Wal-Mart chairman: How we came to embrace sustainability
Rob Walton, Chairman of Wal-Mart Stores, and Peter Seligmann, CEO of Conservation International spoke to Fortune’s Andy Serwer at the magazine’s Brainstorm Green conference in Laguna Niguel, California.
Below is an unedited transcript of their discussion:
MODERATOR: Now, our last session before lunch I’d like to bring out my great colleague, friend, managing editor, Andy Serwer, who’s going to talk about next generation capitalism. Andy?
ANDY SERWER: Good morning, everyone, good afternoon. I guess it’s — well, I guess it’s almost noon, so howdy I’ll just say.
It’s my great pleasure to introduce our next two guests. To my far right is Rob Walton, who is the chairman of Wal-Mart stores, and of course the son of the late Sam Walton, the founder of Wal-Mart.
To my near right is Peter Seligmann, who is the CEO and chairman of Conservation International.
And I should point out that Rob is also the chairman of the executive committee of CI.
So, please join me in welcoming our two guests. (Applause.)
Thanks for coming, guys. I mentioned that I’m kind of treating this as kind of a buddy act, two guys go on a trip, and the fact that it’s not really that unusual that the chairman of the world’s largest company is buddying up with the CEO of an environmental NGO shows how much the world has changed over the past 15 years.
But I’m curious I guess as to how you guys first got to know each other, and so maybe that’s a good place to start. Rob, why don’t you talk about that?
ROB WALTON: I’ll give my version.
ANDY SERWER: Okay.
ROB WALTON: I was on a bus, an airport bus in the way into Tokyo, and I happened to be sitting next to a guy and struck up a conversation with him. The fellow was Michael Totten, who is a senior guy at CI, and he was preparing — I could see he was preparing a PowerPoint for a presentation to some Japanese business. And I introduced myself and he did, and he said, you know, I think my boss is going to meet with you in the next month or so. I said, well, you know, I’ve got a meeting with Ian Johnson from the World Bank to explore environmental issues for our family foundation, and he mentioned bringing some guy along, and the guy was Peter Seligmann.
So, we had our meeting in Bentonville, and Pete helped us a lot with our family foundation. We established environmental focus for — as a third focus area in that, and he’s helped us. We had Ed Wilson, a well-known scientist, visit with us. But Pete had other ideas and in his mind saw the potential for Wal-Mart to make a difference, and in that same meeting Lee Scott stepped in for a while with us, our CEO at that time, and Pete mad his pitch and it struck fertile ground. Lee talked about it and thought about it and engaged Jib Ellison, who’s right here in the audience, and others. CI helped us with all of that, but that’s kind of how it got started.
Then we did some trips and other things.
ANDY SERWER: Well, we’ll talk about those trips.
So, is that your take on how things happened? Let’s get the Rashomon version.
PETER SELIGMANN: Actually I don’t even know what he’s talking about. (Laughter.) No, that’s actually pretty close. We had — I remember Michael Totten giving me a call from Tokyo saying, I was on this bus ride and this guy was looking over my shoulder and he asked me what I was doing, and then when he left he handed me his card and it was Rob Walton, the chairman of Wal-Mart.
ANDY SERWER: What year was this, by the way?
ROB WALTON: 2003, early 2003, maybe late 2002 but just about then.
ANDY SERWER: Right, okay.
PETER SELIGMANN: And then we did get together with some people from the World Bank and Rob.
Then what really struck me, is fascinating and why I kind of was intrigued by Rob and by the company was that I said to Rob, if you really want to learn what we do, and he was interested, you should come to our offices because we’re about to go through annual planning, we’re going to have our leaders from around the world, we have staff in 40 countries. And Rob showed up, notebook, pencil, and spent two days here just going to the planning meetings, taking notes and listening and learning.
That really — no one has ever done that. I mean, I have a hard time going to those planning meetings. (Laughter.) But we spent a lot of time talking about, you know, what does it take to get conservation done internationally, and we decided that the best way to really kind of engage was to start traveling, and we actually started traveling around the world going to diving trips. We went diving in Cocos Island, we went in the Galapagos, we went to Raja Ampat in Indonesia, we went to Suriname into the mountains and forests, and really became engaged in a conversation about what does it take to actually shift behavior.
And I remember very clearly a conversation we had on a becalmed vessel off the coast of Costa Rica surrounded by thousands of spinner dolphins and seeing this fishing vessel, it was a Taiwanese fishing vessel, going through filled with shark fin, and I said to Rob, so we’re going to go in and see the president of Costa Rica, he’s going to look at me and he’s going to see me and he’s going to think an environmentalist, he’s going to look at you and if you could talk to him a little bit about why you need a sustainable supply of fish he’ll listen, and we had some specific requests for how the ministry of fisheries would be managed. And Rob did that and it was remarkable the impact.
