Message from Lee Scott

Lee Scott meeting customers

We know, as the world’s largest retailer, that people have high expectations of Wal-Mart, and that we have unique opportunities and a responsibility to our communities, our customers and our Associates. One of our biggest opportunities – for the future of our business and of the world – is to become a more sustainable company.

Just over two years ago, Hurricane Katrina struck the United States. For the people of the Gulf Coast, it was a devastating event that forever changed the lives of thousands. In a different way, it also changed Wal-Mart forever. Hurricane Katrina showed us our potential to serve our customers, our Associates and our communities by applying our business model to solving major problems. In October 2005, motivated by our experience with the Katrina disaster, we committed to a set of environmental and other goals in a speech titled “Twenty-First Century Leadership.”

This report reviews and discusses our efforts to date. This letter focuses specifically on the environment, health care, diversity, sourcing and the work of our foundation. As you will see, we are making good progress in a number of these areas, while in others we still have work ahead of us. We are also working to establish performance metrics and determine our performance baselines to measure and drive our progress. As we do that, we remain committed to our journey toward building a more sustainable Wal-Mart.

Like everything we do, sustainability begins with our customers. From the day that Sam Walton opened the doors of the first Wal-Mart store in 1962, our mission has been to save people money so they can live better. Today that mission extends to sustainability. We don’t believe that our customers, whether they shop in a Todo Dia, ASDA store, Wal-Mart Supercenter or Sam’s Club, should have to choose between products they can afford and products that are ethically sourced, high quality and environmentally friendly.

We have found that there is no conflict between our business model of everyday low costs and everyday low prices and being a more sustainable business. To make sustainability sustainable at Wal-Mart, we’ve made it live inside our business. Many of our environmental sustainability efforts, for example, mean cost savings for us, our suppliers and our customers, so that in both good times and bad times, they will remain part of who we are.

We have also learned we can become a better company by working together and learning from others. Our 13 environmental sustainability networks are a great example. They are a model of how we work with environmental non-governmental organizations (NGOs), suppliers, scholars, government leaders and other thought leaders to identify and put in place meaningful changes. We’re pleased with this collaborative approach. We owe a great deal of credit to the women and men, inside and outside of Wal-Mart, who work with us in these networks. And we will continue to talk and work with these leaders and groups – including critics – to help us become more sustainable.

A lot of the attention around our sustainability efforts has focused on the environment, which is not unexpected. But our work to become a better company is about more than what we’re doing with the environment. Sustainability at Wal-Mart also has broad economic and social components, including health care, economic opportunity and the quality of life of the people who make the products we sell. Ultimately, these are interwoven, and we are committed to making progress in each of these areas.

Perhaps the most powerful way in which Wal-Mart contributes to communities is through economic opportunity. 176 million customers around the world shop at our stores every week to save money and live better. Families who save money can use the savings to participate in the digital revolution, put more food on their kitchen tables, buy more environmentally friendly products and achieve their aspirations.

The benefit extends even beyond our customers. Global Insight recently updated its independently certified study to show that the average American household saves more than $2,500 per year because of Wal-Mart. Around the world, we create thousands of jobs every year with competitive wages and the opportunity to advance as far as hard work and talent can take our Associates. These jobs meet a variety of needs for a lot of different people – whether the associate is a student who wants work experience, a senior citizen who needs a part-time job or an individual looking to build a career. At the same time, we want to do more, and we will do more, to increase the opportunity we provide our Associates and to spread more economic opportunity throughout the communities we serve.

When it comes to sustainability, we are going beyond the three environmental goals we announced in the “Twenty-First Century Leadership” speech: to be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain our resources and the environment. We’ve developed an approach that goes beyond these goals to driving sustainable practices into our supply chain, the products we sell, the lives of Associates and the communities where we operate and source. We call this approach “Sustainability 360.” And we are applying the Sustainability 360 approach in other areas as well.

When it comes to energy, we’ve made good progress by using more renewable sources and becoming more efficient. We recently began piloting a solar power project that when fully implemented could be one of the 10 largest solar power purchases in the United States and perhaps the world. We are making new and old stores and clubs across the globe more energy efficient by applying technologies such as improved heating and air conditioning and light-emitting diode (LEDs) lighting. We’re also making good progress on doubling the fuel efficiency of our truck fleet by, for instance, improving the design of our vehicles and making use of auxiliary power units.

Working with our suppliers, we are advancing our goal to sell more environmentally responsible products. We are committed, for example, to selling compact fluorescent light bulbs around the world. In the United States, we met our goal to sell 100 million of these bulbs. We expect this will save our customers 3 billion dollars in energy costs and prevent 7 million incandescent light bulbs from reaching landfills. We are also partnering with the Carbon Disclosure Project to begin measuring the non-renewable energy in our products from their procurement to their manufacturing to their distribution. This will lead to less non-renewable energy in our supply chain. While there are many more examples of what we are doing, we recognize that we’ve only looked at a fraction of our merchandise. There are products in every section of our store that we can improve to help our customers lead more sustainable lives.

