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This past fall, Wal-Mart (NYSE: WMT) CEO Lee Scott announced a formal long-term goal to run his company on 100% renewable energy and produce zero waste. Needless to say, environmentalists were skeptical.
Many cried foul, charging that Wal-Mart was just the latest large corporation to engage in a bit of "greenwashing." Critics pointed out that Wal-Mart would be adding 60 million new square feet of retail space in 2007, and that it had even hired a high-priced Washington, D.C., public relations firm to help "spin" the nifty, new green cloak it intended to wrap itself in.
Are the critics right? Could the plan backfire? And what should investors make of the company's new eco-friendly policies?
Kind words and window-dressing?
Scott kicked off the initiative by announcing that Wal-Mart would be investing $500 million annually in technologies that reduce greenhouse gas. He also reported that the company would be designing and opening a couple of new stores that would be as much as 30% more efficient and hinted that Wal-Mart intended to save $310 million a year by increasing the fuel efficiency of its trucking fleet by 25% over the coming years. For good measure, the company even lent its public support to caps on carbon emissions. (As I pointed out in this piece last week, a number of companies, including General Electric (NYSE: GE), DuPont (NYSE: DD), and Alcoa (NYSE: AA), have also now jumped on the cap-and-trade bandwagon.)
The critics applauded all these statements, but also demanded proof.
A small step and a bright idea
Now, it seems, evidence is beginning to materialize. Recently, the company received favorable press for putting in more north-facing windows and installing mirrors to track the sun. Both steps will reduce the need for electricity by making more use of natural sunlight. The company has also started using used motor oil from its tire and lube shop, as well as vegetable oil from its delis, to help heat some stores.
Such things help on the margin, but whether they constitute major environmental initiatives is a matter of legitimate debate.
It's harder to dismiss some of Wal-Mart's other environmental actions. Last fall, I noted that Wal-Mart was engaging in a massive educational campaign to entice its customers to buy more energy-efficient "spiral" light bulbs.
In part, the initiative was aimed at helping its customers save money. Although the bulbs are six times as expensive as regular incandescent bulbs, their superior energy efficiency pays for itself in less than six months. They also last 13 times longer, which means the savings continue for years.
In larger part, though, the company announced that as part of the initiative, it wanted to replace more than 100 million older incandescent bulbs in its own stores with the more efficient spirals this year. That's more than window-dressing -- it's a heady goal. Lighting is one of the biggest uses of electricity in this country, and if Wal-Mart's effort succeeds, fewer coal-burning plants will need to be built, and millions of tons more carbon dioxide won't be spewed into the atmosphere.
If that isn't being green, I don't know what is.
More than just packaging
Another Wal-Mart initiative that garnered less attention is its plan to reduce its shipping-container and product-wrapping costs by 5% by 2013. Again, this might not sound like much, but consider that the plan is expected to save Wal-Mart $3 billion and spare its 60,000-plus suppliers an additional $11 billion.
Already, Unilever (NYSE: UN) has created more concentrated detergents that can be packaged in smaller plastic bottles. Procter & Gamble (NYSE: PG) and PepsiCo (NYSE: PEP) are also endorsing the plan.
In more practical terms, this implies that both transportation costs and carbon emissions will be reduced, because there will be fewer, lighter packages to ship around. Reducing packaging will also reduce the need for landfill space. In total, it has been estimated that the initiative will reduce carbon dioxide emissions by 667,000 metric tons annually.
Brighter days ahead
But Wal-Mart's biggest environmental initiatives are still to come. Earlier this month, the retailing giant issued a request-for-proposal to install as much as 100 megawatts of solar power in select stores. That's 60 times more than Google's solar facility and 200 times the size of the 480-kilowatt facility Microsoft has installed at its California campus.
This solar initiative is bound to capture other retailers' attention; more than any other company in America, every action Wal-Mart takes is scrutinized by others for its impact on the bottom line.
And here's the kicker: With the possible exception of the light bulb initiative, every environmental project will also save Wal-Mart big money. Whether it's reusing old motor and vegetable oil, strong-arming suppliers to reduce packaging, or installing swaths of solar panels, Wal-Mart's new environmental campaign is much more than a slick PR campaign to make it appear greener.
The plan is based in the hard-headed understanding that wearing a green visor does not preclude a company from seeing the world through a green lens. The prospect of saving greenbacks while going green should leave Wal-Mart investors feeling good that the company is doing the right thing -- and profiting in the process.
This article was originally published on January 31, 2007.
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At the time of publication, Fool contributor Jack Uldrich did not own stock in any of the companies mentioned in this article with the exception of Microsoft. The Fool has a strict disclosure policy.