And later on we talked a little bit about how it was really important to focus on personal philanthropy and that’s our engagement, and marine has been supported really generously by the family, the Walton family, but if you’re going to change the world Wal-Mart had to change, and that was really the way we got it and we began that conversation.
ANDY SERWER: I want to ask Rob a little bit about that. So, has your work and involvement with CI pertained mostly to your family foundation or to Wal-Mart (WMT) or is it both, and can you sort of delineate that a little bit?
ROB WALTON: The Wal-Mart environmental initiatives really have been driven by our management team. I mentioned Peter’s suggestion, and CI’s support through the process has not involved me directly very much at all. But our middle management was really the group that so enthusiastically embraced the opportunity.
Our family foundation is engaged all across a bunch of different environmental initiatives and some of them are with CI and some of them with, of course, other organizations, plus we have our own groups.
So, really the CI initiative is more — or my involvement is just more because of my interest in the organization and the great work that it does, the willingness of Peter and the organization, which goes clear back to the start, to take on big issues at scale and to engage with business in particular.
ANDY SERWER: And many people in the audience might be familiar with Wal-Mart’s sort of change in posture, and I think it was sort of it’s now become kind of a famous day in corporate history, at least for Wal-Mart’s corporate history, in 2005 when Lee Scott, who you mentioned, Rob, when he gave the speech sort of laying down, drawing a line in the sand saying Wal-Mart was going to address sustainability and speak to it, and it was going to become a very core part of what they do. You mentioned Jib, and Jib and Lee developed that relationship, and the way I understand it is that Jib had a lot to do with Lee coming to that level of understanding.
And I guess I’m curious, so there is the Jib and Lee relationship, and then there is your relationship, and how do those two relationships relate to each other? Does that make sense to you?
PETER SELIGMANN: It’s connected, it’s fascinating. I met Jib 10 years before that kayaking off the coast of Patagonia.
ANDY SERWER: It sounds like a good job; look at it! (Laughter.)
PETER SELIGMANN: And I had rolled my kayak and he helped me. It was very cold water. And I then had seen what he’d been doing with BluSkye.
And then when we went down to visit with Lee, it was clear that someone who was really engaged in helping business transform had to be involved. So, Rob and I talked about that and Lee decided to include and invite Jib.
But the thing that really struck me, and it still strikes me as remarkable about this experience that we’ve had with Wal-Mart, first of all was getting to scale. I mean, for years we’ve focused on how do you engage business. And, in fact, 10 years ago we started the Center for Environmental Leadership in Business with a grant from the Ford Motor Company. Rob chairs that, Mike Duke is on it, Paul Polman is on it, Frits Van Paasschen; it’s a great group of people.
And we’ve really wanted to engage business, but what I saw at Wal-Mart was remarkable enthusiasm at that midlevel.
I always remember some meeting where somebody I think who was the principal buyer for CDs, which is a big account, billions of dollars, that stood up and said to Lee Scott, “Are you telling me that I can come out of the closet about being an environmentalist,” and he said yes.
And what I said to Rob after I’ve seen this enthusiasm was it’s extraordinary to see a company like Wal-Mart with that kind of innovation. And we’ve learned more from them than I think they have from us in terms of how do you make conservation part of the bottom line, and Rob’s response to me was, “Aw, that’s pretty good, now I just hope we can keep that when we get to be big.” (Laughter.)
ANDY SERWER: Wow.
So, Rob, I don’t think there’s any question that Wal-Mart has made real strides, made real gains and been sincere in its efforts in sustainability. And I know Marc Gunther might be in the room, he knows more about Wal-Mart and sustainability than maybe any other journalist around, so I hope I’m not misspeaking, Mark, but there have been some, of course, who have criticized Wal-Mart both from the I guess left and from the right. The left says it’s a lot of hogwash, it’s Windows dressing, you’re not doing enough; the right says it’s capitulating and it’s a waste of money.
So, how do you — what do you think of that criticism, and how do you all cope with that?
ROB WALTON: Well, you know, we’ve just come out with a — got a hard copy even here that somebody shared with me this morning, the Global Responsibility Report came out yesterday, and it is really good. It makes me proud of what we are.
Our mission is to save people money so they live better. That’s our real —
ANDY SERWER: Save money so they can —
ROB WALTON: Save people money so they can live better.
