Transcript: Wal-Mart Cuts Energy 30%--What Can We Learn From Them?

THE CNA CORPORATION


ENERGY:  A CONVERSATION
ABOUT OUR NATIONAL ADDICTION



SPEAKER:

CHARLES ZIMMERMAN,
VICE PRESIDENT, WAL-MART


TUESDAY, JANUARY 16, 2006
6:00 P.M. TO 8:30 P.M.










Transcript by:
Federal News Service
Washington, D.C.


 




ADAM SIEGEL:  – just start because all of you are engaged in what we want to have going on, which is conversations and interaction, to listen, which everyone who knows me knows is my hardest task, learning, connecting, sharing and collaborating, but we do need to start.

My name is Adam Siegel.  I’m a board member of the Energy Consensus and it’s my privilege to be introducing our speaker this evening.  I want to – at the very first before we start that, I’m going to start with an admin, which is the next meeting will be 5 February; it will be Justin Monday (sp) who will be speaking on the Stern Review Report on the economic impact of climate change.  And as you’re all aware this is – this was a very and is a very important report.  And the tentative title for the conversation that evening is: perhaps the most important report on energy of the 21st century.

This evening as you’re all aware, Charles Zimmerman from Wal-Mart is going to speak, and if I can do this right – I thought it’s this bottom button.  There we go.  One of the very interesting things to me when you think about Wal-Mart and energy right now, most Americans don’t – would not think of this.  You go to the website of Wal-Mart, the first thing right there is environment.  It is one of the four on the top.  Look at their spotlight, what they’re calling attention to: change a light, change the world.  The Green Machine – you all have the article, “The Green Machine” as a handout, which was from Forbes last year, but “Change a Light” – there was just an article in the New York Times about a week ago which looked at Wal-Mart and its objectives to sell compact fluorescents, and one way to think about that, which is going to have a major impact on the overall number of compact fluorescents – a very aggressive of how Wal-Mart is changing retailing on compact fluorescents. 

But let’s step back and think about it as a pure business environment.  It’s going to over – in about three years, it’s going to be perhaps $10 billion a year that Wal-Mart customers will not be spending paying for electricity to utilities.  Wal-Mart is a retailer.  That means that its customers are going to have $10 billion each year in their pockets that are available to spend at perhaps Wal-Mart so that energy, environmental, and good business sense are very well seen in that part of what Wal-Mart is doing. 

Let’s start this again, but let’s go back to that environment.  You go to that environment page: Conserve, Reduce, Renewable.  That is very much something called the energy three Rs, which is reduce your usage, conserve, renewable – you know, so this is very much in line what, you know, sort of pure environmental community would be speaking about when they think about this.  And it is, again, one of the major elements here.

On the front page: sustainability.  Start that journey.  And this is a very interesting – anyone who’s interested in energy issues, anyone who’s interested in environmental issues, anyone who’s interested about how to run a business smart in the 21st century would be well served by spending some time with this.  But rather than spending it on the web, what we have is the vice president from Wal-Mart, Charles Zimmerman.  He’s the vice president of prototype and new format development who has the lead and is going to be speaking to us about how Wal-Mart is working internally in its own stores to change their energy footprint and how it makes business sense for Wal-Mart, and with that I hope I did a good introduction for you really. 

I’m looking forward to this talk, and there is of course, one other thing as he’s walking up – and I apologize for that – is that Secretary Schlesinger, the former secretary of defense and the former secretary of energy, at a recent Defense Science Board last fall when Charles Zimmerman spoke, said, “Well, if Wal-Mart is number two in employment in the nation, when it comes to energy it’s putting number one – the Department of Defense – to shame.”

CHARLES ZIMMERMAN:  Actually, that’s a misquote.  What Dr. Schlesinger said – as I mentioned and I’ll mention it a couple of times as we go through this – that Wal-Mart is the number two purchaser of electricity in the world; number one is the U.S. government.  And at the end he said, “Well, you may be number two – the number two purchaser, but you’re kicking number one’s butt in how you do it.”  So that’s how the quote went. 

MR.    :  (Off mike.)

MR. ZIMMERMAN:  Yes.  Adam’s right.  What I’m going to – we have 14 sustainable value networks at Wal-Mart and I’m responsible for one of them, and the one that I’m responsible for is our sustainable buildings network: basically, the energy efficiency of our buildings.  So what I’m going to talk to you today is primarily centered around what we do from an energy standpoint, why we do it, what the paybacks are, and really the thing that surprises most audiences that I talk to is how long we’ve done some of these things. 

To begin with, I think all of you apparently do have a copy of this in your handouts, if you want to understand more about our other sustainability initiatives, and sustainability is kind of a new word around Wal-Mart.  It’s been around for about 18 months.  Energy efficiency has been around for a long time, and that’s primarily what I’m going to be talking about today.  But when I read this article, I was really dismayed.  As good a job as it did with packaging and waste and organics and our private fleet and China and everything else, it really didn’t address our building program adequately.  So I quickly took the magazine cover and made a few revisions – (laughter) – and in – a couple of weeks ago, Lee sent me – this is Lee Scott, our CEO – and he sent all of us, I think all of the network captains, an autographed copy of the Fortune magazine, said, “Great job, Charles.  Thanks, Lee.”  By the end of the day, he had a copy of this and it said, “My pleasure, Charles.”  (Laughter.)  And in our Friday officers meeting he referred to it as the ugliest Fortune cover he had ever seen, so –

Let’s start with Wal-Mart’s global footprint from a store count basis.  And why I show this slide is when you look up at Canada, those 278 stores, those were designed and built by Canadians long before Wal-Mart entered the picture.  We acquired a company in Canada – a retailer – so we basically acquired most of those stores.  If you look at the UK, those 317 units, again, designed and built by the British long before Wal-Mart ever entered into the picture, we acquired a company called Asda.  Maybe most importantly, you look at Japan, those 400 units; we acquired a company just a couple of years ago called Seiyu.  Again, those stores were designed and built by the Japanese.  So when you look at that map – and that would go for Brazil and Central America; virtually all of our countries we’ve entered via acquisition, but when you look at that map and you stop and ask yourself where would logic tell me that the most energy efficient Wal-Mart stores exist in the world. 

Some of you might be jumping ahead and figuring out it’s already a trick question, but Japan would come to mind.  I mean, it’s the home of Kyoto; surely they have very efficient grocery stores – much more efficient than anything we’ve built here in the U.S. or the UK.  I mean, you think about the EU energy codes and energy regulations, clearly those stores have to be built more efficiently than what Wal-Mart builds in the U.S.  Well, the fact is this is third-party verified data that shows per country, Wal-Mart country what the average kWh per square foot is within each of those countries, and I’ve deleted some of the countries in the middle just to make the graph where you can read it.  But look at the UK: over twice as energy intensive as what we build in the U.S.  Look at Japan, home of Kyoto.  I mean, U.S. again 50 percent less than that, and quite frankly if you’ve looked at any type of data on typical kWh usage for commercial buildings, it would typically be in that 50, 60 range. 

It’s not that our other countries are inefficient; it’s just that Wal-Mart U.S. has always been very efficient, which raises an interesting question: why would that be?  Many of you that know anything about our company know that one of our mantras is “Everyday low price.”  It’s not a Wal-Mart saying; it’s a retail philosophy.  Other retailers across the globe are “everyday low price” retailers.  It means we don’t adjust our prices up and down with sales; it’s the same price all the time.  If you come to my building, you don’t hear us talk about “everyday low price.”  You hear us talk about “everyday low cost.”  Energy is our number two operating expense – number two.  So that is why for the last two decades since Mr. Sam was still around we have been focused on energy efficiency.  It’s the one thing that we can truly control.  We can’t control labor cost.  We called for an increase in the minimum wage.  Eventually labor cost will go up even more.  Utility rates are going to go up even more, but we can control our load and that’s what we’ve been focused on for years.

We’re talking, Mitzi and I, back in the back and we’re talking about on July 12th former Vice President Al Gore came to Bentonville and showed his film, “An Inconvenient Truth,” and we had a lot of other really important VIPs in the auditorium that day and a lot of great things were said, but this really resonated with me and I’m going to quote Lee several times today and even show a few videos.  He said, “We will not be measured by our aspiration, we’ll be measured by our action.”  And like I said a while ago, sustainability is kind of a new thing for Wal-Mart, so some of the goals that are out there – we’ve never taken any steps along those lines, so there’s not really a track record of performance.  But with energy efficiency, there is a track record of performance and that’s what about half of my presentation’s going to be is talking about that track record. 

