This post is part of a series of interviews with thought leaders to explore issues on the frontier of the complex domain of ESG.
What is the cutting edge of sustainable business in 2022? Recent years have seen a transition away from a ‘do no harm’ approach to something altogether more ambitious: actively improving the state of systems. In the case of Walmart and its Sam’s Club membership stores, forging a new path as a ‘regenerative company’ is aimed at targeting not just lower emissions, but protecting or restoring 50 million acres of land and one million square miles of ocean by 2030.
“We want to be the sort of organization that creates value, doesn’t extract value,” says Sam’s Club CEO Kath McLay. “If you apply that thinking to your strategy in real life, then you see the fundamental shift in becoming a regenerative company.”
McLay is CEO of Sam’s Club, whose parent company, Walmart, began its journey toward sustainability a full 15 years ago with a drive towards zero waste, 100% renewable energy and an eco-friendly supply chain. Walmart raised the stakes two years ago, vowing to reshape itself into a regenerative company—one that designates nature and humanity at the center of its business practices. As an innovator and incubator within Walmart, Sam’s Club plays a special role in cultivating strategies—and culture—that can help achieve these ambitions.
To learn what this transformation takes in practice, the Aspen Institute Business & Society Program’s Executive Director Judy Samuelson sat down with Kath McLay at the recent Aspen ESG Summit. In a wide ranging conversation (edited here for clarity), McLay made clear that employee engagement has been a critical driver of the move to a become a regenerative company—and to the success of the business.
Judy Samuelson: I want to start by asking about the culture of Sam’s Club, and how that fits into Walmart’s overall strategy to go beyond conventional sustainability targets. Tell me, when you arrived at Sam’s Club, was the culture well-established?
Kath McLay: Part of the culture was well-established. We see ourselves as innovators—I mean, $73 billion in annual sales is not a small business, but in the shadow of Walmart we can try things and be more nimble. The average Walmart has 120,000 items in it; the neighborhood market, about 30,000. Sam’s Club has 6,000. Every item needs to earn its place in the club, it has to have great quality and disruptive value. There’s also a subtle but profound difference in our relationship with our members.
There are two things that I have been deliberate about adding to that culture. First is the element of always bringing problems to the table, creating an environment where it’s safe to put things that are broken on the table and rally to fix them. Another is a willingness and desire to be obsessed with getting feedback from our members. We have different ways of getting feedback, but the most insightful is when our members on Facebook talk to each other—it’s the truest form of feedback. We hyper focus on that because it gets us in front of: How do we create value? What are the things we need to fix? For me, it’s a great north star, a compass.
JS: How about employees? Do they help define the culture?
McLay: We’ve always run listening sessions. Now we run regeneration sessions, sparking in people’s minds ideas about what is regeneration, and what is their role within it. When you do that, you typically get very probing questions back from associates. In a way, they are holding us accountable and help shape how we move forward.
JS: The goal to become a regenerative company comes with massive responsibility. The commitments Walmart has set include zero emissions across all operations by 2040 and to protect, manage or restore 50 million acres of land and one million square miles of ocean by 2030. How do you and the board know you can pull this off?
McLay: [Walmart’s supply chain consortium to reduce one billion metric tons of emissions], Project Gigaton showed us that if you invite people to the table, you make it a shared learning experience. The whole is bigger than the individual parts. We have multiple pillars under regeneration. You mentioned some of the key goals around environmental sustainability, but we also have ambitions around the opportunities we create for associates, and the role we play within communities, as well as ethics and integrity. We run workshops to educate and empower our associates so they can then be advocates and catalysts for how this comes to life.
For example, we want our private brand, Member’s Mark, to be made with the planet and member in mind. So our members have a voice in creating the products, and we have commitments around getting to 100% fair trade coffee, 100% sustainably-sourced seafood, among other areas.
JS: Is there anything that surprised you from your meetings on becoming a regenerative company?
McLay: I was surprised by the turnout. The first one, it was bucketing rain and we had just come back to the office after COVID. It was pouring but we had a packed auditorium. It shows you that there is an inherent desire amongst our associate base, “I want to understand and I want to play a role in this.”
JS: How do you take these large targets and make them actionable at an everyday scale?
McLay: You get very specific around the steps to get there. You can set a bold ambition, but you then break it down and say, “These are the elements of the program and this is how we track to get there.” Getting to fair trade on coffee was a pretty straightforward path—it wasn’t easy, but it was straightforward. There are other commitments around removing plastics and getting to recyclable and reusable plastic that we’ve got a path to get 75-80% of the way there, but we don’t know how to solve the last 20% yet.
So, you’ve got to work on having the ambition, the metrics, the path, and then work on innovating with your associates to cover the gap. There’s the science and the math of the metrics, and then the art of capturing the imagination and hearts of my associates so that they can help solve the part that we can’t quite see now.
JS: Because of its size, Walmart and Sam’s Club exist as a benchmark, whether you mean to or not. That also includes the question of wages and benefits, and the quality of jobs. Anything you would offer on that score? Back when you started down the sustainability journey, it seemed to open up questions about what constitutes a good job.
McLay: We’ve focused on creating opportunity and development for associates, with programs like the free degree for our associates in the field—it’s a great social escalator that unlocks so much opportunity. It’s also important that we create great jobs and we cross-skill people.
We are training our leadership in the field: How do we create a club environment where people feel proud to work? How do you handle conflict? What does it mean to treat people with respect? We wrap all of those elements together and when you get those parts right, associates want to stay with you. While we are hearing the narrative that a lot of organizations are really struggling [to hire and retain workers], we’ve been in the privileged position this last year of being at full employment.
This post is part of an interview series with thought leaders to explore frontier issues in the complex domain of ESG. It is based on the transcript of Judy Samuelson’s conversation with Kath McLay at the Business & Society Program’s inaugural Aspen ESG Summit, which you can watch in full below:
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