Walmart has a grand plan to help suppliers club together to buy green energy

LONDON — When Hurricane Katrina devastated New Orleans in 2005, it proved to be a tipping point for Walmart, the world’s largest retailer. 

While the business was doing well at the time, it was focused on customers and employees over the broader environment, according to CEO Doug McMillon. “We were a large company but had not fully understood what that meant or what was required of us socially and environmentally,” he said, addressing the Climate Week NYC conference in an online broadcast last month.

“We decided to step up,” McMillon added. “We committed our company to achieving 100% renewable energy, a zero-waste strategy, a more sustainable supply chain and an increase in the minimum wage,” he explained.

Fast-forward to 2020, and Walmart has now made plans to become a “regenerative” company, an announcement it also made at the climate conference. Its environmental goals focus on decarbonization — where it is aiming to emit zero carbon by 2040 — and regenerating the natural world, with a pledge to “protect, manage or restore” a million square miles of ocean and 50 million acres of land by 2030. It also plans to achieve zero waste in its own operations in the U.S., Canada, Japan and the U.K. by 2025.

But as with other companies, much of Walmart’s impact on the environment comes via its suppliers and how shoppers use its products, its Chief Sustainability Officer Kathleen McLaughlin explained. “For sustainability, we are trying to essentially transform the way that consumer supply chains function right from source through to consumer and end of life,” she told CNBC by phone.

Renewable energy sources will be a large contributor to reducing its greenhouse gas emissions, and Walmart wants to use 100% solar, wind and other green technologies in its own operations such as stores and warehouses by 2035 — currently, renewables account for about 29% of its energy sources. Much of that will come from power purchase agreements (PPAs), where the retailer signs long-term deals to buy green energy from suppliers, a practice that has helped it contract 1.2 gigawatts of renewable energy across 2018 and 2019. To put that in context, the solar industry in the U.S. installed 3.62 gigawatts of photovoltaic capacity in the first quarter of this year.

Walmart aims to reduce emissions from its supply chain by 1 gigaton by 2030 via its Project Gigaton initiative, and it is now extending its buying power to its suppliers, who will be able to group together to buy renewable energy via its Gigaton PPA Program that launched in September. Smaller companies can be priced out of the market for renewable energy, and there are only around 100 corporates buying renewable energy in this way, according to Walmart’s calculations and data from the Renewable Energy Buyers Alliance.

“We launched (Gigaton PPA) because of interest from the suppliers, and just listening to them say ‘oh, we wish that we could do more in renewables, this is hard for us, we don’t have the procurement team, we don’t know how to go about it,'” McLaughlin told CNBC.

“It really fits with our whole philosophy and approach with Project Gigaton, which is to encourage a higher ambition, and faster, more impactful action from suppliers decarbonizing the supply chain by providing them access to practical tools,” she added. As suppliers come on board, Walmart will report on how much energy is bought via Gigaton PPA.

It’s not just retail giants helping smaller businesses procure renewable energy — companies that help domestic users collectively buy green power are springing up. U.K.-based Ripple Energy, for example, lets people buy shares in a co-operative that is building the Graig Fatha wind farm in Wales, which will then supply electricity to homes.

It is part of a database of sustainable start-ups put together by venture firm Rainmaking to help reach the U.N.’s Sustainable Development Goals by 2030 and represents a shift toward energy being supplied by a raft of smaller providers, according to Alex Farcet, a partner at the investment company. “The next decade will see a fundamental change in the way energy is generated and consumed,” he told CNBC by email.

“No longer will the market be dominated by an oligopoly of suppliers. As the cost of renewable energies, like solar, continues to fall dramatically, we will see a big rise in community energy and ‘micro generation,'” he added.

As for Walmart, it wants to see more favorable policies in support of renewable energy buying. “We helped shape and are supporters of the Renewable Energy Buyers (Alliance) Principles and in so many jurisdictions (that means) unlocking policy regimes that are going to be more favorable for renewables, or at least have a level playing field. That’s across utilities, regulators, energy market operators, trade associations … And we’d love to see more of that,” McLauglin said.

Walmart has publicly stated its disappointment with President Donald Trump’s decision to pull the U.S. out of the Paris Agreement, and McLaughlin reiterated its position. “We think that the U.S. should stay in the Paris Agreement. And we’ve said that at the time and still believe that … Climate change is one of the biggest crises we face as a planet … And unfortunately, it requires immediate action by everybody to address. So we do need global collective action on it.”

• CNBC’s Anmar Frangoul contributed to this report.