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Business and society in the coming decades

Business exists to serve society.

Over the past several decades, one of the great discussions within capitalism has centered on defining exactly what a business is and what its obligations are to society at large and to the many stakeholders participating in business systems, including customers, shareholders, employees, suppliers, and communities, to name a few.

The obligations to society have been defined in different ways at different points. For many retailers, including Walmart founder Sam Walton, the focus has been first and foremost on serving the customer. For others over the past couple of decades, the focus was myopically on the shareholder. With the advent of shared-value, double-bottom-line, triple-bottom-line, and related movements, we have seen a broadening of the discussion to recognize the importance of multiple stakeholders and the need to promote social, environmental, and financial value.

Long-term capitalism goes one step further, asking companies to actively reshape the systems in which they operate. Those systems could include the complex of logistical and shipping services that move goods around the globe, the web of overseas contract manufacturers on which companies rely, or the array of energy suppliers that fuel worldwide operations. Long-term capitalism takes a deeper view of business’s role in society, recognizing that, in the long run, the interests of stakeholders converge with the interests of the broader community. The actions of any one company may reverberate throughout the various systems in which it operates, generating second- and third-order benefits as well as negative externalities. Under long-term capitalism, companies recognize that fact and, through concerted action with others of sufficient scale, work to ensure constant improvements to those systems.

The basics: Add value for society as well as business

When it comes to serving society, a company’s first task is to ensure that its core business is fundamentally value creating—not just for shareholders but also for customers, employees, suppliers, communities, and the environment.

This stakeholder-value principle may seem obvious, especially given the extent to which triple-bottom-line thinking has seeped into mainstream business discourse. Yet financial short-termism still drives day-to-day decision making for much of the corporate world. For many, shareholder value creation remains the driving force of business initiatives; creating value for stakeholders becomes a by-product or a means to an end. Even when faced with reputational challenges, companies sometimes launch social initiatives as side projects only tenuously linked to the core business, rather than strengthening and articulating the ways in which the core business adds value to society.

Taking a more expansive view of serving society means first ensuring the core business delivers value to the broader set of stakeholders. Is it adding value to the local community, for example, through taxes and engagement with local organizations? It also means addressing externalities related to the core business.

Go beyond the core to change the system

While it is important to operate the core business in a way that delivers value for society and the business, a healthy, high-performing company can and must go further. The world faces social, environmental, and financial challenges of unprecedented magnitude and complexity. No one actor can resolve these issues single-handedly. Governments and civil society are increasingly calling business to the table.

Meanwhile, globalization and technology have heightened interdependence in our social, environmental, and financial systems. Even seemingly small actions can have serious consequences for others far away in space and time. Globalization and technology have also greatly increased transparency. Actions and their consequences, however far removed, are much more visible to all.

So, how can companies define their unique contribution to making society stronger? At Walmart, we use five screens.

1. Prioritize issues that are relevant to the company mission

Like most companies, we look for those issues that sit at the convergence of our business interests and the interests of society. For example, as the world’s largest grocer, we believe the sustainability of the world’s food supply is one of the areas in which we can make a significant contribution.

The United Nations projects that food production must increase by roughly 70 percent to feed the estimated nine billion people who will inhabit the planet by 2050. We will need to meet that challenge in a way that is sustainable for the environment and equitable for consumers and farmers (who make up two-thirds of the population in emerging markets).

2. Draw on the company’s particular capabilities

Even in purely philanthropic areas, companies can have greater impact by drawing on their unique business capabilities and applying those skills to complex societal problems. In our own efforts, we try to add value in ways that are different from—and ideally additive to—what others can do.

For example, to address hunger in the United States, we make use of our particular assets. Over the past several years, we have donated nearly 1.5 billion pounds of food to food banks across the United States, including an increasing amount of fresh food nearing the end of its shelf life. This improves nutrition among those most in need, while reducing the amount of food we send to landfills as waste.

In tackling priority issues, we design our initiatives to promote benefits for society as well as business. We set ambitious targets, and we track progress rigorously.

In food sourcing, for example, we pursue initiatives that lower the environmental and financial cost of food production. One of these initiatives, agriculture optimization, aims to reduce greenhouse-gas emissions by eight million metric tons across ten million acres of row crops such as oats and rice by 2020. Similar initiatives in the food chain and our own operations have allowed us to reduce our greenhouse-gas emissions by approximately 18 million metric tons since 2010. To do so, we are working with the Environmental Defense Fund, as well as other large food companies, including Cargill and General Mills, to adjust the use of fertilizer and other inputs. We measure progress by tracking improvements in greenhouse-gas emissions, water, yields, and other critical factors per ton of food produced, by supplier and by category.

4. Reshape the system for lasting improvement

In the era of long-term capitalism, companies can and must go beyond the kinds of improvements described above. They can do this by harnessing their expertise and scale and by joining with other organizations to reshape global systems for lasting improvement.

Now we are exploring opportunities to collaborate with others to strengthen transportation and processing infrastructure in emerging markets. This will help develop local economies, feed local populations, and support local farming families, all while providing a secure supply of high-quality food products for Walmart customers.

5. Engage partners in transforming systems

To achieve lasting solutions to complex social and environmental challenges, we have learned that it is essential to engage and collaborate with other leaders of the systems we seek to strengthen.

The difficult challenges facing the world today are well beyond the scope of any single player to address. Solutions will depend on cooperation among leading organizations in all sectors.

To achieve the magnitude of change the United Nations, World Wildlife Fund, CDP and others have called for in food, such as a reduction in water usage, a 3 percent annual decrease in private-sector greenhouse-gas emissions, and a 15 percent increase in yield in the next ten years, leaders of the food system must take concerted, coordinated action. In recent years, there has been an explosion in the number of multistakeholder collaborations in the food system, including the Consumer Goods Forum, which aligns retailers and manufacturers in achieving global food commitments such as sourcing 100 percent sustainable palm oil and soy; the World Economic Forum, with its Grow Africa and related initiatives; USAID’s Global Development Lab, to harness the power of the private sector and others in addressing development challenges; and the Clinton Global Initiative, with its innovative approach to sparking collaborative commitments from corporations, to name just a few.