We have made progress on our goal of a 5 percent reduction in packaging as part of our longer term effort to eliminate all waste at our stores and clubs. Achieving the 5 percent goal would be the equivalent of taking 213,000 trucks off the road per year, and saving 323,800 tons of coal and 66.7 million gallons of diesel fuel from being burned. We’ve also introduced “sandwich baling” in the United States and a number of other countries, which allows us to recycle loose plastic that would otherwise be thrown away. Doing this not only reduces the amount of waste we send to landfills, but in the United States, it added tens of millions of dollars to our bottom line last year.

Our Associates play a key part in Sustainability 360. They are the source of many of our most innovative ideas. Through a program called The Personal Sustainability Project, almost a half million of our Associates are making commitments to recycle, save energy and focus on wellness. We are expanding this concept to other countries like China, so that Associates around the world can have the opportunity to improve their health and the health of the environment.

Our goal in health care is to make it more accessible, more affordable and higher quality. We are making health care more affordable for our customers through initiatives like our $4 prescription drug program, which is available in the United States, Puerto Rico, Mexico and Brazil. We are also improving the health care benefits we provide our Associates. In many countries where we operate, such as Canada and the United Kingdom, there is a national health system. In the United States, we’ve improved our health care benefits steadily over the last two years. We now offer our Associates more choices of more affordable health plans, with lower deductibles and coverage for all eligible children. More than 90 percent of our Associates report that they have health coverage. By forming the Better Health Care Together coalition, we’re also taking part in the conversation about how we can reform the U.S. health care system and bring coverage that’s accessible and affordable to all Americans.

We’ve also worked hard to make progress in the area of diversity, which has led to a more diverse workforce throughout every level of our company. In the United States, we are voluntarily sharing the annual report we provide to the Equal Employment Opportunity Commission. These numbers show a more diverse workforce in all demographic groups and an increase in female and minority representation at the officer and manager levels. Other major efforts like our legal diversity and minority supplier programs are also having an impact beyond our own workforce. Our work is also global in nature. Over 40 percent of our store managers in China, for example, are women. We’ve also launched the “Senioras de Atendimiento” program in Brazil and are fully committed to the Gender Equity Model in Mexico.

We believe that many of our sustainability issues come together in the area of sourcing, particularly in developing countries. And while we’re on par with our competitors, we have more work to do in this area. We believe factories that treat their workers well and are good stewards of the environment will have a stronger commitment to overall quality and be better long-term partners. Our 200-member Ethical Standards team is focused on improving how we ensure that the people who make the products on our shelves can work in factories that are good neighbors and good employers that offer responsible pay and benefits.

We also believe there is a leadership opportunity to source products in a more environmentally responsible way in the developing world. We are beginning to work with supplier factories to help them reduce pollution and use less non-renewable energy. We will also help them develop an understanding of the social and business benefits of fair trade certified products and other types of investments. We’re experimenting with efforts such as our fair trade coffee sold in Sam’s Club and a sustainable community development project ASDA supports in Africa.

Another area where we contribute to the communities we serve is our foundation. We continue to give back more and more every year through both our foundation and the generosity of our Associates and customers. In fact, last year our customers and Associates donated $115 million worldwide to charities through our stores, and we donated $300 million worldwide as a company. We make the majority of our contributions where we can have the greatest impact – at the local level. Still, we know we can be smarter. In the future, we believe we can magnify our impact by more strategic giving and by focusing some of our efforts on a few national issues.

This report lays out where we have come from in the last two years and how we have become a better company and a better business. I think I can speak for everyone at our company – from the chairman of our board, who has been an inspiration throughout, to our nearly 2 million Associates around the world – when I say that we are proud of our progress. And as we continue to make progress, because our pace of change is so dynamic, we will update this report accordingly on the Internet rather than just on an annual basis.

Much work remains to achieve the goals we set for ourselves. Our carbon footprint is growing slower, but it is still growing. We are reducing waste, but we are far from the day when we have eliminated waste in our stores. Many of the products on our shelves can be made more sustainable. We are working to become more diverse and build more sustainable sourcing relationships.

In the end, this report is just a step. So we hope that you will judge our commitment to sustainability not just by this report, but by our record. We make no claims of being a green company. And we’re not saying we’re better than other companies. But what we are saying is we’re doing sustainability in a way that’s real and right for Wal-Mart and is touching the lives of millions of people around the world. We do recognize our opportunity and our responsibility to make a difference in this world for our customers, our shareholders and our Associates.

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Lee Scott
President and Chief Executive Officer, Wal-Mart Stores, Inc.

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