Toward a Zero Waste Future

Wal-Mart Stores, Inc. | 2016 Global Responsibility Report

Toward a zero waste future

With the world’s population expected to reach 9 billion people our facilities every year, we aim not to generate any waste in by 2050, the global waste problem is expected to grow as well, the process of getting things to customers. And if we can’t sell unless we change course. The World Bank estimated that the a product, we don’t want it to wind up in a waste stream; we’d world produced 3.5 million tons of solid waste per day in 2010, prefer to donate it, recycle it or reuse it in some way. To date, and that amount is projected to double by 2025. That’s not we have made good progress – by the end of 2015, Walmart simply a lot of trash, it’s a lot of lost value – as much as $2.6 trillion U.S. achieved 82 percent diversion of materials from landfill and annually in raw materials and residual worth. Landfill waste is a diverted an average of 71 percent in international markets.* double loss: wasted product, and wasted natural resources to As we have learned more about reducing waste in our own produce the product in the first place. The world can’t afford to operations, we have embraced the concept of a “circular use up water, forests, food, minerals, fossil fuels or any natural economy,” which moves away from a “take-make-dispose” resource in this way. approach to one where products, their biological residue or At Walmart, we’ve been attempting to reduce waste in our component parts, are cycled back into the economic stream. A operations because we hate waste of any kind. Waste increases circular economy values the reuse and regeneration of materials costs for our customers, our business and for society. As millions and energy, and it encourages product design and handling that of tons of food, other products and packaging flow through minimizes total environmental impact across the life cycle.

Operations Packaging and products Recycling education and infrastructure

*Based on review of material handling and waste diversion processes in the U.S., U.K., Chile, Central America, South Africa, Japan, Mexico, Canada, Brazil and Argentina, as reported by waste vendors, food banks and stores. In cases where real numbers were not available due to industry challenges, they have been estimated based on industry-acceptable standards. Accordingly, we have extended our zero waste aspiration Moving toward a zero waste future benefits business as well as to include the whole supply chain, from farming and society. Eliminating operational waste avoids landfill fees and manufacturing, consumption to end of life. Working with increases revenue from resale of salvaged materials. Reducing suppliers, customers, nonprofit organizations and others, we're waste upstream, increasing recycled content and repurposing drawing on our strengths – such as our store and logistics products can lower cost of goods and generate innovative infrastructure, our philanthropy and our connection to products for customers. And in the long term, the preservation customers – to pursue practical initiatives that will start to build of natural resources enhances supply security. a more circular economy. To this end, we're asking suppliers to In the following section, we describe our progress on three main design products with more recycled content, and with reuse strategies to move toward a zero waste future: and recyclability in mind. We’re returning waste materials to the production stream by taking back certain products from • Eliminating waste in our own operations customers and helping suppliers convert waste. We’re also • Promoting improvement in package and product design collaborating with suppliers and the Walmart Foundation to encourage communities to invest in recycling infrastructure • Expanding recycling through support for education and through the Closed Loop Fund and other initiatives. improved infrastructure

How Walmart supports a circular economy

Support suppliers in Provide customers Expand recycling production of products education and choice through support designed for reuse, of products with for education and recycling and cascading circular attributes improved infrastructure

Manufacture User Recycle

Design Retailer Reuse/Repair

Support innovations Eliminate waste and Provide customers that design out waste recover materials in with tools and our own operations programs that will help them to maximize the value of their goods Wal-Mart Stores, Inc. | 2016 Global Responsibility Report

Zero waste – waste

Toward a zero waste future: Progress against commitments As of Fiscal Year End 2016

Initiative Commitment Progress

Create zero waste across our global operations. Diverted from landfills 82 percent of materials previously considered waste from Walmart U.S., and an average 71 percent from Walmart International.* Eliminating waste in our own operations Reduce food waste in our emerging market stores Reduced food waste in our emerging market stores and and clubs by 15% and in other markets by 10% by clubs by 15.3 percent (versus 2009 baseline); Although progress December 31, 2015 (versus 2009 baseline). was made in Japan, the U.K. and the U.S., we did not meet the overall goal for other markets.

