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WHEN Wal-Mart starts selling a line of organic cotton baby clothes in Europe and Japan later this year, the new products will account for just a fraction of its annual sales of about $300bn.
But Wal-Mart's embrace of organic products underlines the question now facing environmental activists and others who have pressed the company to change its business practices: is the world's largest retailer setting off after Nike, Gap and others to embrace the cause of good corporate citizenship?
The cotton initiative was cited by Lee Scott, chief executive, in a speech in October, in which he set out a dramatically new vision of Wal-Mart, long criticised for focusing on low prices at the expense of everything else.
"What if we used our size and resource to make this country and this earth an even better place for all of us?" asked Mr Scott, as he announced targets for reducing greenhouse gas emissions and cutting waste. He also committed the company to working with its suppliers to promote good environmental practices.
"That speech was the single most groundbreaking speech from the CEO of a major US company on the environment that I have ever heard," says one leading US environmental activist.
Wal-Mart's new strategy has thrown down a challenge to its social and environmentalist critics, who now have to decide to what extent they should engage with a company previously regarded by many as an irredeemable villain. Three months after the Scott speech, there is still a high level of scepticism.
"My sense is that there is a lot of concern that they are taking a piecemeal approach," says David Waskow, a campaigner at Friends of the Earth's Washington office. "People want to see more broad-based evidence of change."
The scepticism reflects Wal-Mart's troubled record. In the US, the company has been repeatedly censured by the Environmental Protection Agency over waste water run-offs from its stores, which are cited as a factor encouraging urban sprawl. Activists say the company also traditionally supports congressional candidates with poor environmental records. It is facing a lawsuit alleging sex discrimination against its women workers, and last year it paid $11m to the justice department for allowing subcontractors to use undocumented immigrant labour.
The company is also aggressively anti-union. The Scott speech came against the background of a bitter campaign against the retailer in the US led by labour unions, which has focused on the low-wage model and poor healthcare provision prevalent in the retail sector.
"Environmentalists are cautious about applauding Wal-Mart's commitments because we believe that the company is trying to isolate the labour movement," says Michael Marx, head of Corporate Ethics International, an environmental campaign group, noting that the unions are regarded by many environmentalists as important allies.
Wal-Mart's overall environmental strategy was drawn up with assistance from Conservation International, a non-profit environmental group that works closely with companies, who in turn provide most of its funding.
But for membership-based environmental groups, such as the Sierra Club, and others that seek to work in coalition with student and labour campaigners, engaging with the biggest villain on the block presents risks of losing support and funds.
In a sign of the distrust it faces, Wal-Mart has been unsuccessfully trying for a year to find a "senior director of stakeholder management", a position that it says would "help pioneer a new model of how Wal-Mart works with outside stakeholders, resulting in fundamental changes in how the company does business".
Wal-Mart argues that its intentions are serious, and that the objective is improving its own business, rather than winning over its critics.
"The more that we work with people, we see things we hadn't seen before, and we become better as a company," says Andy Ruben, the company vice-president who has been overseeing the sustainability drive for the past five months.
"Over the past 18 months as we have continued to progress, there are people who are now willing to talk to us, who were not willing to talk to us 18 months ago."
The company, he says, has "dozens of people, or more" working in 13 "sustainability networks" covering areas such as farm products, seafood, wood and paper, and gold and jewellery, bringing together its buyers with suppliers and concerned non-profit groups.
Last month it announced it would work to source all its wild-caught fish from sustainable fisheries certified by the Maritime Stewardship Council -- joining a select group of US retailers headed by Whole Foods Market, the leading organic and natural food retailer.
Mr Scott also argues that Wal-Mart's size -- it operates more than 3,000 stores in the US -- means it can have a huge effect on suppliers' standards, as well as on the development of new energy saving technology.
Glenn Prickett of Conservation International argues that Wal-Mart can also contribute to improving industry standards: its work on shrimp certification, for example, led to broader rules on biodiversity and tighter standards from others in the environmental movement.
"What's exciting about Wal-Mart is the scale, and also the bigger reach they have into the public. You begin putting environmental ideas and offers in front of the US public ... and in the long run that's better for the environment."
Wal-Mart was the first general retailer in the US to set out specific targets on greenhouse gases. Its existing level of disclosure on its efforts to monitor workplace conditions in its supply chain remains far below standards set by Nike and Gap, but still goes beyond its main competitors, including Target, Costco and Kmart.
"They are a large company that has a huge supply chain ... if they change their practices they could set a standard for the industry, as well as for their own company, and it can have huge impact," says Mindy Lubber of Ceres, a coalition of investors. She points to Nike's moves to improve monitoring of its factory conditions, which contributed to a broader industry-wide effort.
Environmentalists say a key test of Wal-Mart's commitment will be its plans to release an initial environmental sustainability report in 2007, together with internet data that would be used to track its commitments on the reduction of waste and greenhouse gas production.
Similar reports from corporations such as HewlettPackard and Ford include company-wide breakdowns of their output of pollutants and greenhouse gases.
In the meantime, activists face the challenge of adapting to a world in which Wal-Mart still fails to meet their standards -- for example, with its use of greenfield sites, anti-union policy in the US and business model based on low-cost consumption -- but where it is no longer completely unresponsive to criticism.
That is already leading to discussions between campaign groups on a significant change in strategy. The days of purely negative campaigning by labour groups may be numbered, in favour of a new mix of engagement and campaigning.
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FT Syndication Service
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