But who can tell me what this is a picture of?  This is going to be interactive.  It’s a white roof; so it’s a roof and there are two energy-efficient aspects to it that somebody might point out.  It’s white.  Skylights, let’s start with it; we’ll go back to the white in a minute.  The skylights: these are our prototypical skylights and this could be one of a couple thousand of our U.S. stores.  It’s not an experimental store, not a test store, and those skylights are polycarbonate dual glaze, so three layers of polycarbonate; some of the northern and extreme southern locations actually triple-glazed.  You can even see by the photo the dimples – it’s prismatic so it’s highly efficient as far as skylights go. 

But skylights aren’t efficient, they are actually inefficient.  They let heat in, they let heat out, unless you have them tied to a system like this.  This is the Wal-Mart continuous daylight harvesting system and the key phrase is continuous.  There are other people that do versions of daylight harvesting that will turn off one-third of the lamps.  Then when the brightness from the outside gets high enough, it turns off another third.  So you see these continuous flashes throughout the store.  Ours is continuous.  You never see it happening.  Even if all we can dim is 0.5 percent, we will dim 0.5 percent.  So on a Wal-Mart store it starts off the day at 100 percent, 99.9, 99.8 and goes all the way down till it’s completely off.  The customer never sees it happening.

And what you see in this photo is a sensor in the upper right hand corner and the controls – a very simple system actually – in the bottom left hand corner.  And I put this slide in because it gives the best visualization of what actually happens without having maybe a time-lapse split-screen photography, but what this is is this is a graph of a store in Tyler, Texas.  I just selected Tyler, Texas out of random, and these are about five days in the life of that store and this shows the total lighting load inside and outside the store. 

As you can see, these four-hour increments down here.  It starts at midnight.  So at midnight – our stores are 24-hour operations – at midnight, with no daylight coming in the skylights obviously all the sales floor lights are full on, parking lot lights are full on, we’re at our maximum load and that’s what you see with that 180kW.  Then you see that little dip at about 6:00 in the morning at the top.  That’s when the parking lot lights kick off, so you can see the system is reacting.  Then what you see happen is from about 8:00 in the morning till about 10:00 in the morning as the sun rises higher and higher in the horizon, our internal lights on the sales floor dim lower and lower and lower until they get to a point right here where they’re completely off. 

So the sales floor lights are 100 percent off.  Now, somebody might ask, “Why are you at 35kW?”  Well, we have restrooms, we have offices, we have food preparation areas where we have suspended ceilings where we maintain the lights.  But sales floor lights are completely off.  So you could see throughout the five days that.  You can see during the night times, the full on. 

Does anybody want to guess what this is?  It’s either a large cloud or a small storm.  It’s about a two-hour event.  But what’s important is the lights never go completely back on.  As it moves in, they slowly ramp up to offset that darkness only as far as they need to for the customer, and then once it clears, they slowly lower themselves back down.  Now, this is East Texas in late June, so you can see we have some pretty stormy days.  But that valley represents the savings on each one of those days. 

Now, if you look at that savings, that valley, each one of those valleys is worth about $250.  So for a $330 billion company that may not sound like a lot of money, but over the course of the year that adds up to about $90,000 to $100,000.  That system costs us $200,000.  Anybody who can do the math – that’s a two-year payback.  That’s smart business.  It’s also fantastic lighting.  That is a picture of the sales floor of one of our supercenters with the lights completely off.  Color rendering is better, the light levels are higher than they’ll be at 9:00 tonight in that same store and, oh, by the way, we’re saving a lot of money.

And this points out as well we’ve been doing this for over a decade.  You read a lot of the press on our Aurora experimental store and McKinney, Texas, experimental store.  They say things like Wal-Mart dabbles in daylighting.  We quit dabbling back in 1995.  I mean, this has been part of our program since 1995.  We built our first experimental store in 1993 in Lawrence, Kansas.  We built two more in ’95 in City of Industry, California and Moore, Oklahoma.  It was the learnings from those stores that generated a lot of the things I’m going to be talking about in the first half of this presentation. 

That 2,100 stores has now grown to about 2,400 stores with this system, about 350 million square feet.  And any of you that are familiar with the Energy Policy Act of 2005 baselines, we’re 50 percent below the ASHRAE 90.1 lighting baseline.  So, yeah, I get tickled hearing other people talk about: “Well, we’re 5 percent below.  We’re 10 percent below,” these different things.  We’re 50 percent below ASHRAE 90.1.

Somebody mentioned white roofs, and I used to really be embarrassed even bringing this up because it seems so elementary, but this is a project in South Florida.  See the Wal-Mart store on the right, another big box retailer on the left.  You fly into California, Texas, Arizona, Florida, you see this all the time.  That white roof will reduce our cooling load in this store by about 10 percent.  Yes, it costs more.  It pays for itself in about two months.  I mean, it’s a no-brainer.  We used to really try and fine-tune where we did this as far as climate zone and geographically.  We just do this across the country now.  Even Minneapolis, St. Paul, we would do a white roof.  Yes, this time of the year it’s not the smartest thing to do, but we have more months of cooling than we do heating.  So that’s just part of our U.S. prototype for all our stores now.

And I’d point out that we’ve been doing it a while.  This is an ad from the California Energy Commission back in 2001.  They kind of used Wal-Mart as their poster child for promoting a cool roof technology.  Another thing that we’ve been doing since the first hypermarket, I guess, we built when Mr. Sam was still around.  Every Wal-Mart store that has a refrigeration system, we recapture the waste heat from that refrigeration system to generate our domestic hot water.  Think about your refrigerator at home.  You put your hand down at the bottom where the compressor is, you feel cold air or hot air coming out from underneath there?  You feel hot air.  Think about all that refrigeration equipment if you put it inside of a Wal-Mart store.  It’ll overwhelm the space.  That’s why we put it outside, but if we didn’t do anything else, we’d just be discharging that heat into the atmosphere, which is what most people do.   What we do is we capture that heat and, again, basically generate all our hot water for free.  We’ve done it for over a decade – thousands of stores.  We wouldn’t even know any other way to do it.  Now, that’s good.  Bad thing is we only use a small fraction of our waste heat.  And I’ll talk about how we’re using more of it in a little bit.

So these are some of our past, current, present efficiency items: daylight harvesting for over a decade, cool roofing for over a decade, heat reclaim for over a decade.  I’m kind of embarrassed that the industry recognizes EERs of 11 to 13 as high efficiency, but they do, but we will be installing units to have efficiency ratings probably 50 percent greater than that by the end of the year. 

And then this is interesting because no one can tell me when we started this: centralized energy management system and monitoring.  Every Wal-Mart store in the U.S. we monitor/control the temperature, humidity, lighting, and refrigeration from Bentonville, Arkansas, and what that means is if you’re a store manager and you leave the door to your walk-in cooler open for more than maybe half an hour, you’ll get a friendly phone call from Bentonville saying, “Did you know that the walk-in cooler door XYZ has been open for 30 minutes?  Would you go check on it?”  It also means that – and I don’t know if I mentioned this, but we control the humidity in our stores as well. 

It also means in 2001, during the California brownouts when Governor Davis issued the proclamation that all retail and all commercial had to turn off a third of their lights during operating hours, we didn’t have to call store managers and try and explain how to go in the breaker room, flip certain breakers and hope they complied.  We just turned a knob in Bentonville, Arkansas down 34 percent and it lowered all of our lights – didn’t turn off one and not the other two.  So we’ve been doing that best thing anybody can guess is over 20 years.  So I guess we attribute that to Mr. Sam. 

Act of dehumidification: every Wal-Mart store that has, again, refrigeration equipment in it, we actively dehumidify that space, which means we don’t expect the air-conditioning equipment to dehumidify it.  That’s not what it’s designed to do.  It’s designed to cool the space.  We have specific dehumidification equipment and how we use that is we lower the humidity down to about 40 percent in the store, which allows us to raise the temperature in the store and the customers are still comfortable.  So our competitors might be operating at a 74 degrees set point, we can operate it at 76 or 77 degree set point – much, much more efficient.  The refrigeration equipment runs more efficiently, the HVAC equipment runs more efficiently.  It all lasts longer because of that.  Again, just a win-win.  Payback with probably less than a year for that investment. 

Then exterior LED signage.  What I like about this is I used to be in charge of maintenance among other things at Wal-Mart, and these letters are about five to seven feet tall.  They’re on the front of the building about 25 feet up in the air, so you can imagine what the cost to re-lamp those every two years was.  It was dangerous.  It was costly and about half the time one of those letters was burned out in between the re-lamp period.  Now with LED, the LEDs actually last longer than the letters do.  We will never re-lamp that sign.  The polycarbonate letters will fade and crack and we’ll replace them before we ever replace the lighting, which is important because we’ve found other applications for LED now, and we’ll talk about that in a few moments. 