At the end of 2015, Walmart Eliminating waste in trade-in program. We also For example, in the U.S., in U.S. diverted from landfills 82 provide diversion options for collaboration with Metrolina, percent of materials previously our own operations customers in Chile and Brazil. we have launched a program considered waste, with Walmart In South Africa more than 143 that encourages our customers International diverting an As we drive toward our zero tons of post-consumer e-waste to bring used floral containers average 71 percent.* waste goal, the first step is was diverted in 2015 through a and trays into Walmart Garden to reduce the amount of collaboration with electronics Centers. Metrolina picks them waste in the system. In our companies Samsung and up and recycles them, repur- operations, we do this through DESCO. posing the recycled materials a combination of diverting into new floral pots for Walmart. and repurposing materials, We are exploring additional After a successful pilot in 2013, measuring waste and reducing ways we can work together the program expanded in 2014 food waste. with manufacturers, recyclers and 2015 to now include 732 and other retailers to support stores. This year, we received Diverting and solutions that will easily allow more than 1.4 million pounds repurposing materials customers to recycle used of plastic containers and trays, Globally, we recycle nearly products, with the goal of which Metrolina can use to 3 million tons of fiber and eventually being able to resell, create the equivalent of In 2009, Walmart and Sam’s Club plastics annually. For our donate or repair them. 500,000 pots. U.S. launched a first-of-its-kind customers, we’re increasing the organics recycling program number of trade-in programs As we pursue our zero waste nationwide. As of 2015, the we offer for hard-to-recycle goal, Walmart looks for ways equivalent of more than 25,000 items like smartphones, tablets we can help “close the loop” – tractor-trailers full of food waste and video games. Thus far, bringing waste materials back has been diverted out of the waste we’ve collected more than into the production stream, stream through composting, 100,000 mobile phones and working with suppliers to conversion to animal feed and tablets through our U.S. store create new products. energy production through anaerobic digestion.

Current waste flows at Walmart Walmart Materials Management Program

Unsold Unsold Trade-in products/packaging food

1 2 3

Recycling

Reuse Donation Animal Composting/ Refurbish to people feed anaerobic Resale digestion Closed loop

Last resort

Land ll/ incineration Ecoscraps®: From food waste to garden growth

Measuring waste management system. This time, this platform will allow In 2015, Walmart began Pursuing zero waste in our platform will allow our waste our waste vendors to track selling garden products from operations requires that we vendors to submit information their performance monthly Ecoscraps®, a company that turns food scraps into organic and work collaboratively with directly to Walmart, and it and annually, as well as identify sustainable lawn materials such hundreds of waste vendors at provides us with a tool for areas for improvement and as compost, potting mixes and the national and local levels quality control, identification potential innovation. plant foods. Our sales of these around the world. Given the of discrepancies in data and products to date amount to fragmentation of the waste and performance management. more than 2.4 million pounds recycling industry, efficiently When the system is fully of food waste diverted from coordinating with vendors implemented, every market landfills. Ecoscraps® are made in and obtaining reliable data is and store manager will be able part with food waste recycled paramount. To address this, to view and receive actionable from Walmart and enrich the in 2015 we began a rollout data on their recycling and soil, helping our customers of a global integrated data donation performance. Over grow healthier plants in a more sustainable way. Wal-Mart Stores, Inc. | 2016 Global Responsibility Report

Zero waste – food

Reducing food waste will need 60 percent more baseline. We’re happy to report As the world’s largest grocer, food by 2050 to feed a growing we achieved this target, with a we are especially concerned population. As a result, Walmart reduction of 15.3 percent. For with reducing food waste. is working to prevent food from this specific goal we limited According to the United entering the waste stream at categories to meat, produce Consumers and food waste Nations, approximately all and to donate food that isn’t and bakery and defined food one third of global food is sold to its highest and best use. waste as food that wasn’t sold The Walmart Foundation is also wasted from production to When food can’t be donated, to our customers or donated exploring ways to encourage consumption each year. That we’re redirecting it according for human consumption. consumers to reduce their own equates to roughly $1 trillion to the U.S. Environmental food waste. For example, through annually in wasted food value. Protection Agency’s Food For stores in developed markets a grant of nearly $375,000 to the In the U.S. alone, the Natural Recovery Hierarchy by turning – located in Canada, Japan, nonprofit organization Global Resources Defense Council it into animal feed, recovering the U.K. and the U.S. – we set a Green, we’re supporting the estimates that consumers it as energy through anaerobic goal of a 10 percent reduction. study of the factors that motivate waste almost 2 million metric digestion or composting it. While we made progress, we residents of multi-family dwellings tons of food every year. have not fully reached this goal to participate in food scrap recovery. That’s equal to the weight of In 2010, we set a goal to reduce in all markets. In the U.K., food 500,000 commercial airplanes. food waste in our emerging waste reduction programs All this waste poses a risk to market stores – located in have been established for the world’s ability to feed a Argentina, Brazil, Central a number of years, and the growing global population. America, Chile and Mexico biggest opportunities for According to the World – by 15 percent by 2015 in reduction have already been Economic Forum, the world comparison with our 2009 realized. In the U.S. and Canada,

