Walmart

Walmart has not significantly progressed its acknowledgement of the business materiality high exposure to animal proteins poses. Its approach continues to be consumer driven. Its latest scenario analysis of 2020 assessed a 5⁰C warming scenario and was a high-level overview that covered the impacts on certain animal agriculture supply chains. The company also conducted an ESG materiality assessment that found meat/dairy as a top priority for climate and nature. At least 50% of Walmart’s total sales are derived from food, signifying that animal agriculture contributes to a sizeable proportion of the company’s Scope 3 emissions. Failing to robustly address the environmental impacts to and from its animal agriculture supply chains presents a material risk to the company, leaving Walmart vulnerable to future climate-related threats. Scope 3 emissions amount 95% of Walmart’s carbon footprint, and even with Walmart acknowledging that its most significant impact on GHG emissions is to engage suppliers and other value chain stakeholders to reduce their GHG impact, its Green Financing Framework (published in August 2021) does not include projects or KPIs to mitigate Scope 3 emissions within its Use of Proceeds/Project Green Bond Project Categories. Walmart’s approach to portfolio diversification continues to be consumer-driven; there is no evidence of integrating it as a climate mitigation tool. Protein diversification is not incorporated in Project Gigaton or as a lever to decarbonise product supply chains. Moreover, despite the company highlighting the selling of products that sustain resources and the environment (lower-impact ingredients) as a sustainability action, there are no mentions of diversification of the product portfolio. The company recognised the beef sourcing impacts on deforestation in South America, and it hints at plausible biodiversity issues caused by beef production. At the same time, Walmart publicly recognises that animal agriculture plays a significant role in providing nutritious meat, dairy, and eggs to its customers; nevertheless, there is no such recognition statement for plant-based or alternative proteins. Walmart has endorsed the Business Roundtable call for a national climate policy to reduce US-based emissions by 80% by 2025, which includes carbon pricing. Yet, the company does not disclose if it uses internal carbon pricing or which supply chains are most carbon-intensive. The updated version of Walmart’s scenario analysis, conducted in 2020, aimed to provide a high-level overview rather than a realistic prediction that could be used to develop a granular decarbonisation strategy. It was TCFD-aligned and covered the impacts on some animal agriculture supply chains. The warming scenario considered was 5°C and assessed the effects on 25 of its top commodities. Walmart found that it would have issues sourcing only half of the commodities. Animal feed, shrimp and milk were found to be at risk of climate change but will remain unaffected in the aspects of land suitability, farming conditions (for animal products) and heat stress (for people). Walmart considered the transition risks of carbon taxes for meat and dairy, yet it is unclear if the company found material financial impacts. As the company did not plan to draft mitigation strategies from this assessment, the only climate mitigation actions implemented for animal agriculture are local and sustainable sourcing initiatives. Walmart mapped meat/dairy as a top priority for the climate and nature categories in its ESG materiality assessment; for climate, its mitigation actions are driven by “Project Gigaton”, which focuses on forest positive and agricultural practices. For the nature category, mitigation actions focus on membership in the US Roundtable for Sustainable Beef, Roundtable for Sustainable Poultry, and Field to Market. These memberships, however, hardly translate into specific actions or targets (except for beef in Brazil).