So this part of the presentation has been kind of trying to establish how energy efficient the stores in the U.S. really are and there’s been a lot of press about us recently.  Fortune magazine had a cover story on USA Today.  I actually got to be on the Weather Channel a couple of months ago.  But this is by far my favorite quote that has come out of all this: “I have traveled extensively, visiting retail in the North America, Central America, South America, Europe, and Asia and I can honestly say that in my opinion the stores Wal-Mart builds today in the U.S. are the most energy efficient of any I have ever seen anywhere in the world.”  Now, I told you about former Vice President Al Gore being at our office.  I’ve attributed some quotes to Lee Scott.  Does anybody want to guess where this one came from?  Actually it came from me – (laughter) – and I am a little bit prejudiced, but I have traveled in about 25 countries.  All I do is walk into stores, look at the lighting, look at the HVAC, look at the refrigeration, and I truly believe that statement. 

So we’ve got the most energy efficient boxes in the world.  We’re well ahead of our competition, so what are we going to do now?  Well, according to our CEO, Lee Scott, on October 24th, 2005, he said you’re going to take those highly-efficient stores that have daylight harvesting systems, heat reclaim systems, cool roof technology, and in the next seven years – now five years nine months – you’ll reduce the energy consumption by 20 percent.  He also said you’re going to take that very efficient prototype, and the most energy efficient prototype in retail around the world, and in the next four years – now two years nine months – you’re going to reduce energy consumption of that prototype by 30 percent. 

When these goals came out in 2005, I knew they were coming.  I had some ideas on how we would get there, but I was still scared to death.  I mean, I didn’t know if we could really put off in these timeframes, but let me tell you what’s been going on.  In our existing stores last years we retrofitted 200 stores with a new refrigeration retrofit that reduces energy consumption by 8 percent.  We’ll do 400 more stores this year and 400 stores every year thereafter until we get to the entire chain.  The payback of that retrofit is less than two years.  We have a HVAC retrofit that we did in 200 stores last year; we’ll do in 400 stores this year, 400 stores every year thereafter until we’re though the chain, the payback of that retrofit is less than two years.  We have an LED freezer case lighting retrofit that will start this year that we’re looking at that we want to do 500 stores or 1,000 stores per year.  The payback on that is right at two years. 

So we’re actually ahead of the curve on the 20 percent energy reduction and this Friday in Kansas City we open a new store that is – we call it our higher efficiency prototype.  We used to call it the high efficiency prototype, but we figured we’d better call higher efficiency.  It will be 21 percent more efficient than what we were building in 2005.  And this time next year we’ll open stores that are 30 to 50 percent more efficient than what we built in 2005.  And stop and think: that’s taking already very efficient design and taking a 30-50 percent even more efficient. 

So here’s how we’re doing it.  Does anybody spot two things in that photograph that might be a little different than your typical grocery store?

MR.    :  (Off mike.)

MR. ZIMMERMAN:  Heard all glass doors.

MR.    :  (Off mike.)

MR. ZIMMERMAN:  LED, yes I mentioned it, so somebody – yes, look at that product.  Think about your grocery shopping.  Do you ever – do you usually have to open a door to get to Oscar Mayer bologna?  The answer is no.  In fact, there’s what that case would typically look like; that’s a product that is typically out in the open.  Does anybody want to guess according to ASHRAE how much energy you save just by putting those doors on, from a refrigeration load standpoint?

MR.    :  (Off mike.)

MR. ZIMMERMAN:  How much?

MR.    :  (Off mike.)

MR. ZIMMERMAN:  Wow, we must have ASHRAE engineers here.  (Laughter.)  Actually it’s 70 percent and our tests that we’ve conducted shows that it is a 70 percent reduction.  I don’t know about you, but I’ve been led to believe that those are specially designed cases, the air flow is just right and there’s not much leakage, but that’s why you freeze to death in grocery stores because all that cold air does leak.  So we’re testing the doors. 

And then somebody else mentioned the LED lighting.  We’re not testing this.  This was a home run.  We did this in McKinney, Texas, our last experimental store in Aurora, Colorado – both opened just a little over a year now and it’s proven to be a big, big home run for us – 50 percent less energy just from a lighting standpoint.  That means you’re introducing 50 percent less heat into that refrigerated case, so your refrigeration runs more efficiently.  The lighting lasts three to four times longer.  We think now this lighting will going to last as long as the refrigerated case does and it looks fantastic – absolutely fantastic. 

But what’s missing from this picture?  People.  And we’re a 24-hour operations.  Our stores are very busy most of the time, but there are times when there’s no one in front of that lighting.  And if there’s no one there to see it how efficient is it?  And it finally donned on us that it’s not efficient at all.  So what we’re doing in the stores we’re opening starting this January is over each one of those cases is a motion detector.  And here is what happens: about 20 to 30 feet away the case senses the customer coming and it turns on the lights; then after the customer moves about 20 or 30 feet away, there’s a 30 second timer that kicks in and then, if there’s no other customer in the space in that 30 seconds window, the lights kick themselves off, so it’s continually dynamic, continually motion sensing.  And when they first propose this to me, I said, okay, so what are we going to get?  Ten percent off time?  Forty percent off time.  So the life of the lamps are extended 40 percent.  The energy saving is extended 40 percent.  The return on investment is extended 40 percent. 

And this is just one of my guys with one of the Philips lighting engineers just showing we’re looking at all applications throughout our store for LED lighting.  Right now it’s just the freezer cases.  It’s only place we’re installing it prototypically.  We’re testing in a few other locations, but I firmly believe someday the entire store will be lit with LED.

So if you think about our lighting, we have a dynamic sales floor lighting system that continually adjusts automatically based on the outside conditions.  All our offices and restaurants have occupancy sensors, so if there’s no one there, the lights aren’t on.  And now, even our point-of-purchase lighting is getting to a point where it is dynamic and if there’s no customer there to see the product, it will turn itself off. 

So here’s some of our future efficiency items.  We’ve talked about the interior LED lighting – we’re looking for more and more applications – we’re still testing the additional doors on the refrigerated cases.  Where we’ve done it so far, it’s been in new stores so we didn’t have a proven sales history.  There are some of our merchants that feel that for some of the categories the customers may be impacted, like yoghurt.  Maybe we sell less yoghurt because they have to open a door.  So what we’re going to do is going to six existing stores this quarter, retrofit those open cases with closed cases so we can look at the sales history up to the time we put the doors on and then the sales history after.  My feeling is most of the categories will show no impact; there may be one or two categories we can’t do the doors. 

Variable speed fans and motors on HVAC and floating pressures in refrigeration; that just goes to the point that since we control everything from Bentonville, we have to have pretty sophisticated control technologies, and up till now we just either had everything on or off.  We’re installing more sophisticated technologies now so we can vary it throughout the day. 

Emerging HVAC technologies.  I’ve mentioned the store we’re opening in Kansas City next week, our higher-efficiency proto.  It’s a heat pump closed-loop water system, so it takes all that refrigeration heat that we’re not using today and uses it to heat the store.  And so even in Kansas City, I think it’s projected 95 percent of the time we won’t have to use any electricity or gas to heat the store, during the winter time.  Our refrigeration waste heat will do that for us. 

And then this last one is really exciting if you’re big on greenhouse gases, and it’s CO2 secondary loop refrigeration system.  We installed the first ever for the U.S. secondary loop refrigeration system in a Sam’s Club in Savannah, Georgia.  And I’m going to let Lee Scott, our CEO, describe it real briefly.  It’s about a two minute video, but this is him talking to our Sam’s manager at their holiday meeting, last October.

(Begin video presentation.)

LEE SCOTT:  But I’m really excited about what happened in our new club in Savannah, Georgia, where we installed – I know – we installed the first ever carbon dioxide secondary loop refrigeration system.  Now, I know you are dying to understand the physics behind this and I am prepared to discuss that this morning with you.  Actually, I don’t have a clue what that means.  (Laughter.)  But I can tell you what happens after you implement it and it functions properly.  It means eliminating 1,000 pounds of refrigerant, which is 60 to 80 percent less than normal.  It means preventing 460,000 tons of carbon dioxide from entering our air every year.  It means reduced energy cost and reduced maintenance cost for our club, and thanks to a more stable temperature in the case, it means that we will lose fewer products because of temperature variants. 

