the ecological aspects of its program of
"corporate social responsibility"—a purposely vague term for "good
works" on which a company spends time and money even though the
activities do little or nothing to increase shareholder value. Although
this can sometimes accomplish great things—the considerable relief
efforts Wal-Mart would soon undertake in the wake of Hurricane
Katrina in 2005 would be rightly celebrated as the epitome of meaningful
corporate social responsibility in action—"CSR" is sometimes a
derogatory term in the corporate world, a source of as much resentment
as pride. Wal-Mart's leadership had always asserted that the greatest
social good the company could do was to offer products that people
use every day at the lowest price possible, saving real and needed cash
for its customers. Many of its customers, after all, live paycheck to
paycheck; one out of five gets by without a checking account. That was
Wal-Mart's founding mission and its competitive edge. By that
definition, Wal-Mart asserted, it already did enormous good in the world by
helping the working family stretch its dollars. The added burden of
spending on corporate social responsibility ran counter to Wal-Mart's
goal of reducing prices as much as possible. It was a moral and social
good, sure. But it didn't help Wal-Mart serve its customers. And it
didn't help Wal-Mart compete.
It never occurred to Scott, or to anyone else in the company's
leadership, that the answer to Wal-Mart's environmental woes might
lie not in defending the core business of Wal-Mart but in changing
that core—and that doing so could make Wal-Mart more competitive
rather than less.
And, really, why would he think such a thing? Wal-Mart ranked
among the most successful enterprises on the planet, having grown
from the randomly stocked, pile-it-high-and-sell-it-cheap department
store Sam Walton opened in 1962 in Rogers, Arkansas, to a
company that could decide one day to enter the grocery business,
as it did in 1990, and within the decade become the leading seller
of groceries in the country. Wal-Mart soon had more grocery sales
than its two nearest competitors combined, Safeway and the former
market leader, Kroger, which had been in the grocery store business
for more than a century. Wal-Mart's core business model had taken
it from zero to grocery market leader in less than ten years, so awash
with cash that it could open seventeen super center stores (average
size: 200,000 square feet) every month, sell the same salmon and
celery and canned soup as its competitors for 15 percent less, and
drive twenty-nine supermarket chains into bankruptcy in the process
In a good year, the floor space of its newly constructed super-
centers would be enough to pave over the world's most visited urban
oasis, Central Park in New York City.
The idea that there might be something wrong with this core
business model and that it had to be fixed—not just for the good of the
planet but for the good of the company—would have seemed absurd to
Lee Scott if anyone had articulated such a seemingly far-fetched idea.
But that was about to change.
The roots of the change are varied, but its earliest moments can
be traced to a conversation in early 2004 between Jib Ellison and his
friend and mentor Peter Seligmann, founder, chairman, and CEO of
the environmental organization Conservation International. Seligmann's
nonprofit had become a major force in the battle against habitat
destruction and deforestation, and Seligmann had garnered the sup-
port of an impressive list of tycoons and celebrities, from the actor
Harrison Ford to the founder of Intel, Gordon Moore, to S. Robson
"Rob" Walton, the chairman of the board of Wal-Mart, eldest son of
the company's founder, and tenth richest man in the world at the time.
Seligmann, a legendary environmental rainmaker, routinely brings
in a hundred million dollars or more a year for Conservation
International from people like Moore and Walton. Ellison had almost gone to
work for Conservation International years earlier, but his wife had not
wanted to move from California to the East Coast, where Seligmann is
based. Ellison had instead partnered with three other young corporate
consultants to start up a boutique business strategy firm in the San
Francisco Bay Area, a successful venture named The Trium Group,
that had taken him in a different direction from the concerns of
Conservation International. Now the former river guide was on sabbatical
from Trium, giving himself twelve months to test whether he could
make a living advancing his long-simmering ideas about a new sort
of corporate environmentalism. He had flown to Washington to the
Conservation International headquarters to ask for Seligmann's help.
"Your board of directors is filled with the captains of industry. I
know they're giving you millions of dollars a year to do what you do so
well," Ellison said. "But back home it's another story. Their
organizations are doing nothing."
Ellison's argument: These same corporate scions should—and
could—be convinced to go beyond the sort of philanthropy that
supported Conservation International. Their next step, a potentially
world-changing one, should be to remake their businesses into
environmentally sound powerhouses. What if doing good for
environment didn't cost the company but made more money for it? In
Ellison's view, businesses could seek out competitive advantage over
other brands by pursuing energy efficiency, leaner packaging, cleaner
plants, conservation, and system wide transparency and sustainability.