Walmart’s approach to Scope 3 focus has not been significantly updated since the creation of Project Gigaton in 2017. Walmart continues to ignore the carbon mitigation potential of reducing animal-derived exposure through protein diversification. For a company of the size and name, Walmart does not have policies and programs across species addressing the environmental impacts of animal agriculture products. The pillar of the company’s Scope 3 mitigation action plan continues to be Project Gigaton. Walmart’s approach to tackling Scope 3 emissions has not been significantly updated since the creation of Project Gigaton in 2017. While this project was pioneering at its formation, Walmart has not since elevated its ambition to align with industry best practice. The project currently excludes product portfolio diversification. The Project’s carbon reduction trajectory is not aligned to 1.5 degrees warming and does not explicitly address the Scope 3 emissions from animal agriculture supply chains; this is because the company does not see animal agriculture as a common GHG source across all its product categories. The company confirmed, it is reassessing its overall Scope 3 footprint, action plan, measurement methodologies, and disclosures. Walmart’s net zero target by 2040 continues to exclude Scope 3 emissions; Walmart ignores the carbon mitigation potential of reducing animal-derived exposure through protein diversification. The company has no target to diversify its portfolio away from high-carbon products like meat and dairy. The company did not provide a timeline of when it would align its current Scope 3 target to 1.5 degrees nor include Scope 3 emissions in its long-term net zero target. The company’s ‘nature pillar’ of Project Gigaton has been a critical point of engagement with animal agriculture suppliers over the past year; it is focused on ingredients and inputs. The nature pillar encompasses grazing management and feed production; it does not strongly consider the end products. Walmart uses science-based calculators to determine the impacts of changing animal agriculture practices. However, as one of the largest retailers in the world, there is no evidence the company is robustly addressing the environmental impact of its animal agriculture supply chains. There continues to be no sustainable sourcing programmes to address the environmental impacts across animal species (i.e., pork, poultry, dairy). Nevertheless, the company understands that it needs to start moving towards a ‘good, better, best’ approach for sourcing commodities. In its discussion with investors, it referred to the 20 sustainable commodities by 2025 goals in the company’s latest ESG report. These goals continue to be insufficient to significantly reduce the environmental issues associated with livestock, such as biodiversity loss and deforestation, GHG emissions, water use and scarcity, and waste and pollution. An example project to become a regenerative company is a collaboration with the WWF on grazing management with Northern Great Plains landowners for 1 million acres. Sustainable sourcing for seafood centres around certifications (MSC, BAP, ASC, GSSI, Global GAP). The company has certification targets by 2025 across operating countries for shelf-stable tuna assortment (private brands and supplier brands) and fresh and frozen seafood. For beef, it has improved traceability through geospatial mapping. The company has a deforestation policy that covers beef and soy. Walmart did not report progress on its target to only source fresh beef from the Brazilian Amazon and Cerrado and the Gran Chaco in Argentina and Paraguay (South America) that has been produced with no deforestation or conversion by 2022, nor for its commitment to source and use only soy that has been produced deforestation- and conversion-free across South America by the end of 2023. The company shared with investors that it did not provide an update on its South American beef sourcing because it does not feel confident in the validity of the data. Investors can expect an update in the future once the methodology evolves to a point where Walmart feels the reporting is accurate. Sustainable sourcing for seafood relies on third-party certification, which is only one avenue to address the environmental impacts; certification cannot be relied on solely given it is typically a pay and display model, data quality and availability are often poor, and the issue of resource exploitation persists (fishing volumes do not decrease due to certification, instead those companies that purchase certified catch take a larger share of the well-managed stocks).

Walmart did not achieve considerable progress in its plant-based product portfolio. It launched new products, yet there is still no evidence of R&D resources dedicated to portfolio diversification, nor on the reformulation of products to limit animal-derived ingredients. Nevertheless, the company was clear about focusing on affordable price ranges in its own brands. The company does not make a link between health and nutrition and plant-based product development. We found no evidence that the company is investing internal resources to significantly expand its plant-based assortment (as peers like Kroger and Amazon are). The company does not report its total R&D spending on plant-based and alternative proteins. It also does not report on category sales. The expansion of Walmart’s plant-based range over recent years has been driven by consumer demand. Plant-based products make up a small portion of the business. Walmart shared it does not intend to create a plant-based own-brand range; it wants its plant-based products to be affordable for all customers and does not believe in creating a premium plant-based line. Walmart’s approach is to expand the assortment in its core brands (Sam’s Choice, Great Value) to increase plant-based options as consumers already trust these brands. The company is not looking to reformulate its products to reduce exposure to animal-derived ingredients. In the discussion with investors, Walmart was hesitant to agree on the improved nutritional value benefits that plant-based products can offer, which indicates that the company does not have a strategy for interweaving its plant-based product development with health and nutrition like other peers are doing. Moreover, alternative protein sources are mentioned under “Affordable, nutritious food offering” along with organic food, yet there is no further detail or strategy for their expansion. It is also unclear how alternative proteins fit within the “Great for You” icon. It is unclear if Walmart has at least 10% plant-based items in all relevant product categories (i.e., fresh, and frozen meat, dairy, eggs, desserts ready meals), and if this percentage has increased YoY.