I told you: sustainability is cool.  And you – that is just one club.  What if we did that in every club?  The possibilities are endless, which is why sustainability is not just a one-time program; it is a part of our Wal-Mart culture.  It is helping us to be more environmentally friendly, but it has the added bonus of making our company more efficient.  Environmental sustainability is a business imperative at Wal-Mart.

(End video presentation.)

MR. ZIMMERMAN:  When Lee asked that rhetorical question, what would this mean if we did it in every club, meaning super-center, neighborhood market, everywhere we have refrigeration systems.  And he didn’t know the answer when he asked that question, but I’ve since shared it with him.  And this is what really gets exciting.  Wal-Mart has a pretty big truck fleet, maybe the largest in the world: 7,000 tractors, 44,000 trailers; they drive 900 million miles per year.  That number seems impossible but if you multiply 7,000 times about 123,000 miles per year you get the 900 million miles. 

But look: this is our global carbon footprint from a percentage standpoint.  Look how much our trucks, cars, and planes contribute versus what leaking refrigerants contribute.  And Wal-Mart doesn’t leak any more refrigerant than any other grocery retailer out there, but basically the answer to Lee Scott’s question: what if we install this system in every one of our facilities?  We would more than offset the impact of our entire truck fleet: 900 million diesel miles per year.  Now, that’s big, but Wal-Mart is just one company.  What if all of a sudden Target did that and Costco did that and Albertson’s did that and Food Lion did that?  Well, for them to do it, they have to understand and have this stuff shared with them. 

So one of the other interesting things that’s changed about my company in the past year and a half is this happens to be the grand opening of that Savannah, Georgia, Sam’s Club and standing up on a podium – what initially jumps out as being different is that’s one of my guys.  He’s a mechanical engineer.  What gets even more different is when you look who’s in that audience.  Target’s in that audience.  Costco’s in that audience and their audience.  Publix is in that audience.  Food Lion’s in that audience.  Whole Foods is in that audience.  We invited every single competitor we could think of, and a few others we hadn’t thought of, to come meet our vendors, review what we had done, why we had done it.  We had the EPA there shortly after this as well.  But we are sharing with everybody everything we’re doing, what we’ve done wrong, what we’ll never do again.  I’ve given the same presentation to Best Buy.  I’ve given it to Office Depot.  I’ve given it to Kohl’s.  So that’s what is really dramatically changing is – yes, Wal-Mart’s big, we purchase about 1 percent of the electricity in the U.S., but if we can get our suppliers, if we can get our producers, if we can get our competition to do the same things, we’ll get where we need to be a lot sooner.

To help highlight that this is a global effort, it’s not just Wal-Mart, U.S., every country has two energy goals: they have a retrofit goals – so how you’re going to get to that 20 percent existing store energy reduction; and they have a new store goal: how are you going to get to that 30 percent new prototype reduction? 

This happens to be the UK’s retrofit plan, and what you see on the left-hand side of the sheet are the different initiatives.  So you’ve got refrigeration initiative one, refrigeration initiative two, HVAC initiative one, lighting initiative one.  And then over in this column, you have the paybacks.  Look at those paybacks: one ear, one year, four years, 0.17, two years.  I mean, just great paybacks. 

This is Brazil’s new store plan: 5.6, 4.4, 3.9, 1.3, 1.4.  So far in the U.S., we have not approved any retrofit initiatives that don’t have a payback of greater than two years, just because we only have enough resources to actually execute those.  We’ve committed to investing $500 million per year in the new technologies to get to where we need to be.  If we had the resources to physically install all this stuff, I think they’d give me $1 billion per year.  I mean, with paybacks like this, it would be an no-brainer.

So that’s kind of where we are on efficiency and I know that’s primarily what this group wanted to hear about, but I have to take this next step because I’ve got guys on my team that constantly have to remind me that sustainability is more than just energy efficiency.  So if you bear with me, we’ll talk about a couple of things that aren’t directly related to energy.

First off, this is another ad on one of those Wal-Mart websites.  This happens to show our 14 different sustainable value networks, and you can see mine that I lead – the sustainable buildings network.  Because we have gotten so hung up just on focusing on energy, I broke that network into three subnetworks: site building and materials – excuse me, site materials and methods, building materials and methods and in systems materials and methods.  And of course, everything we’ve talked about it’s been systems related. 

But what we’re looking at going forward now, we’re implementing this year in some cases, rainwater harvesting, domestic water conservation.  And here’s a number that just blows me away: does anybody know who Paul Hawken is?  He wrote “The Ecology of Commerce” and he’s the Hawken of Smith and Hawken.  He was talking to us the other day and he said in California, 50 percent of the energy generated – electricity generated goes to move water.  And that’s just phenomenal, but think where their water comes from.  So if you can reduce your water consume for water – if you can increase your water conservation by 50 percent, you just reduced utility demands – electric demands by 25 percent.  So some of these things that you don’t think are energy related, really are. 

Construction of re-recycling.  That’s something that our great competitor Target does really well, that we’re trying to learn from.  And then increase in recycled products.  Just in this photo, if you see this black baseboard and black chair rail and visualize in a Wal-Mart store, most of walls have merchandise on them, so there’s not many places where you’d need a product like that, but still our building program is so robust, we purchased about 2 million pounds of that product each year.  It turns out it’s made of 99 percent recycled plastic.  We’ve been purchasing that for years because it was more durable, it looked better and it cost less, not because it was sustainable.  Once I found out that it was 99 percent recycled plastic, I asked the obvious question: where does that plastic come from?  And you sometimes get some bad answers to that question.  But has anybody ever looked at a disposable diaper and think about unfolding it, and wandered what happened to those little leg holes that they punch out when they manufacture those disposable diapers?  I can tell you, they go into the baseboard and chair rails of your local Wal-Mart store.  So we’re taking somebody else’s waste and use it as a building product. 

Another group’s waste we’re taking is the coal-fired electric generating industry’s fly ash, and we’re also taking the steel manufacturing industry’s slag.  In our concrete mixes – in fact, this is an interesting story.  This is a shed on I-25 North of Denver.  It’s about 5:30 in a Saturday morning and what we’re doing is we’re pouring test slabs.  And we invited all our competition to this one as well, but it was 5:30 on a Saturday, not a soul showed up.  But we don’t put vinyl floor coverings in our stores that we build today, so it’s exposed concrete.  And if you see the little pieces of paper on the columns, what we’re testing is different fly ash and slag and recycled aggregate additives.  Right now, today all of our exterior concrete allows up to 40 percent fly ash and slag.  Our interior slabs we didn’t allow any, sometime this year we’re going to move to a point where we require a minimum of 20 percent fly ash and slag in all of our concrete and allow up to 40 percent, regardless of where in the building it is. 

Now we’re starting to move into some of the cool stuff that we’ve tested recently, that we think has some applications.  This is our Aurora, Colorado experimental store that’s been open right at 12 months, and this is called a solar wall.  Usually when I say solar wall, people think of photovoltaics and solar panels.  But this is called a solar wall, I think it’s a phrase coined by the National Renewable Energy Lab that we’re working with at this project, but all it is is a hollow cavity on the south side of the building, a metal skin, you can see the perforations in it.  It’s on the south side of the building, so when the sun hits it in the wintertime, guess what happens?  The air inside heats up.  Because of those perforations as the hot air rises, it draws in more fresh air and then we pull that preheated air into our roof-top units.  I was in Aurora last week.  The outside temperature was 30 degrees, so in a normal store we’d be burning natural gas or using electricity to heat that outside 30-degree air, in this case, we were heating 60-degree outside air.  So basically free heating. 

This installation ¬– (audio break, tape change) – year we’re going to do six more installations with different variations on this theme, but we think this is something that has application for all of our northern locations going forward. 

Photovoltaics – we are right now working with a number of companies looking for someone that can match our scale that can do hundreds of projects a year.  Photovoltaics for us, unless there are incentives or rebates or other programs in place don’t make economic sense, but there are about 12 states where there are such programs, so we may be pursuing that.

This is the one thing I can guarantee that you will not see on any future Wal-Mart stores for the time being: that’s onsite wind generation.  We did this is McKinney and Aurora, and it works, but it just doesn’t have a payback for us, so it’s not going to be something we pursue.  We might buy wind power, but we’re not going to self-generate it. 

And this one.  This is our rain water harvesting system in McKinney, Texas, and it’s a great example of what happens if you let architects – I’m not an architect – get their hands on things – (laughs) – because there is no way you could afford to this in our business environment and have a payback.  However, you can do that, and do exactly the same thing.  In fact, do it better.  That water that comes off our roofs are practically potable already, but this is our future rain water harvesting systems look like, and we’re testing the next one in – there close by the home office in Fayetteville, Arkansas, but we think this has a lot of potential for us. 