They could, in short, boost their profits, their image, and their market
position through the elimination of waste—because waste is not only
bad for the planet, it costs money. Yet every day, U.S. companies that
prided themselves on penny-pinching and efficient operations were
squandering billions of dollars because they were riddled with waste
without realizing it. Ellison was convinced that if waste elimination and
sustainability were made a core strategy, not viewed as a pilot project
or as a bit of good citizenship but baked into the culture and mission of
a company, it would provide a winning business model. He had made
a study of it, he told Seligmann, and had documented a small number
of businesses that were succeeding with this approach of serving both
profit and planet—Patagonia, for one, had made it a core purpose of
its business and developed a loyal customer base; Nike had reversed
its reputation for sweatshops and environmental disregard and gained
market share in the process. The solutions were all there, he said, just
waiting, hidden in plain sight.
"Give me five minutes with any of them," Ellison begged Seligmann
"That's all I ask. A CEO-level conversation."
Asking Seligmann to take advantage of his coveted access to busy and
wealthy chief executive officers, whose time and meetings are scripted
months in advance, was no small favor. Ellison's notions about sustainable
private enterprise weren't just outside the mainstream in 2004—
they ran counter to the knowledge and experience of most American
CEOs. By and large, they heard the word "environment" and thought:
regulations, bureaucracy, lawsuits, obstacles, delays, added costs, bad
press. They did not think: business opportunity. Ellison's consultancy
partners back in San Francisco thought he was, at best, too ambitious.
Ellison was blunter: "They think I'm crazy," he admitted. But Seligmann
did not think Ellison was crazy. Intrigued, he promised to think
about how he might help. It turned out that Seligmann had already
engaged some corporate leaders in just the kind of conversation Ellison
had in mind. The timing couldn't have been better.
Three months later, without prelude, a bland e-mail materialized
on Ellison's home computer in Healdsburg in northern California
wine country. Seligman had shot him one short line: "Rob Walton
will call you."
The name seemed familiar, but Ellison couldn't quite place it and
he had to look up Walton on the Internet. The first words that popped
up in the Google search were " . . . officially took over as Wal-Mart's
Chairman two days after his father's death," and Ellison realized the
opportunity he had sought from his friend at Conservation
International had arrived, bigger, better, and more fraught with possibilities
than he had imagined.
Seligmann, he would learn, had just begun a series of eco-expeditions
with Walton and his sons—to Costa Rica, Madagascar, Brazil, the
Galápagos Islands. This relationship, and the knowledge of endangered
species and landscapes it was giving Walton, led the magnate to donate
$21 million to Conservation International through the Walton Family
Foundation to support ocean habitat protection. On one of their trips,
Seligmann had pitched the idea Ellison had championed: that the
Wal-Mart juggernaut itself could be a far more powerful force for
environmental reform than any donation, no matter how generous.
Walton seemed interested in hearing more but pointed out that as
chairman of the board he was removed from day-to-day operations at
the company. Such ideas would be more appropriately discussed with
the chief executive officer. What Walton could do, however, was make
such a discussion possible—he would arrange for Ellison to get his
wish, a CEO-level meeting. And so, a few weeks later, with Seligmann
and Walton in attendance, Ellison sat down at Wal-Mart's famously
modest redbrick, tin-roofed headquarters in Bentonville, Arkansas,
with Lee Scott, the leader of the biggest company in the world.
The meeting felt like an audition to Ellison, and with good reason.
Scott already had met with several prominent environmentalists
and green consultants, among them Amory Lovins, the head of the
famed Rocky Mountain Institute and the recipient of a MacArthur
Foundation "genius grant." Now the CEO looked over the thin,
casually dressed Ellison with a wary smile. Lovins was a rock star, but
Scott had never heard of this guy "Jib" or his fledgling Blu Skye
Sustainability Consulting. He would never have taken the meeting
but for the intervention of Rob Walton.
Just the third chief executive since Wal-Mart's founding almost a
half century earlier, Scott was the only top executive at the company
to have gotten his start managing the trucking division rather than a
retail line, and he would be the last CEO to be groomed by company
founder Sam Walton. He was a practical man, a workaholic CEO, and
he was not sure how he felt about this river guy in blue jeans.
Ellison had spent a third of his adult life sleeping in a tent next to rivers
around the world and rarely set foot inside a Wal-Mart, unless it was to
scrounge supplies during river trips. The gulf between the two seemed
to expand as Ellison, in introducing himself, excitedly described his
family's current lifestyle: "Now we live on eighty-five acres off the grid
in northern California and—"
"Whoa, whoa, whoa," Scott interjected, staring at Ellison. "You live where?"
"In northern California," Ellison repeated.
"No, what did you say before that?" Scott asked. "Off the grid?
What exactly does that mean?"

(Continues...)

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Excerpted from Force of Nature by Edward Humes Copyright © 2011 by Edward Humes. Excerpted by permission of HarperBusiness. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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