ANDY SERWER: Live better.
ROB WALTON: That is Wal-Mart’s mission. And we can do that and we do that with good returns.
But expectations of our company go way beyond that. It used to not be that way when we were a little company based in northwest Arkansas. And for a while we weren’t that but we still thought we were.
I think Lee Scott had to deal with that transformation in awareness in our company, and I think that we’ve done that; this reflects that. We’ve made a lot of progress on those really big initiatives, those big goals that Lee set out.
I was in — Duncan McNaughton was presenting earlier, was in a panel, and I’m really proud of what the merchandisers have done.
The sustainability index, one of the questions was about it not going fast enough. But good gosh, this is really complicated stuff, and it’s giving buyers information to help form decisions and compare products. It will be a great day when we can give consumers that information, because we think they make great decisions already, we just need to give them more information.
So, I think we’re going the right direction, and we’re doing what our communities expect of us.
ANDY SERWER: Right. And getting that information piece that you just mentioned to consumers is tricky stuff there, right?
ROB WALTON: That’s right, but, you know, Duncan has just implemented a good for you label. It’s just a simple label, and it’s either on a food product or it’s not, but it has rigorous standards behind it, and if a customer is concerned about that they can look at it, the one that has it, the one that doesn’t have it, compare price, if they want to read the label they can do all of that stuff, but it is a real step forward for us. It’s information to customers, and we think it will make a difference.
ANDY SERWER: Peter, is Wal-Mart an example to other corporations, and should it be?
PETER SELIGMANN: It definitely is, and whatever good examples you can have they should be, and I think that Wal-Mart has really stepped up.
I think that the challenges are extraordinarily complicated. We worked with Wal-Mart because Wal-Mart has 100,000 suppliers, and we were going one-offs, company after company, and we thought rather than doing that there’s got to be a different way to do this. So, it was if Wal-Mart embraces these concepts and sees that it’s good for the customers, it’s good for their employees, it’s good for reduction of waste, increasing energy efficiency, securing a supply chain, that means it’s good for the shareholder. And if you push that down the supply chain and say to your suppliers, you know, best shelf space goes to the best company, the green one, that really made our work — that was a global agent of change, and we focused on that.
Our engagements with businesses focus on institutions and industries that have a big ripple effect.
I mean, I think that if you just give me a second, I’d like to say that we have — I mean, I love the fact that we have a gathering here of companies and people that are engaged in this, and we could not have had this 25 years ago when we started CI: it would not take place. And so this is a big shift, but there’s an enormous urgency, too. I mean, when we look at metrics, we look at population, 7 billion to 9 billion in the next four decades, we’re going to double our demand for energy, food and water, we’ve got extinction rates that are accelerating, we’ve got fisheries that are collapsing, we don’t really have time to dillydally.
And so it’s extraordinarily important that Wal-Mart steps up, as they are doing. The concept of an indices of sustainability is extremely important, because we need to put a value on what nature contributes to health, and that’s what they’re doing. So, we need to pick up the pace.
ANDY SERWER: Right. So, working with Wal-Mart is actually opportunistic for you given their scale.
And so, Rob, I’m thinking that maybe it wasn’t a coincidence that he was sitting near you on the bus, right?
ROB WALTON: Well, it was one of his guys, but it wasn’t a coincidence, because he showed up at the meeting actually, at all. But it’s a good thing he did.
ANDY SERWER: I want to ask you, Rob, a little bit about your family foundation and the work that you all are doing, because I think it’s under-known in this country. You guys fly below the radar, and I think you like it that way a little bit. You’ve increased your profile a little bit over the years. But can you talk about what you’ve been focusing on in terms of sustainability and conservation? What areas specifically have you been focusing on?
ROB WALTON: So, the family foundation is focused on three general areas: education reform largely where we are very active, our delta area of Arkansas, Louisiana and Mississippi, and our local region, that’s the second, and then environmental, which is new within the last 10 years. It’s been taken up by a third generation. We have eight young folks from 40-something, early 40s down to the mid-20s, and they really are the ones who are taking up certainly a great interest in that, all of us on the board.
So, in the environmental area we concluded that an area that’s kind of underserved with the foundation interests was marine and freshwater, and so those are the areas we focused.
With CI we’ve done big projects in Raja Ampat part of Indonesia, that’s the Papua Province of Indonesia in the Coral Sea, extraordinary area of marine diversity, and also a big project called the Eastern Tropical Pacific Seascape, which is four countries marine areas that includes Galapagos and Cocos and Coibas, Coiba Island off of Colombia, also activity in the Philippines and some others. So, CI has been supportive of us there.
