Last week, Wal-Mart announced a five-year plan to reduce the levels of salt, fats, and sugars in its packaged foods and drop prices on healthy fruit and vegetables. Even apart from theendorsement of Michelle Obama, the announcement received a great deal of attention. The probable impact is obvious: Wal-Mart's customers will enjoy somewhat healthier diets, to the benefit of their health and longevity. And the potential impact is huge. Wal-Mart is modeling a new approach that, given its market power, will influence how business is done across its industry.
Having seen a variety of such moves in recent years, I am reaching the conclusion that we are entering a new age of commerce. Companies hoping to compete in it may have to go back to school, and learn the three Rs that are the new foundations of business: respect, responsibility, and restraint.
Respect. Implicit in Wal-Mart's announcement is a deeper sense of respect for its customers. While the company has always cast itself as the protector of customer's pocketbooks, it now recognizes they are too often forced to choose between affordability and healthiness. Its plan to change that stands in marked contrast to the kind of corporate greed that sees customers as a resource to be exploited. A company that starts from the position of what it can get away with, instead of how it can improve people's lives, is the antithesis of respect.
Responsibility. As the nation's largest retailer, Wal-Mart seems to get that with great power comes great responsibility. By taking the lead in making healthy food cost less, Wal-Mart can have more impact on the nation's eating habits than any other organization. Having previously led a program toreduce environmentally-unfriendly packaging and engage in more sustainable business practices, the company is willing to set goals that will stretch it. For example, with regard to its commitment to reduce sodium levels by 25%, Leslie Dach, Wal-Mart's executive vice president for corporate affairs,told The New York Times, "We think it's a realistic target, but it's aspirational in the sense that we can't tell you today how it's all going to get done." Will it happen? We shall see. At the instigation of Michelle Obama, The Partnership for a Healthier America will monitor the company's progress. By teaming up with the White House and agreeing to public accountability, Wal-Mart is taking on the responsibility, and putting its reputation on the line.
Restraint. The price reductions are predicted to save Americans who shop at Wal-Mart approximately $1 billion a year on fresh fruits and vegetables alone. Importantly, however, those lower prices are intended to squeeze Wal-Mart's margins, not its farmer suppliers'. The company hopes to make up the shortfall through increased sales so that overall profitability will not suffer. Still, it is a significant display of restraint. The company undoubtedly has the purchasing power to push the burden of the cost reductions onto suppliers but chooses not to do so.
Is Wal-Mart above reproach in all aspects of its business? Of course not. Any company the size of Wal-Mart must see the full gamut of business practices. But the new plan does signal a continued positive shift in the company's ethos and actions.
In a new media world of Wikileaks, BrandKarma, and Goodguide it is all too easy to assume that changes like the one announced by Wal-Mart are made as a form of pre-emptive defense. Why not, however, take them at face value? By pursuing this initiative, just as with its sustainability initiative, Wal-Mart is also serving its own interests as a growth-minded corporation. As Jim Stengel describes in this post about the household products company Method, ideals have an incredible motivational power that supercharges all the company does. The end result is a strong, successful, and profitable company. By serving customers better and making staff feel more enthusiastic about where they work, Wal-Mart will continue to thrive and prosper.
While the recent debacles involving financial institutions make one wonder if powerful companies can change their ways, evidence from other quarters gives one hope. It seems to me that a new breed of corporation is gaining ground. The new breed is characterized by their ideals. Their mission is not just to make money but to do so by enriching people's lives. They recognize no compromise between the two.
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