Recovering food: A hierarchy of priorities

The U.S. Environmental Protection Agency (EPA) created the Food Recovery Hierarchy to help orga- ood ecovery ierarchy Most preferred nizations prioritize steps they can — Reduce the volume of surplus food take to prevent waste and divert SourceSource Reduction Reduction unused food. Each tier of the Food — Donate extra food to food banks, soup kitchens and shelters Recovery Hierarchy focuses on FeedFeed Hungry Hungry People People different management strategies. The top levels of the hierarchy FeedFeed Animals Animals — Divert food scraps to animal feed generate the most benefits for the environment, society and the IndustrialIndustrial Uses Uses — Convert waste oils and food scraps into fuels or energy economy. Walmart uses this hierarchy as a guide in our efforts to put CompostingComposting — Create a nutrient-rich soil amendment food that might otherwise go to a landfill to its highest and best use. DisposalDisposal — Use land ll or incineration as last resort Least preferred our emphasis on providing implement what we’ve learned production and packaging, fresh and affordable food to in the past five years: how through ordering or distribution our customers meant that important it is to build a culture or during handling in the we unintentionally increased focused on waste reduction, stores. This allows us to address our food waste by rigorously to enlist the support of store problems in systemic ways and discarding food that was leadership and to have a close the gaps at every stage bruised or damaged in the standardized way of measuring as necessary. It will also enable handling process. waste reduction across our us to continue reducing waste entire organization. We’re also without compromising our Going forward, we will developing an end-to-end commitment to delivering fresh continue to pursue our targets perspective on the value chain food to customers. in food waste reduction. to determine the point where As we move ahead, we will food waste occurs, either in

Lessons learned in reducing food waste

Walmart’s efforts to reduce food now tracked on a daily basis. These and provide our associates a simple, to orders; and increased the engage- waste have taught us some measures have helped Asda keep safe means of removing only the ment of store employees. important lessons along the way. its food throwaway rate at the very broken eggs and consolidating the low level of less than 1 percent in undamaged product into whole Work proactively upstream in the Promote an organizational culture the last five years. cartons. As a result, this year we supply chain. As we have tried to that is anti-waste. Our Asda prevented 37 million eggs from increase our offering of fresh food business in the U.K. internally Use associate knowledge to change being thrown out. to customers, we've learned there adopted a “We hate waste” culture internal processes. In the U.S., is more for us to do in working and widely promoted it across Walmart store managers brought Provide consistent measurement with our suppliers proactively. the organization. Merchandising to our attention that a large and tracking tools. Wal-Mart de We were primarily focused on and operations teams set up food volume of perfectly good eggs was México introduced a food waste preventing waste once food waste reduction objectives that placed in the organics bin because scorecard that allowed consistent reached our stores, when there are were tracked and rewarded when we had to throw the whole carton measurement and tracking of prog- interventions we can make earlier in progress was made. Every store away when a single egg was ress across the organization. Each the distribution process. We believe now does a “waste parade” at broken. In response, Walmart’s store has a food waste reduction this is an opportunity for us to the end of the work day, where operations and merchandising goal, and they monitor daily perfor- reduce food waste in the future, by department managers present teams crafted two simple mance with this scorecard. Using working on solutions that consider food which needs to be discarded solutions. First, they worked on a this information, they have formed the whole process of distribution to store managers. They discuss ruggedized, shelf-ready, reusable a cross-department committee that from harvest to purchase. what happened and suggest plastic container to transport and has introduced a series of reduction alternatives to prevent waste going merchandise the eggs, which solutions that have improved the forward. Trading, supply chain and reduced in-transit damage. Then, monitoring of refrigerated products operational teams also have food we worked to introduce a process during deliveries, as well as overall waste reduction goals that are to consolidate egg lots in stores logistics; helped with adjustments Wal-Mart Stores, Inc. | 2016 Global Responsibility Report