I talked a while ago about co-generation: combined heat and power.  This again is Aurora, Colorado, during the blizzards when the store lost power.  These burn natural gas.  We didn’t lose any of our refrigerated or frozen product in the store.  Had we not had this system, we would have lost about $1 million worth of product.  So this generates about 40 percent of our electricity needs in the store by burning natural gas.  We think this has a lot more application for us going forward, but we just don’t have any concrete plans in place today.  And part of the benefit – I mentioned the combined heat and power, at 600 degree Fahrenheit air that we’re taking into the store for radiant floor heating, for hot water demand, for our rooftop unit heating.

 Pervious pavement.  I’ve got – that won’t interest you guys.  I’ll skip over that real quick, but here’s the one that just blows me away.  I talked about the water situation in California.  When I first got into this, I thought, well, maybe we can take some of the proceeds from these great paybacks on energy to fund what we need to do from a water conservation standpoint.  It turns out this has better paybacks than the energy stuff does. Even in a retrofit situation, going into an existing store, ripping out all the sinks, ripping out all the urinals, ripping our all the faucets, ripping out all the toilets and replacing them – payback of 18 months.  Within the United States of America, with our cheap water, cheap sewer – payback of 18 months.  New store – payback of three months.

We feel confident that we can reduce our water consumption by 50 percent.  We’re testing some new waterless urinals, some new ultra-low flow fixtures in a couple of stores in different markets now.  We’ve got the request in to our senior executives for funding to proceed with this.  We’re talking about saving maybe five billion gallons of water per year, and that’s not that big of a deal here in the U.S., but in a lot of our other countries it’s a huge deal, but the fact that it’s got those paybacks is just something that I wouldn’t fathom. 

MR.    :  (Off mike.)

MR. ZIMMERMAN:  How does what work?  The waterless urinals? 

MR.    :  Yes.

MR. ZIMMERMAN:  Well, the old design – and we’ve been testing this off and on for a few years, but in the trap is a cylinder.  It’s an oil in it, and the urine is heavier than the oil, so the oil acts as the trap.  The problem is that if somebody pours coffee in there, or coke on there, the wrong type cleaner, it completely fouls it up.  You have to replace the cylinder and it’s very costly.  Now there is a rubber flap cylinder, so it’s mechanical.  It’s just – you know the party favors you blow on and it unrolls?  It’s like that rubber flap is curled up in the bottom like that, so as the urine goes in, the gravity unrolls the flap, it passes, then it rolls back up and forms the trap again.  The Army’s used it at Ft. Bragg for like three years – not had any issues with it, and if we could just get one year out of it, we could replace it every year and it would be a great payback for us.

And then all the other fixtures are just adding air to the water so that you get a lot more velocity.  This has got absolutely nothing to do with energy, but I need to throw it out there.  I hope I’ve kind of convinced you that maybe we build pretty energy efficient buildings, maybe we’re moving the right way in using more and more waste materials and recycled materials in our buildings, but there still might be those out there that say, yes, but you go build a store and you take a 20-acre site that was a field or maybe it was a brownfield site, but you’re developing land.  So what we have done working with the U.S. Fish and Wildlife organization is we mitigate acre for acre; every acre we develop, we donate to them permanently reserved high priority wildlife habitat.  So this year if we develop 20,000 acres of property, we will donate permanently reserved 20,000 acres of priority wildlife habitat with the U.S. Fish and Wildlife organization.  So we’re trying to offset our footprint in just about every conceivable manner. 

And here’s a video that I’ll skip on that.  You’re not interested in that.  Now, I added these slides because I knew that there would be some questions about our truck fleet.  And these are just – I’m not the truck fleet guy.  There’s somebody else like me that does that piece of our business.  These are just some of the numbers I relayed to you earlier: 7,200 tractors, 44,000 trailers, 900 million miles per year.  We’ve gotten active with the EPA Smartway program and a Sustainable Global Transportation Group member.  But they had goals similar to my area, except theirs were actually a little more aggressive: 25 percent fuel efficiency improvement by 2007.  You can see as of January there a 24.9 percent. 

And it was interesting: when I was meeting with the Pentagon earlier today, they were questioning me about this one – this fuel additive.  They say, we have all these snake oil salesmen that come to us and say that these different additives will give you 5 percent, 8 percent, 10 percent energy savings.  Well, we’ve proven that 1.6 by driving 900 million miles per year with those additives.  We know those numbers are right, so they’re going to hook up with our fleet guys, but 25 percent fuel efficiency improvement by 2007 – they think they’ll exceed that this year and get closer to about 31 percent.  And then their long-term goal: double the fuel efficiency of the fleet by 2015. 

Here are the trucks that we’re putting on the road today.  You can see some of the aerodynamic aspects of those.  We have a no-idle policy, so once our trucks pull behind our stores, they shut the engines of completely.  All of the trucks contain auxiliary power units now, and look at – in one year alone just with the APU $22.5 million savings.  It pales in comparison with my $50 million that I contribute with daylight harvesting, but oh, well.

MS.    :  (Off mike.)

MR. ZIMMERMAN:  We have a no idle policy.  So –

MS.    :  (Off mike.)

MR. ZIMMERMAN:  Yes.  We just have sign all across the back of our store, “no idling,” and store managers and everyone else are encouraged to call us if – and I think they can even tell with the global positioning equipment that they have and the trucks now that the truck is stopped for more than a certain amount of time and – kind of like our doors on a refrigerate cases – you’ll get a phone call from the D.C. saying, hey, turn your truck off. 

So how big is this?  Wal-Mart is the largest purchaser of HVAC equipment in the world.  We’re the largest purchaser of refrigeration equipment in the world.  We’re the largest purchaser of lighting fixtures in the world and lamps.  As we change our specs, the industry specs kind of change with us. 

Given the fact that now we are talking with our competitors, we are going to our suppliers, we had two of our energy team people in China this week meeting with our major suppliers saying, why don’t you use T8 lamps, why don’t you use this, why don’t you use that?  This is big.  I really, truly believe that we will make a change in the next couple of years because of the things that my company is involved with, the things that we’re getting involved with some of our suppliers, et cetera.  I mean, GE is a great partners in all these efforts.  Lennox is a great partner of ours, but at the end of the day I think I’ll just leave to Lee Scott with his closing statement on how big this is.

(Begin video clip.)

MR. SCOTT:  In my view, this effort in sustainability is one of the most important things that we will undertake in this decade and possibly in this century.

(End video clip.)

MR. ZIMMERMAN:  We haven’t been around a century.  So if the CEO of the world’s largest company says this is the most important objective of that company ever, I think it’s pretty big.  Thank you very much for allowing me to be here, and, Mitzi, do I need to answer any questions or – (applause).

SUNJIN CHOI (PH):  Good evening.  Sunjin Choi (ph) in IDA.  Thank you very much for a splendid remark.  My question is regarding UK issues.  You mentioned you have a quite – (unintelligible).  You have a 317, I think, stores you have?

MR. ZIMMERMAN:  Something like that.

MS. CHOI:  Something like that.  And you told me UK stores are twice as efficient as U.S.  What are the contributing factors? 

Second question is, as you know, UK Department Trade Industry came up with – (unintelligible) – report last May, and one of the component is that they will create UK Energy Technology Institute, which will be basically private and public partnership initiative and BP and others will participate.  My question is, will you participate? 

And I was all surprised by your last year’s annual turnover: $320 billion, which is equivalent of GDP of Saudi Arabia.

MR. ZIMMERMAN:  Yes.  I’ve seen things that showed that like compared to other countries we’re like tenth in the GDP rankings or something like that.  Why is the UK not as efficient as the U.S.?  Yes.  Why is the UK less efficient than the U.S.?  A couple of different reasons.  One, their stores are smaller and they have a larger percentage of the store devoted to groceries, so it’s a little skewed – those numbers.  But also they have probably on average twice the lighting levels in their stores than we would have in the U.S.  They have more open cases.  Even freezer cases don’t have doors in the UK.  It’s very common for those to be open.  In fact, I wish I had that slide back up.  If you remember, Mexico looked the most like the U.S. 

Anybody want to guess why Mexico looks almost identical to the U.S. in energy efficiency?  That’s because it was the first country we acquired – the first country we entered.  (Laughter.)  I’ve made that mistake before.  But we have been in Mexico for over a decade, so those stores have come along and look very similar to the U.S. stores.  The UK – we’ve been there a while, but the British are stubborn.  They think they know than everybody else and they think they’ve got to have twice the light levels and they think every refrigerated case has to be open, but we’ll get them there. 