In the U.S. we work in the water quality issues and other issues in the Gulf of Mexico and fisheries issues, sustainable fishing, largely related to catch share programs in the U.S., which have become very accepted over these five years or so that we’ve been working. I don’t know how much we’ve been a catalyst for that but we certainly have been supporting it.
And finally the Colorado River watershed is where we have quite a bit of activity.
ANDY SERWER: So, this is a global endeavor, which is unlike education and the other stuff that you guys do, right?
ROB WALTON: Yes, the marine activities are global, some of it U.S. and a lot of it around the world.
ANDY SERWER: And this is a personal preference of the family that’s just something that you all decided to focus on, right?
ROB WALTON: Yes. Oh, absolutely.
ANDY SERWER: And can you talk about the size and the scope of the foundation and the amount of giving you guys have done?
ROB WALTON: Let me think. Grant level is about 300 million a year I think, in that range, half of it probably for education, and the other — two thirds of the rest probably for environmental stuff.
ANDY SERWER: So, that’s pretty significant.
ROB WALTON: It’s gotten to be pretty good-sized.
PETER SELIGMANN: It’s really been — I mean, the engagement in the marine side in particular has been really pioneering work. It’s actually led — I mean, the support that the foundation gave us, which was to set up the concept of seascapes, really large marine areas where it’s in the enlightened self-interest of countries to work together to manage their fisheries —
ANDY SERWER: Yeah, the Indonesia thing, what is that project then specifically? How does that work?
PETER SELIGMANN: Well, it’s in the western province of Papua, an area called Raja Ampat. Every time we go diving there we’re discovering 15, 20, 30 new species. It’s an area that was heavily exploited for timber, and overfished, portions of it overfished but large portions completely undisturbed.
ROB WALTON: No sharks.
PETER SELIGMANN: Yeah, the sharks are gone basically.
And so we worked there to get the communities involved.
But what it’s really led to, which is the biggest thing that we are involved with, it’s led us into an area called the Pacific Oceanscape. With the experience that we got working on the eastern side and the western side, we went into the middle of the Pacific and have signed an agreement with 17 small island developing states. So, it’s really interesting, the middle of the Pacific there’s a country like Kiribati or Tokelau or Cook Island that no one has ever heard of, and they’re tiny little states with a couple thousand people maybe. They own giant swaths of the ocean, so they’re actually giant ocean states.
So, we put together an agreement with 17 of them to create the Pacific Oceanscape that covers 8 percent of the earth’s surface, 60 percent of the tuna population, and it’s 17 island states saying we’re going to create an interconnected network of marine protected areas because we want to protect our fisheries from poaching, we really need healthy oceans to respond to the threat of climate change, we need to store carbon, and they make money, and it’s a food security engagement for the rest of the world. The World Bank has stepped in, the government of the United States is helping us with enforcement, Australia and New Zealand. So, these ideas really mushroom into big deals.
ANDY SERWER: So, where do you — I’m sorry to drill down maybe a little bit farther than anyone wants to on this, but so where do you stand with this endeavor though? I mean, how is it working?
PETER SELIGMANN: We signed the agreement in September of last year. It started with Kiribati, a tiny little country south of Hawaii, between Fiji and Hawaii. And in the Polynesian culture good news travels fast, so they set up a very large marine protected area. We financed it, set up a trust fund to compensate them for not fishing, worked with them to set up a processing plant so the areas they do fish they make more money.
Good news traveled fast, all the other nations of the Pacific heard about it, because they shared it. They said we want to do a deal. We put together an agreement in Auckland last September, and all 17 signed it. And we have the next meeting in Cook Island in August, and since then, since last year Cook Island has set up a million square kilometer marine protected area that’s like 240 million acres. Tokelau has done 400,000 square kilometers, and Kiribati has done about 600,000.
ANDY SERWER: So, last question, for instance, they’ve limited the amount of tuna you can catch in that area or something like that, would that be something —
PETER SELIGMANN: Yeah, they’re setting up, designing marine protected areas. The biggest challenge is enforcement, because Kiribati has this huge ocean area the size of California and they’ve got one boat. (Laughter.)
ANDY SERWER: Yeah, a big problem.
PETER SELIGMANN: So, the deal is — what’s interesting is the United States Coast Guard signed an agreement called Shipriders where the Coast Guard provides training vessels, we put policemen from those countries on those vessels, and you have to just arrest a couple of poaching vessels, and that costs — I mean, one ship caught costs $3 million for release. And so you catch a couple of poachers and the word gets out, and that’s what’s happening in the area.