Zero waste – products and materials and packaging

Improving packaging of the Sustainability Index, during transit. At the same time, Increasing the use and to factor reuse and recycling packaging has an important supply of recycled content and product design possibilities into their designs. function in preserving and pro- We’re also working with As we work to eliminate waste tecting products and providing our suppliers to help them in our operations, we also know Some waste streams, such information to customers about incorporate more recycled that, as a retailer, we have the as electronic waste, present the product itself. content into their packaging opportunity to engage with particular challenges. As the materials. In 2014, we surveyed suppliers and manufacturers number of electronic devices While we’ve made significant nearly 100 Walmart suppliers to encourage them to “design sold every year increases with progress with our suppliers about their current and future waste out” of the products sold consumer demand, there is a in optimizing packaging, we use of various types of post- in our stores and online. While corresponding need to keep still have work to do. Now consumer recycled (PCR) plastic. the primary responsibility to such products out of landfills. that we have packaging key In 2015, we used the Index to create sustainable products These products often include performance indicators (KPIs) collect PCR content data for a rests with our suppliers, we toxic materials, like metals, that in our Sustainability Index, we range of material types. More don’t want our customers require special handling and can better measure and track than 1,200 brand manufacturers to have to choose between could be reused if recycled progress toward more sustain- across 28 product categories affordability and sustainability properly. able packaging design and responded, and we determined when they purchase from us. end of life initiatives. We’ve also an average of 23 percent of Building on our implementation That’s where designing been working with customers store shelf packaging contained of the Sustainability Index with products with the end in to better understand their PCR content. our suppliers (see pg. 56), we mind is critical. For example, expectations of, and challenges are engaging with suppliers to: Samsung recently launched around, packaging. • Design products for a television that is easier to end of life disassemble at the end of its life, which was awarded ISRI’s Walmart recycled content in packaging by product sector • Optimize packaging Design for Recycling® Award. The television utilizes snap- The Sustainability Index includes Index to the question, “What questions for suppliers that track percent of sales packaging has together parts that eliminate • Increase the use their performance in key indicators. post-consumer recycled content, and availability of the use of many screws. The following chart shows the sustainable sourced renewable recycled content The result is a product that’s results from the suppliers that content or recyclable content?” easier to disassemble, recover, participated in the Sustainability Designing for end of life and recycle at the end – a As waste continues to grow fitting example of the circular Percent of globally, it's becoming more economy at work. Sector post-consumer important to design products recycled content at the outset with their end in Optimized packaging Electronics 27 Let’s face it – packaging is a mind. This allows important Food, beverage and agriculture 25 materials to be recycled back hassle. Unwieldy boxes, diffi- into the value stream. While cult-to-open plastic clamshells, General merchandise 29 overflowing bubble wrap: Once Walmart is not ultimately Home and personal care 14 responsible for the design packaging is opened at home, it Toys 40 of the products we sell, we can be challenging to determine are actively encouraging our what to do with the materials * Does not reflect all products on Walmart shelves suppliers, through the use needed to protect a product The soft side of packaging

Clothing and shoes – which come apparel orders, which is available done in our footwear business. in all shapes and sizes – present to our buyers, replenishment and Since 2013, we’ve transitioned 85 a particular challenge when it sourcing teams. Through using this million pairs of shoes from boxes comes to using the right amount tool, we reduced the overall number to hangers. This reduces the overall of packaging. Too much packaging of boxes we ship by 8.1 million packaging while taking up less creates unnecessary waste, while compared with FY2015, while also space. The results have been clear: too little can fail to appropriately saving nearly 6.3 million pounds Better space utilization, with 16 protect a product during transit of corrugate, preventing more than million pounds of corrugate saved; and in stores. In our footwear and 7,800 MT of greenhouse gases more than 20,000 MT of greenhouse apparel business, we’ve started to and eliminating $15.3 million in gases eliminated; and $9 million in address this dilemma in two ways. operational costs. associated cost savings. The path to optimized First, we’ve created a tool to Additionally, we’ve looked for areas packaging: Asda’s optimize the size of corrugated where we can reduce packaging “Packaging Den” cardboard shipping cartons for our or remove it altogether – as we’ve Finding the right kind of packaging requires a balance of customer and environmental needs. In our Asda stores in the U.K., some ready-to-cook poultry Transforming bottles into apparel labels meals were receiving a high number of complaints because In 2015, we worked with our labels toward lower impact versions. the type of packaging used supplier Avery Dennison, a global One of the label changes for our emitted an odor upon opening. packaging company, to find a No Boundaries line eliminated more sustainable option for the 29 million cotton-dyed fabric We took our customers’ fabric labels in our private label endfold labels and implemented feedback into our packaging apparel lines. This collaboration new recycled content labels that innovation lab – the “Packaging resulted in transitioning our No use 100 percent less water and Den” – to come up with a Boundaries and Secret Treasures 32 percent less energy, emit 39 solution. Drawing from previous apparel to use 100 percent recycled percent less greenhouse gases and success with a plastic film that content labels, which are derived create 98 percent less solid waste could go directly into the oven, from plastic bottles recycled into than the old label. we worked collaboratively with PET polyester. During the year, this our packaging supplier to create initiative transitioned 80 million a new pack where the customer only has to pierce the film, eliminating any odors and the need to handle raw chicken. The package cooks directly in the oven and then can be recycled after use. Wal-Mart Stores, Inc. | 2016 Global Responsibility Report