I’m actually speaking at a British consulate meeting Thursday this week in Huston.  One of your questions was about us participating in something in the UK.  Lee Scott is actually going over soon to something sponsored by Prince Charles to speak, and he’s going to be specifically to talk to retail in the UK and what they can do to be more efficient.  So whether Asda is actually going to be part of that organization you talked about, I don’t know, but we are being very upfront with what our expectations are in the UK.

BRAD HOLLOMON:  Brad Hollomon, Institute for Defense and Homeland Security.  I was interested in the $500 million number that you put out there.  It sounded like it was not a number that was built from the bottom up, but it was a number that was arrived at a corporate level.  And I wonder if you could say a little bit about where that number came from, why it’s not a billion, why it’s not less than that?  Because many other companies have difficulty coming up with that. 

And as a second question, do you rely at all on outside investment?  Do you have performance contractors or is there an opportunity for somebody like me to come in and pick up some of those three-year payback investments?

MR. ZIMMERMAN:  No, we do not hire performance contractors.  And where the $500 million number came from I can’t really tell you.  I know we’ve done of lot of studying about where each country was from an energy efficiency standpoint, but I actually kind of think it was just a nice round number that no one thought we could ever actually have the resources to reach.  When I kind of looked at where we’re going peak with all these retrofits, I see us at somewhere around $380 million.  I’d like to get to that $500 million.  There’s just not enough bodies to get all this stuff done.  But I don’t think it was a really in-depth, detailed study. 

The Pentagon today kept trying to get to me to say, well, don’t you have some big, thick studies to explain daylight harvesting?  And – no.  I’ve got one sheet of paper that says – it costs this and it returns this.  That’s all I need.  And they say, you mean to invest $17 million in LED lighting, you can just make the decision to do that?  Yes.  We have a track record of returning what we say we’ll return, so we don’t have to prove a lot of this stuff, so I think Tom Show (ph), our CFO got to Lee Scott, our CEO, and said, in our CAPEX budget let’s just budget $500 million.  They budgeted it.  It was a great guess, and if I can find the resources I’ll be happy to go to him and as for another $500 million.

ROBERT FARON:  Hello.  I’m Robert Faron.  I’m an attorney and work on sustainability counseling.  I think one of the things that was most amazing about the Wal-Mart adventure – I’d call it – is how this has been transferred through your management structure, the networks, the type of work you do.  I’d wish you say something about that.

MR. ZIMMERMAN:  Have you been to some of the network meetings?

MR. FARON:  I’ve been involved in that.

MR. ZIMMERMAN:  Yes.  I’m just a civil engineer.  I think – within our company of 1.8 million associates, I think we have maybe half of dozen that were hired to lead the sustainability initiatives.  Everybody else it’s just part of your everyday job.  So I’m a civil engineer, I was responsible for the building program.  They just came to me and said, guess what?  You have some new goals, you have new responsibilities, Tim Yatsko in our fleet area, senior vice president, ran our fleet area.  Now he is also responsible for fleet sustainability.  So it’s part of every business units’ responsibility.  I’ve hired no additional staff to do this.  We will open the 300 stores this year in the U.S. just like we have for the last couple of years.  We’re just going to do it a lot more efficiently.

It’s actually probably easier for my group, because we have always been focused on energy efficiency, but we haven’t been focused on sustainability.  In my architectural team this year I’ve given a goal to them: each one of them has to come up with five specification changes that are sustainability related, but non-systems, so it can be organic, concrete form release oil.  It could be recycled reinforcing chairs for the steel and the concrete, but we just haven’t thought that way in the rest of our program.  But, yes, it’s been really difficult personally.  I probably spend an extra 10 hours a week on top of my 70 that I used to spend, but this is the part that’s fun and this is the part where I know I’m making a difference.

DAVID BLAIR:  Hi.  I’m Dave Blair from the Department of Navy.  I’m really glad to hear that you’re going in and talking to your suppliers, especially in China, about some of the ways that they can be more efficient.  I suspect that you’d find out, too, is that the numbers you’re getting in your U.S. operations and worldwide operations would pale in comparison to what you’d get out of your Chinese manufacturers. 

MR. ZIMMERMAN:  Yes.  It’s about 10 to one.  We think our major suppliers represent 10 times the footprint, and that’s just major suppliers.  I don’t even know how you define that, but we define major suppliers and it is 10 to one.

MR. BLAIR:  Great.  Okay.  Can you talk about some of those?

MR. ZIMMERMAN:  Actually, we’re just in a pilot stage now.  It’s called SEEP, Supplier Energy Efficiency Program, and we had two of our energy department people – and this is something we may outsource just because we don’t have the resources, but we had two of our energy people out in China visiting with a handful of these major suppliers, just getting a feel for what opportunities might be.  And for the most part we’re just doing things like looking at the lightning and are they doing things from a lighting standpoint that they could just take from our store program?  Are they doing things from a refrigeration standpoint?

So really the technologies that we already employ – can we migrate those into our suppliers programs?  The one example that our energy department uses all the time is an underwear manufacturer out of Georgia where they went in and just walked into the store and about two hours saying, you need to think about this, this, this, reduced their energy demand by 70 percent.  And of course, that reduction – I’m sure it was his number too, operating expense too.  Then those lower prices get passed on to Wal-Mart, we pass them on to our customers, and the cycle continues.

MR. BLAIR:  Wal-Mart requires – (off mike)?

MR. ZIMMERMAN:  We couldn’t require it, but it’s a competitive environment, so if they have those savings, we won’t get 100 percent of it, but to be competitive they’ll pass some of those on.  But we are putting together – we’ve always had suppliers scorecards, and I’ve never even seen one, but there’s a bunch of different categories where you rate suppliers.  Sustainability is now going to be one of those categories.

MARK NOBLE:  Hi.  Mark Noble, and thank you for coming.  It’s a very interesting and very impressive set on information here.  In fact, I’d like to take some of it to various places I work with energy, in Arlington Country and the Northern Virginia regional parks where I work.  One concern that always runs not just under this program, but pretty much anything when we talk about energy is what’s happening to the overall energy consumption.  If we want to take, say, just for example our country –

MR. ZIMMERMAN:  Right.

MR. NOBLE:  – and so we say we’re becoming more and more and more energy efficient, and at certain times, say, our GDP goes up faster relative to energy consumption and that’s good because we’re energy efficient, but overall we end up using more and more energy.  And so in the end it ends up being where we have to look at energy conservation where we actually have goals of reducing our whole society’s energy use, and I wonder if you have – if you talked about that at Wal-Mart and if you have any kind of large-scale solutions in that regard?

MR. ZIMMERMAN:  Well, I don’t know if we have large-scale solutions, but one of the things Adam mentioned was our goal to sell 100 million compact fluorescent lamps this year.  When I was in Aurora, Colorado, last week I was with a film crew from Frontline and we stood in the light bulb aisle and we just watched customers.  And most customers – the only incandescents they were buying were like the clear globes.  I mean, you can’t get clear compact fluorescents, but we watched customer after customer and lower-income customers in some cases, too, that were being thoughtful and taking the compact fluorescent three-pack off the shelf.  So the products that we sell to our customers can go a long way with regards to that, but one of our – I need to add it to our presentation, one of our overarching goals is to be supplied 100 percent by renewable power.

Now, fortunately there is no timeframe on that, and as part of the reason we’re so aggressively pursuing the reduction within the store footprint now is because at some point we’re going to have to buy offsets, install photovoltaics, buy wind power, et cetera.  But I think we’re trying to do a better job communicating to our customers.  The store that I mentioned that we’re opening in Kansas City – for the first time ever we’re going to tell the story of daylight harvesting, we’re going to tell the story of LED lighting.  Typically we’d try to keep that almost invisible to the customer, but we’re trying to explain to them why we’re doing the things we’re doing and what things they can do in their own homes. 

MR. NOBLE:  The power of having a mike and I’m walking around – question of if Wal-Mart is 1 percent of American electricity and you’re sharing – hopefully you’re being aggressive enough to share in where you’re laying out and saying this is a two-year payback, this is a four-year payback.  How much in the retail industry can you see, let’s say, in the next eight years if you have cooperation in your network of cutting U.S. electrical demand via what Wal-Mart’s doing that and then what it’s sharing?