Walmart’s efforts on consumer engagement are focused on making alternative products available and known to consumers that are already interested in these products. None of its initiatives targets the broader consumer base; there is no evidence that Walmart is investing time and resources in understanding which aspects of plant-based products (i.e., animal welfare, antibiotics, sustainability, health, taste, trend) appeal most to Walmart’s target consumers to exploit them and accelerate a dietary shift. For the consumers looking for alternatives, the company provides filters on its online website for plant-based (vegan and vegetarian products). The Walmart app also has a function that allows consumers to search and find the location of plant-based items in the store. In-store signage is used to call out products with social or environmental attributes (e.g., sustainable seafood shelf signage for Walmart U.S), including helping customers locate plant-based options. Walmart shared its learnings on placing meat analogues alongside their conventional counterparts as more effective than having plant-based products in their own store section. However, there is still no clear marketing strategy to accelerate the uptake of plant-based foods and alternative proteins. The company uses plant-based products alongside meat items in its advertisements. For example, in a Fourth of July ad, Walmart might show both alternative and conventional meats at a BBQ. This is done to attract consumers who already follow a plant-based diet rather than to encourage all customers to try plant-based items. Walmart is conducting consumer research to understand the sentiment around diverse protein sources and how to drive sales of these products. However, it is unclear how Walmart measures the success of consumer engagement programmes for plant-based foods. It does not disclose any marketing budget/spend relative to animal-derived products on marketing campaigns.

Walmart is working on the collection and assessment of Scope 3 emissions, using its THESIS system. Currently, the estimate of Scope 3 emissions is 95% of total GHG. It reported it has 57% of its Project Gigaton target in five years, and it still has seven years to go before the target year. Walmart did not report progress on its beef tracing targets and it continues to lack disclosure on how the company’s product portfolio is shifting. During 2022, the company has been reassessing its overall Scope 3 footprint, action plan, measurement, and disclosures; it anticipates setting new targets by the end of 2022. The company does not measure Scope 3, but it is estimated that 95% of total emissions are Scope 3. The company acknowledges that it needs better metrics to track and report its Scope 3 emissions. The company did not provide a timeline for disaggregating Scope 3 emissions. In 2021, Walmart reported that 574 million MT of emissions had been reduced, since 2017, through its Project Gigaton. This means the company has achieved 57% of its 2030 target. The company shared that more than 4,500 suppliers have been engaged through Project Gigaton since its launch. Walmart only reports absolute emissions of two of the largest categories within Scope 3 (purchased goods and services and use of sold products), and no absolute figure was reported for total Scope 3 emissions, prohibiting investors from tracking progress on the percentage of emissions reduced. Despite committing to measuring and reporting beef procurement and soy used in animal feed information annually, there is no evidence of progress reported. There is no public disclosure on how the company’s product portfolio is shifting; investors have no way to evaluate if the exposure to animal-derived ingredients and products has shifted or whether increasing the sale of plant-based products has resulted in Scope 3 emission reductions. The company is not considering reporting on plant-based sales; it clarified it does not report at category level for any category. If the company had a plant-based sales target, it would report on it with an appropriate metric but would not use a numerical figure; Walmart is not considering setting a plant-based target.

The company did not participate in the technical round table on measuring a portfolio transition. The company met with the coalition and it showed a willingness to learn about best practices, whilst being transparent about the challenges it faces with portfolio diversification in its operating markets and target consumers. Walmart responded to FAIRR’s follow-up questions via email, reviewed and provided feedback on the final assessment.