Wal-Mart Leads Retail Sector On Sustainability Metrics

| About: Wal-Mart Stores, (WMT)

Summary

Wal-Mart's GHG metrics suggest an efficient enterprise.

WMT's 2020 renewable energy goal needs a couple key environmental disclosures to make that goal transparent and verifiable.

The company's board of directors includes 25% women, nearly achieving the key 30% mark.

Seeking Alpha contributors have identified Wal-Mart (NYSE:WMT) as an undervalued company and a dividend champion worth a closer look by long-term value investors. When Seeking Alpha contributors identify an undervalued company that pays dividends in a sector that I am interested in investing in, I analyze that company compared to its top peers on standardized, non-financial metrics for material environmental, social and governance (NASDAQ:ESG) issues that may impact the business value or reputation of the company or its sector. For this blog, I am comparing Wal-Mart to top brick-and-mortar competitors Target (NYSE:TGT) and Costco (NASDAQ:COST), and top e-commerce competitor Amazon (NASDAQ:AMZN) on material ESG disclosures and performance.

Companies voluntarily release key ESG data through annual reports such as the 10-K and the sustainability reports. Since 2009, corporate ESG data has been available through the Bloomberg Professional Service (Bloomberg) and other financial service platforms. The primary source for the ESG data in this blog is the Bloomberg platform. If a company sees an error in their ESG data, it should contact Bloomberg and get it corrected, as it would with public financial data.

As a threshold issue, I am interested in whether Wal-Mart's size works to its advantage on environmental issues. Specifically, I am interested in whether WMT's environmental metrics show a pattern of continuing improvement when it comes to the energy demands and related greenhouse gas (GHG) emissions normalized by sales from the company's 11,620 retail stores and 158 distribution centers.

Table 1 shows that Wal-Mart's total GHG emissions from its store and distribution centers steadily increased between the years 2006 and 2013, from 18,900 thousand metric tons of GHG in 2006 to 21,200 thousand metric tons of GHG in 2013. The key insight from Table 1 is that while Wal-Mart's GHG emissions were steadily increasing, the metrics suggest that the enterprise continually reduced GHG emissions as a percentage of sales.

Table 1

Wal-Mart

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Total GHG Emissions (thousands metric tons)

18,900

19,300

20,100

20,800

20,300

20,600

20,800

21,200

-

-

GHG Intensity per Sales

61

55

53

51

50

49

47

45

-

-

Click to enlarge

Standardized GHG emissions and intensity metrics can be evidence of whether an enterprise is continually improving energy or operational efficiency. As a general rule, a pattern of reduced environmental intensity metrics tied to a pattern shows that the enterprise is gaining in efficiency, which supports reduced costs, reduced risks, and contributes to greater and sustainable profits.

According to Bloomberg, it looks like Wal-Mart stopped disclosing total GHG emissions in 2013. At the same time, WMT's 2015 Sustainability Report discusses the enterprise's commitment to renewable energy discussed further below.

Table 2, column 3, shows that Wal-Mart has the second highest ESG Disclosure Score of 38, which on a scale of 0 (no disclosure) to 100 (full disclosure) is a below-average score. Keep in mind, however, that the retail sector is behind many other sectors when it comes to disclosing key and material ESG metrics to the marketplace, and Table 2 makes that apparent.

Table 2

Name

Market Cap $ B

ESG Disclosure

Engy Intensity/Sales

GHG Intensity/Sales

Waste Intensity/ Sales

Water Intensity/Sales

Target

43

46

84

53

NA

167

Wal-Mart

215

38

N/A

45

NA

NA

Costco

83

26

N/A

15

NA

NA

Amazon

236

17

N/A

NA

NA

NA

Click to enlarge

For example, investors concerned about climate change are likely interested in how much total energy Wal-Mart uses as an enterprise, and what percentage of that total constitutes renewable energy. Wal-Mart's 2015 Sustainability Report states that by Dec. 31, 2020, the company plans to reduce the total kWh-per-square-foot energy intensity required to power its buildings around the world by 20 percent compared to its 2010 baseline. But unless WMT discloses its year to total energy usage, and its renewable energy usage, its goal for 2020 is not transparent and verifiable.

Notice that the company has not provided total waste and total water disclosures to the marketplace, nor have most of its competitors. Only Target has disclosed energy and water usage metrics to the marketplace in a standardized format recognized by financial service provides like Bloomberg. As an investor, I am particularly interested in Total Waste and Waste Intensity metrics for enterprises that include food retailers. I expect them to be high, because I know from other research that some of the largest U.S. food retailers have stunningly high waste metrics. Yet, in virtually every other industrial sector, investors view waste as profits down the drain. Hopefully, Wal-Mart will disclose key energy, waste and water metrics in its 2016 Sustainability Report due out in April 2015.

Finally, we examine a key Social metric for publicly-traded companies, which is the percentage of women who are board directors.

Name

% Women On BD

% Women EMP

Target

27

57

Wal-Mart

25

57

Costco

17

NA

Amazon

30

NA

Click to enlarge

Wal-Mart and Target have both disclosed that 57% of their workforce is women. Wal-Mart further discloses that 25% of its corporate board includes women. Neither Costco nor Amazon reports how many women are employed in their workforce, but Amazon reports 30% of its corporate board includes women.

There are a growing number of studies that show that public companies with at least three women or 30% women on their board financially outperform those companies that lack board gender diversity. Wal-Mart is almost there, and perhaps will achieve the 30% women on the board mark very soon.

Disclaimer: The author does not hold a position in any of stocks mentioned in this article, and has no plans to change that position within the next 72 hours.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.