MR. ZIMMERMAN:  Boy, I don’t know.  I don’t know.  I kind of know what Target’s footprint looks like and Home Depot’s footprint and Lowe’s footprint – maybe 5 percent.  When you take – because what I really look forward to someday is walking into a little non-chain convenience store and opening up a case to reach in and get a Mountain Dew and see a row of LED lights in there because then that’s when I know we kind of permeated the industry.  But when you think about the Kohl’s and the Home Depots and the Lowe’s and the Targets – every grocery chain out there from an energy standpoint, it’s got to be 5 to 10 percent.  And from a greenhouse gas standpoint, because of the refrigerants, much grater than that. 

Yes, ma’am?

ROSEMARIE SZOSTAK:  Okay.  Let’s talk trash, because I know – oh, I’m Rosemarie Szostak.  I’m with LMI.  I know that Wal-Mart has a very interesting recycling program for how you handle your plastics.

MR. ZIMMERMAN:  Right.

MS. SZOSTAK:  Do you want to say a little bit about your waste usage?

MR. ZIMMERMAN:  And David Redfield from our Sam’s program is the person that’s over our waste network, and I wish I had the data to share with you.  I’ve seen slides of some of the stuff we’re doing with these sandwich bales.  We have balers in all of our stores that bale the cardboard, and now they’re putting like layers of plastic bottles and hangers and aluminum cans in different color coded bags within that cardboard, so it’s a sandwich.  It’s cardboard on top, cardboard on the bottom, everything else in between.  And then when it gets to the recycling center that used to just take the cardboard, they now segregate all these bags out, but that is one of our other goals is to get to a point when we’re creating zero waste. 

And actually it’s one of the networks – again, I wish they were here.  I need to get some slides from them.  I think they’re actually ahead of where I am in reaching my goals because they’re finding a great revenue stream from not paying landfills to take this stuff, but getting revenue streams from people that are now recycling for us. 

Yes, sir? 

JOHN CLARKE:  I’m John Clarke, retired engineer for Caterpillar – mechanical engineer.  A couple of issues I’d like you to respond on.  The options of generating your own electricity – does that keep coming up and being put down again?   And the question of whether you use ground water in any way as a source and sink for your heat?

MR. ZIMMERMAN:  We haven’t used ground water, and if I had Jim McClendon, my mechanical engineer, here he might be able to describe why.  In some countries we generate some of our electricity during peak hours just with our backup generators.  In the U.S. it would probably be combined heat and power approach that we would take, and a lot of – in the U.S., because the grid is so stable, we don’t have backup generators in our store in U.S.  So just one incident like the blackout in Aurora that UTC Cogent system can pay for itself practically, but right now the only place in the U.S. where we are generating a large portion of our power is Aurora, Colorado, but we anticipate seeing more of that as we go forward.  But we’re not getting any pressure to do that or any resistance to do that either actually.

TRACY BOWEN:  Thank you.  I’m Tracy Bowen.  I’m the executive director of the Alice Ferguson Foundation.  It’s a local regional environmental educational center, and I really appreciate what you guys are doing, and you can feel the enthusiasm for what you’re doing, and I’d like to follow up on the trash question.  We have a trash free Potomac initiative in this region, and we really would love Wal-Mart to work with us.  I think what you describe is an important part of it, but also the packaging that is taken away by the consumers.

MR. ZIMMERMAN:  Yes.

MS. BOWEN:  I’d like to hear what you guys are thinking about that, and I just want to reinforce from Rosemarie’s comment how important that is and how much energy usage is happening from the packaging alone.

MR. ZIMMERMAN:  Yes.  And we have a packaging network as well and, again, I wish I could answer your questions, but I really don’t have the background in that area, but if you want to send me an email I can get you hooked up with David Redfield in the waste area.  And then I can’t remember who’s over packaging now, but someone in the packaging area as well. 

You’ve been waiting a long time.

Q:  I got a simple question.

MR. ZIMMERMAN:  It’s about buildings or energy, right?

Q:  Yes.  It’s a little bit different, although I’m interested in the permeable –

MR. ZIMMERMAN:  Really?  Okay.

Q:  A little bit different from the – (unintelligible) – question.  With the competitors, how is it going culturally?  How’s the attitude?  Do they see it?

MR. ZIMMERMAN:  I can remember when we had the Sam’s Club opening and we sent – I won’t mention the name, but we sent an invitation to retailer XYZ and their response was, this must be a mistake, we’re retailer XYZ, not XYZ manufacturing.  So they’ve been very skeptical at first, but right now – I mean, every week I talk to three or four of our competitors about something along these lines and used to I just wouldn’t hear from them.  We might see each other at a trade show and just say hello, but they wouldn’t ask me, I wouldn’t ask them versus now every week it’s a big piece of what I do. 

They haven’t been quite as open with sharing with us just yet, and I think they’re just waiting to see if we’re really going to walk the walk or not.

Q:  You haven’t seen any programs start yet by competitors similar to yours?

MR. ZIMMERMAN:  Office Depot has always been – had a sustainability program and we’re sharing openly with them, but, no, I haven’t seen anyone else come out as aggressively as we have.  I think a lot of people are standing back and – okay, it’s been 12 months.  Is it working?  Is it not working?  Let’s watch and see they fall flat on their face before we jump in.

DAVID SHEETS:  I was just curious.  David Sheets from the Army.  I was just curious if you certified – tried to certify yourselves either green building standards.  Are you silver, gold, platinum?  You hear all those kinds of things these days.

MR. ZIMMERMAN:  The two stores I’ve mentioned a lot today, Aurora and McKinney, are the last two experimental stores.  Aurora could have been lead silver had we chose to certify it.  McKinney could have been certified.  Unfortunately, in the U.S. Green Building Council there’s not a retail category, so by the time your try and fit your building into the generic commercial categories, you end up doing a lot of things that just financially don’t make sense for us.  So there is a retail pilot underway with U.S. GBC right now, and we are corporate members of U.S. GBC, and if they come up with a retail standard that makes sense for our customer and for our associate and for our operations, we’d be thrilled to certify every one of our buildings.  But we’ve chosen not to now just because of the precedent it would send and it just doesn’t make sense for us.

KELLY ROSS GILLESPIE:  Hi.  Kelly Ross Gillespie from the Alliance to Save Energy.  Lee Scott was our award winner this past year for their great work in energy efficiency, so thank you.

 MR. ZIMMERMAN:  Yes, I have that on my desk by the way – the chairman’s award.

MS. GILLESPIE:  (Laughs.)  Well, thank you.

MR. ZIMMERMAN:  I mentioned it in my evaluation I just turned in for this year also.  (Laughter.)  So thank you.

MS. GILLESPIE:  You’re welcome.   The question I had for you is the number that you came up with, 900 miles with the fleets.  Do you see Wal-Mart possibly having an impact influencing alternative field vehicles whether it be hybrids – with their trucking fleet?

MR. ZIMMERMAN:  Yes.  We’re testing hybrid trucks as we speak.  E85 – we have our fleet network, and then we have an alternative fuels network.  I think I’m going to end up mentioning all of them, but we also have the fueling facilities at probably 2,000 of our locations, so if all of a sudden we started being the place you knew you can get E85, that would be a big impact, but – yes, hybrid – I mean, again, we’re trying to figure out how to reduce our – or increase our fuel efficiency twofold basically in our truck fleet, so hybrid vehicles and biofuels will be part of the way we have to do that.

SHERRI GOODWIN:  Thank you for that excellent presentation and for showing that sustainability can be good business practice.  I’m Sherri Goodwin with the Center for Naval Analysis.  Is Wal-Mart part of the industry alliance that’s getting ready to call for more aggressive greenhouse gas reductions, and can you say something about that if you are and if not?  Thank you.

MR. ZIMMERMAN:  And we have a greenhouse gas network also, by the way.  We have testified on Capitol Hill about the fact that we believe global warming is real, and the fact that we believe we need some carbon trading guidelines.  Right now we’re trying to figure out how we’re going to work in 50 states, 14 countries with everybody having their own rule. 

As far as the specific group you’re speaking of, I don’t know if we’re part of that or not, but we have made some – and I’m not a – in fact I don’t understand the whole carbon trading thing at all; as an engineer it just dumfounds me.  But we have been very vocal, and probably on that website that Adam referenced has some statements as to exactly what our stance with carbon and greenhouse gas emissions are. 

PETER GARRETSON:  Well, I guess I’ve got the mike, so I’ll ask a question –

MR. ZIMMERMAN:  I just design them and build them.

MR. GARRETSON:  It strikes me as a very interesting practice that you would deliberately bring in your competition and share your competitive edge – I’m sorry, Peter Garretson from Headquarters Air Force.  I’m just curious – what’s the thinking behind that that’s motivating it, and how is it that you think that you’ll be able to maintain your competitive advantage if you’re giving away all your greatest secrets?

