OM in the News: Wal-Mart’s Green Revolution

“For a company that has been lambasted for a range of corporate sins, from low wages and deplorable working conditions to accusations of predatory pricing and monopolistic behavior, Wal-Mart’s energy initiative sometimes smells a little like greenwashing,” writes Forbes (Nov. 23, 2015). But Wal-Mart has installed 105 megawatts of solar panels–enough to power about 20,000 houses–on the roofs of 327 stores and distribution centers (about 6% of all its locations). That’s enough to make Wal-Mart the single biggest commercial solar generator in the country. And it intends to double its number of arrays by 2020. It’s all part of a goal that former CEO Lee Scott set in 2005 for Wal-Mart to be powered entirely with renewable energy. (See our 2011 blog regarding the excellent book about Scott: Force of Nature).

Wal-Mart uses an incredible amount of electricity–29,000 gigawatt-hours per year, and its U.S. electric bill is around $1 billion per year. The firm now gets 26% of its worldwide power from green sources, including wind, solar, fuel cells and hydropower. “To make it harder on ourselves,” says Wal-Mart’s energy chief, “everything we do has to make business sense.” If Wal-Mart were worried about making the business case for green energy, it could just follow the lead of other retailers like Kohl and Starbucks, which brag of running their operations 70%-plus carbon-free. But they do so by buying carbon credits or “offsets” to balance out their greenhouse-gas emissions. Instead, Wal-Mart has reduced its energy costs per square foot of retail floor space by 9%.

Wal-Mart gives access to its roof space to SolarCity or other installers, which pay to put up the panels (at a cost of about $1.2 million for the average array). SolarCity then sells the power generated to Wal-Mart under a long-term deal–at a price often cheaper than what the local electric utility would charge. The bad news for Wal-Mart and the entire green energy industry is that the federal green energy tax credit is set to expire in 2017.

Classroom discussion questions:

1. What is the genesis of Wal-Mart’s green revolution?
2. Why is sustainability an important operations issue?