Politics from the Palouse to Puget Sound

Saturday, November 10, 2007

No More Low Prices, No Way?

In an effort to appease its critics and improve its image among its enemies, Wal-Mart is embracing a global warming strategy that will dramatically increase its operating expenses.

Wal-Mart believes it can use the concern about global warming to improve its public image. Accordingly, the company is disclosing its estimated environmental impact and promoting its actions to reduce its carbon footprint. By following this model of a CSR company, Wal-Mart hopes to earn public credit by playing an active role in being part of the “solution”.

The problem for Wal-Mart is its CSR strategy has blinded it from the reality that global warming alarmism and subsequent regulation is a colossal business risk. In the short term, the company will get some positive headlines for being “green” but in the long term, the impact of high-energy prices from global warming regulation will harm its business.

Why in the world would Wal-Mart want to suck up to its opponents (who are simply arrogant snobs like John Edwards anyway) while turning its back on its friends?

1 comment:

Tom Forbes said...

You're absolutely right Michael.

Here's what Wendell Cox and Richard Vedder had to say in their book The Wal-Mart Revoution:

There are two potential problems with Wal-Mart's new "kinder and gentler" approach. First, if it is a genuine attempt to convince Wal-Mar critics that Wal-Mart shares their concerns and really wants to be allies in their causes (equitable working conditions, a sustainable environment, and so on), we are highly skeptical that it will work. A large part of the opposition to Wal-Mart is funded by labor unions and they have one overriding goal - either to unionize Wal-Mart or greatly reduce its scope and market share. It is unlikely they will be appeased by any moves to, say, raise wages or benefits that do not involve union membership. Moreover, little that Wal-Mart has done addresses the concerns of the antiglobalization opposition.

Second, in its attempt to appease critics, Wal-Mart may be risking abandoning the strategy that made it strong and successful: everyday low prices. If Wal-Mart is suggesting it will require its suppliers to pay overseas workers higher wages, or if it offers expensive benefits to workers heretofore not provided, it will raise the cost of products, lowering the great benefit to Americans, especially lower-income ones, of having access to low-priced goods. In one of the quotes above, Lee Scott seems to be saying, "Let Americans pay more for garden hose." There seems to be a tradeoff here - a willingness to sacrifice some of Sam Walton's vision for the company in order to try to placate some critics. It may be too high of a price to pay.