MR. ZIMMERMAN:  Three things.  One, we do it because Lee Scott in his speech of October 24th, 2005, said we would do it.  The other reason we do it is Wal-Mart buys about 70,000 skylights per years.  We pay about $200 a piece for skylight curb assembly.  What if I could bring Home Depot, Lowe’s, Target, and Kohl’s to those venders?  I’m going to get the first break on the price, and because I buy more than anybody else I’ll probably always get the best break.  So bringing in everybody else will ultimately lower my cost as well.  Third thing is – I’m 46-years-old.  I’ve got another 10, 15, 20 years left in me maybe.  I want to make a difference.  I want to leave a legacy.  I can’t do it just with my company, but having the Targets and the Home Depots and the Lowe’s and everybody else talking about 2005, 2006, 2007 when we all came together and made a difference – that’s kind of a third reason.  It’s fun watching the shock on their face, too.  (Laughter.) 

Q:  I have to say I resisted the temptation to say this before, but if you aggregate purchases with those other people, you can drive down the per unit cost by bulk.  You buy bulk anyway.

MR. ZIMMERMAN:  Yes.  I’m not sure we can get that far.

Q:  You can’t get that far?

MR. ZIMMERMAN:  We’re not sharing our direct cost in a lot of ways.  What we share are the returns on investment, so we’ll show the model, we’ll explain how we get there, and then we leave it up to these other companies to figure out how they get there.  But if you approach GE on LED lighting today – no, you may not get the Wal-Mart price, but you’ll probably get something close, especially with us bringing you to the table.

Q:  (Off mike, laughter.)

MITZI WERTHEIM:  I’m Mitzi Wertheim.  I’m sort of one of the energizing bunnies for this event, but they’re many of us, so I’m not alone.  I want you to talk more about the leadership piece, and I want to understand in greater detail when you talk about – did you call them knowledge networks? 

MR. ZIMMERMAN:  Value networks. 

MS. WERTHEIM:  Value networks.  Tell me what a value network is.  Who are the participants?  How do they behave and relate to one another?  My own view of that – the whole energy climate issue – the number one challenge turns out to be about changing behavior, because there’s lots of technology out there.  It’s not about coming up with –

MR. ZIMMERMAN:  Right.

MS. WERTHEIM:  It’s not that we don’t need a lot of new things, because indeed we do.

MR. ZIMMERMAN:  Right.

MS. WERTHEIM:  But the harder part is changing the behavior and it seems to me you’ve done that.  What was it in the leadership piece?  And you talk about caring about doing something more than your job.  Is that the kind of people you hire?  Is that something that gets brought in from the top and sort of you all get infused with it?

MR. ZIMMERMAN:  Well, from an energy standpoint, I can’t really compare it to the other networks because if you’re talking packaging, you’re talking waste – yes, it has had to be a change in mindset because this hasn’t been something they’ve been focused on before. 

In my area, it’s just been part of our everyday job, so we always have been focused on it.  But going back to the structure of the network and who is part of a network – I’m the network captain, I have three network managers, so the systems guy, building guy, and site guy are just part of my everyday team, but they report to me within this network, too.  Then we reach out throughout the company and we get people from operations, and merchandising and loss prevention and tax and legal and finance, so a fully cross-functional team.  One, we seek out hose disciplines to make sure we have a good knowledge base, but then we open it up to people that – it may be an hourly associate, a secretary for someone, who’s just concerned about the environment and has read up a lot on this stuff, so they get to be part of the network. 

MS. WERTHEIM:  So how do they behave as part of the network? 

MR. ZIMMERMAN:  We have monthly meetings, quarterly – in different levels we have more; we bring in the big network like once a quarter.  But we talk about what we’re doing, what we’re not doing, why we’re doing certain things one way and not in another way?  Everybody gets a chance to pitch in their two cents worth.  We have outside entities – NGOs, Rocky Mountain Institute, Conservation International, the Vinyl Institute.  We pull in all kinds of people into these meetings.  Edison Electric Institute, Alliance – you name it.  If you want to be part of our network, you’re part of our network.  I’m meeting next week with a faith-based sustainability organization that I think is going to be part of our network.

It’s kind of hard to describe because in my area it’s so unique because we have such a direct correlation to the bottom line – have always seen that correlation and always been so involved, but I think a lot of – you talk to the people in the other networks, they say the same thing: that this is what gets me up in the mornings.  They get tired of reading the negative press about Wal-Mart.  They know the reality of our company.  They know what we really stand for.  This is a chance to do something that people have a hard time poking holes in, and it’s just good to feel good about what you do every day.

MS. WERTHEIM:  So how is the network connected?

MR. ZIMMERMAN:  We’re connected with the other networks through my level.  So the network captains every month have a conference call, and depending upon override like vinyl, which we use vinyl building products, vinyl packaging products worrying about waste associated vinyl, so those network captains might meet just as needed to discuss that specific issue.  But there’s only 14 of us, so –

MS. WERTHEIM:  Worldwide?

MR. ZIMMERMAN:  Worldwide, and we’re all based in Bentonville – the network captains are.  Now, we have network managers and other people in the other countries, but we’re all there in the same campus.  We see each other, we know each other, we talk to each other all the time, so –

MS. WERTHEIM:  So you share.

MR. ZIMMERMAN:  Absolutely. 

MS. WERTHEIM:  How did this culture of sharing – I mean, I consider that one of the greatest stumbling blocks in the Defense Department: it is not a sharing culture.

MR. ZIMMERMAN:  Yes.  Well, Sam Walton started it with our Saturday morning management meeting.  If you’re a member of management in Bentonville, Arkansas, you show up on Saturday morning at 7:30 and attend the Saturday morning management meeting in the auditorium.  Now, it’s gotten so big, it’s closed circuit to some of our other little buildings in Bentonville, but Fridays – I mean, I’m just a vice president.  I’m nobody.  But Fridays I’m sitting across from Lee Scott hearing what has happened this week in the company, what’s going to happen next week.  Saturday, my – you know, everybody that works for me has the opportunity to set within a few feet of Lee Scott, hear what’s happening in the company this week, what’s going to happen next week?  So it’s just something that Sam started years ago that we’re all centrally located in Bentonville.  We come together at the end of every week, share our successes and failures and talk about what we’re going to do the next week. 

I interviewed a few years ago – I was wondering about where my career was going and I interviewed with another retailer that might be 100th the size of Wal-Mart.  Yet, in my role I would take there, I would have very little access to the CEO of the company.  And it’s just dawned on me what a unique experience working at Wal-Mart it is where an entry level manager can walk into Lee Scott’s office, can set across from him in the Saturday morning meeting, can stand up and state their opinion.  It’s just a unique piece of our corporate culture and one that I cherish – I hope never changes. 

MR.    :  (Off mike.)

MR. ZIMMERMAN:  Yes, I could use a beer.  (Laughter.)  They have – I don’t know how many of you have ever had Sierra Nevada Pale Ale, but they have Sierra Nevada Pale Ale on draught and it is delicious here.  I’ve never had that before.  (Laughter.) 

Q:  I don’t represent the Alcoholics Anonymous.  (Laughter.)  I’m Stan Salett, president of the Foundation for the Future of Youth.  I have a foundation related question.  Wal-Mart and the family has a significant foundation; to what extent does the foundation reflect any of the issues or values that you’ve just described?

MR. ZIMMERMAN:  What we do – what they do a lot of is they provide funding for a lot of the organizations, maybe even like yours, so a lot of people contact me wanting funding for events or funding to sponsor organizations.  We send those typically to the Wal-Mart Foundation and then the Wal-Mart Foundation decides though some set of filters what needs to go to the Walton Family Foundation.  But I know sustainability has become one of the big areas that both foundations are sponsoring.  I mean, it was really Rob Walton that got Lee Scott with some of his conversations of Conservation International to start heading down this path. 

Another thing: a lot of people, vendors come to me and say we need capital to start up production of this or that.  Well, Wal-Mart’s not a capital venture firm, so I send them to the foundation as well and I believe they receive some grants as well for some of their efforts. 

MR. SIEGEL:  Mr. Zimmerman, I’d like to thank you very much, Charles, for this evening, it’s worth while.  (Applause.) 

MR. ZIMMERMAN:  Thank you.  Thank you.

MR. SIEGEL:  And, of course, remember that on February 5th and thank you to Mr. Zimmerman.  We do have at least one question about why is the United Kingdom so inefficient in its retails compared to the United States.  (Laughter.)

(END)

File Attachment: 

011607 Transcript.pdf