ANDY SERWER: Right, okay, interesting stuff.
I want to throw the floor open to questions at this point and see if we’ve got any here. We have one over here.
QUESTION: Peter, you talked about over 25 years of being in this work, and now facing a need for more urgency. That’s all happening against a backdrop of political challenges, both in this country and really all over the world. What have you done to evolve the mission of Conservation International to contend with the environment that we’re operating in today?
PETER SELIGMANN: Change the mission.
We were really pleased in the beginning of setting up protected areas all over the world, but in the backdrop of looking at all those wonderful successes we realized that we were losing the war. I mean, we didn’t stop extinctions, we didn’t change development. I mean, it was basically putting beautiful places into a conservation pantry, and when anybody got hungry they reached in and they took it.
So, we really thought we need to rethink and instead of focusing on a parallel path with conservation on one side and development on the other side, conservation has to be inserted inside of development. And all that means is that we have to understand what nature gives us and put a value on it.
So, a forest should be valued not just for timber but for the water supply it gives us, insects should be valued not just it’s a nice pretty insect but that’s your pollinator, and if you lose that and you hand pollinate it’s really expensive.
So, basically we’ve shifted our mission to support human wellbeing by restoring and protecting ecosystems that give us service to people.
ANDY SERWER: We have another question over here.
I should mention that John said that Conservation International is having its 25 anniversary, and I should point out that Wal-Mart is having its 50th anniversary this year, so both anniversary years for both gentlemen.
QUESTION: Matthew Kirenan with Inflection Point.
Mr. Walton, first of all, congratulations for everything that Wal-Mart has accomplished on the company side, but I have a question about the family foundation. As you probably know, there’s a tendency among major foundations in this country to not spend a lot of time — you mentioned that you give away roughly 300 million a year, which I’m guessing is 5 percent of the asset base. There’s a growing tendency for foundations to address the other 95 percent of their resource base and begin to invest that in a way that is consistent with and maybe even accelerates the program objectives on the other side. Could you tell us a little bit about whether the Walton foundation has looked at that, and if you haven’t I’d certainly, for what it’s worth, I would strongly suggest that you do, because there’s a lot of impact being left on the table by not doing that. Thank you.
ROB WALTON: Okay, so the foundation expenditures are public information, the resources are not, and we don’t have those kind of assets. We spend on a different basis than you’re describing.
Good point. We are mostly dependent on revenue from Wal-Mart resources. So, it’s not really much of a separate investment vehicle at this point. It will be in the future I expect, but probably would rather not go into it much more than that because it gets into our personal planning processes and all that sort of thing. Good point, good point.
ANDY SERWER: It’s an interesting point, but you could see, you know, do you want to maximize your returns and wouldn’t that maximize the impact, but it’s a great discussion point.
ROB WALTON: Well, you know, Andy, that it leads to a related point is that I think that there are more and more investors who care about the kind of companies they invest in, and we will certainly hope that we fall within both sides of that category.
At Wal-Mart we are just as part of our institutional connections with investors have somebody dedicated to, what do you call it, ethical investor, ethically oriented investors. So, this is not an obscure area and it’s not small either, and it’s growing rapidly.
ANDY SERWER: Right.
Other questions from the floor?
I had another question for you, Rob, and that is, as the chairman of Wal-Mart and being on CI’s board, so how do you bridge those two roles?
ROB WALTON: Well, we have different — I don’t see a conflict certainly. We have certainly different constituencies. Wal-Mart, our real focus is on our customers and being a responsible company. With CI the scope, as you’ve heard, is extremely broad and ambitious. I think we have very common interests and it’s not a difficult connection to make at all.
ANDY SERWER: And Peter, for you, so how do you see the relationship between corporations and NGOs evolving? Do you have other relationships like this one? How can things change and get better?
PETER SELIGMANN: Yeah, we do a lot of work with companies, and simply put the corporate world is probably the only sector of society that understands that revenues have to exceed expenses. (Laughter.) So, that’s kind of the winning ticket eventually. So, we really believe that what we need to do is demonstrate that long term stability, success of a corporation is linked to taking care of the ecosystems, valuing nature. And so if we don’t engage with the corporate sector, we think that society loses. So, we’ve been doing it since we started the organization and we’re going to keep on doing it.
ANDY SERWER: Great.
All right, well, I don’t want to stay in between you guys and lunch, and so our time is up. Please join me in thanking Rob Walton and Peter Seligmann. (Applause.)