Zero waste – packaging and recycling

s of information to customers of pulp and paper products – n ton em Expanding recycling illio iss m aste from io 5 of w lan ns regarding what can – and ranked as a Sustainability Leader 7 ns l obs dfi an to loca lls h n w through education t io ne on waste e ll 0 ion d can’t – be recycled. The labels based on their scores in the r i 0 ill isp o m 0 b ed ma o , cl ter s m 7 7 9 cy ia a 2 2 . e l s 1 r s l and improved also offer an opportunity to 2015 Sustainability Index. As e s s s c t e e r t s u d e a e i d v e v v i e r generate local conversation one of a few select suppliers, a o r R D C S infrastructure P about why a particular item Georgia-Pacific volunteered to Potential impact 100 Million Closed Loop Fund may not be recyclable, or why pilot with Walmart in the use We’re also helping to guide it's only recyclable in certain of the How2Recycle label on The Closed Loop Fund: our customers through areas. We're working with our Walmart and Sam’s Club private Investing in recycling the complicated terrain of suppliers to incorporate these label packaging. The pilot has infrastructure recycling and make it easier labels on Walmart and Sam’s resulted in the development of to recycle through facilitating Club private label packaging internal processes and guidance Created in 2014 by Walmart and improvements in recycling and encouraging national documentation to help future the Walmart Foundation with a infrastructure. In 2015, brand suppliers to consider suppliers use the label, as well coalition of 11 other corporate and Walmart U.S. joined Green using the label as well. as recycling communication foundation partners, the Closed Blue’s Sustainable Packaging for our customers. Walmart Loop Fund (CLF) aims to invest Coalition’s How2Recycle™ label This year we worked on using plans to expand the use of $100 million over five years to boost program. These standardized the label with Georgia-Pacific – the How2Recycle label across the amount of recycled materials packaging labels provide one of the world’s leading more of its private label available for manufacturing consistent and transparent and to redirect food waste to manufacturers and distributors products in 2016. beneficial purposes. Through no-interest and below-market interest loans to municipalities and private companies, CLF funds projects to improve local recycling infrastructure and boost recycling rates, thereby increasing the value that can be recovered through recycling and returned to the production stream.

In 2015, CLF closed its first round of funding with an initial capital investment of $7.8 million, which led to an additional investment of $17 million to support three projects: a plastics recovery facility Expanding recycling in Baltimore, Md., plus municipal recycling conversions from dual to single stream in Quad Cities, Iowa, In a collaboration with Coca-Cola, separate PET packages in their and Portage County, Ohio. Walmart Argentina launched homes and bring them to recycling the “Optimism that Transforms” stations available at Walmart program, which is aims at stores. In 2015, more than 100,000 increasing the recovery and kilograms of PET were collected for recycling of PET. The program recycling. encourages the community to Notes from the field: Challenges in the pursuit of zero waste

Economic volatility short term, using nonrecycla- commodities to buyers can be Over the past two years, a drop ble materials while working for unpredictable. Public policies in commodity prices severely longer-term recyclable options. regarding recycling protocols hampered the worldwide and materials recovery around market for recyclables. That Long-term thinking the world are also far from drop caused many suppliers There may be short-term unified, and lack of consensus to turn to less expensive tradeoffs and necessary on and use of industry labels virgin materials, decreasing innovations needed for long- can leave customers often the demand for recycled term successes. For example, confused about what can – and feedstocks. keeping food fresher for can’t – be recycled. Additionally, longer might require using the recycling industry lags in Quality of materials a nonrecyclable package in technological innovation and The quality of recycled mate- the short term. With a longer- data gathering, which could be rials is often variable, due to term view, we are striving used to provide more accurate, mixing of different types of ma- for innovative packaging targeted assessments and terials and potential contami- and waste systems that will solutions at the local level. nants in the recycling stream. improve both recyclability and This can affect both price and food preservation. availability of recycled materials. When it comes to packag- Industry and policy ing, optimization often requires fragmentation balancing the type of materials Significant fragmentation exists used to protect a product in the recycling industry and against the potential damages its global infrastructure. Even to that product. This might when sufficient demand for a be adding more packaging to recycled commodity exists, the protect the product or in the distribution of those recycled