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  • Print publication year: 2019
  • Online publication date: May 2019

Chapter 2 - Walmart Mexico: Clean Energy to Reduce Costs and Improve Corporate Image

Summary

Abstract

Sustainability strategy has become a top business priority for Walmart Mexico, the retail giant's largest company outside of the United States. Walmart Mexico has not always prioritized sustainability. In fact, the company had long relied on a business model that instead emphasized low-cost production, low wages, and limited benefits for its store employees. Walmart Mexico has, however, now embraced sustainability as the centerpiece of a new, community engagement driven approach to business. This sustainability initiative— started as an investment in low-cost renewable energy resources— aligns well with Walmart's underlying commitment to “everyday low prices.” These investments also work to improve Walmart's public image, blunting political concerns that had arisen in Mexico about reports of corruption at the company. The case of Walmart Mexico brings to light two important lessons for Latin American companies on sustainability strategy. First, context matters: Walmart's commitment to financial savings actually strengthened the case for cost-saving investments in sustainable energy. Second, a crisis can sometimes provide the spur needed to embrace new business practices and develop successful environmental strategies.

Introduction

In October 2005, Walmart's world headquarters in Bentonville, Arkansas, announced that the company would pursue a set of sweeping, long-term sustainability goals. These aspirations included sourcing 100 percent renewable energy, creating zero waste, and selling products that sustain the environment. Walmart intended for these changes to apply at all of its companies worldwide, including at Walmart Mexico.

After a slow start, Walmart Mexico has taken up the charge from Bentonville and made sustainability a major strategic priority. This effort has transformed the company into one of the world's most sustainable retailers, strengthened its brand, blunted government hostility, and protected Walmart's market position. Rather than adding financial burden, the company has found that sustainability actually bolsters its famous value proposition of “everyday low prices,” while also achieving a heightened level of corporate social responsibility.

The Call to Action

Walmart's chain of stores and supercenters in Mexico emerged from a local entrepreneur's successful business empire. In 1958, Jerónimo Arango opened the Aurrera Bolívar market in Mexico City. Over the next three decades, Arango went on to build his umbrella company, Grupo Cifra, and established a network of retail and service stores under the Aurrera, Superama, Vips, and Suburbia brands. In 1997, Walmart bought Grupo Cifra, renaming the chain Walmart Mexico.