A Socially Conscious Wal-Mart
I was thrilled to see a current event aligning with the topic of socially conscious big business: Wal-Mart has decided to jump into the organic food market. There are some other reports and discussions taking place around the Internet, but I’m a big fan of NPR (if you’re willing/able to deal with the non-text story content). The topic of socially-aware big business is something that I have discussed with Sally in the past, and we we agree that it is a necessary step for a world in which the superpowers are all corporations rather than nation-states.
This is actually a topic that came up in Thomas Friedman’s The World is Flat—in a chapter I was reading this morning, actually (check out the commentary under the “Social Activisim” section heading on page 298 in the first edition). The key idea is that huge multi-national corporations like Wal-Mart are quickly becoming more powerful than individual nations. We are entering an era in which governments are relatively powerless to enforce strong rules created to control such entities. The entities themselves have money to fund powerful lobbiests and control the creation of law, and even when laws make it to the books, there is simply not enough organization and energy in government beaurocracy to effectively enforce them. In this new reality, it is the responsibility of these corporations to be good world citizens on their own terms. This can be scary, and Wal-Mart has eroded our trust in the past with poor and even dishonest treatment of their employees (e.g., non-existant health care, taking advantage of illegal immigrants–knowingly).
I’ll be honest, I am a huge supporter of Wal-Mart (but please, keep reading anyway). I am amazed by their tremendous success in revolutionizing supply chain management. The took advantage of a challenging distribution scenario in their original Kansas stores, and pushed themselves to solve the problem so well that it could be applied to the formation of a very successful worldwide distribution effort. There is a constant energy working to eliminate inefficiency in not only their own supply chain, but the extension of that supply chain into individual suppliers (a point not often considered positive). I firmly believe that it was this culture of constantly maximizing efficiency and “trimming the fat” that lead to poor treatment of their employees. But then something happened, there was a great consumer push-back: just about everyone is now aware of Wal-Mart’s employee treatment, and this has seriously harmed Wal-Mart’s image. In fact, I know of some people who have stopped shopping at Wal-Mart completely. I’m not willing to go to that extreme, but it’s clear that this is an issue in many people’s minds.
In response to this public relations disaster, Wal-Mart needed to do something. In fact, they needed not only solve one specific problem, they needed to take note of the fact that people do care about more than just the lowest price: people care about whether or not Wal-Mart is a good citizen of the community. Some view this embrace of organic foods as simply a business decision (organic foods represent a rapidly growing market, despite a 20-30% price premium). On the contrary, I view this as a realization by Wal-Mart’s executives that they are under the public microscope and need to act carefully to improve their image. Clearly, the retail behemoth would not be jumping on the organic bandwagon if it weren’t a viable business, but that fact just demonstrates the power of the customer. Customers voiced their anger, and Wal-Mart responded, by sheer necessity; this is a success for consumers wielding their power to improve their own world; they have spoken with their wallets, which is all Wal-Mart understands, and taken steps to make this world a better place. This action is going to have a positive impact on their public image, and improve their bottom line in the end.
Of course, some people are arguing that Walmart will force Organic Foods to lower their standards. I don’t think this is as much a problem as it is made out to be. Even if a particular food is made outside the United States, it must meet specific FDA criteria to carry an organic label. Wal-Mart will necessarily push the producers of these organic foods to improve their efficiency. Indeed, Wal-Mart has that effect on all suppliers. I believe this is a necessary step for organic foods if they are to become more than just a small niche. If organic foods become available in sufficient quantities to sustain a large portion of the market for food products, then we will see a tremendous improvement in the overall farming practices—worldwide. In the parlance of Thomas Friedman, Wal-Mart will be wielding their supply chain overwhelming powers as a tool for positive social reform. In fact, Wal-Mart is currently better positioned to reform world-wide farming practices than any single government. Years from now, this may be viewed as the turning point for sustainable farming practices. Wal-Mart may just be forcing the world’s farms to build skills necessary for practicing sustainable farming practices at a scale capable of feeding the masses. This is a good thing.