Global fishiness

In July 2005, four Wal-Mart staff members traveled quietly to Chile to look at conditions in the salmon industry. It wasn't a Wal-Mart trip; the Wal-Mart staff members were part of a larger group of twenty buyers, industry representatives, environmentalists, and others who spent four days talking to Chileans, looking at salmon farms, and touring processing plants.

Gerry Leape of the National Environmental Trust had two staff members on the trip, along with representatives from several marine conservation groups in British Columbia, where regulation of salmon farming and salmon processing is further along than it is in Chile. Rodrigo Pizarro met the group in Chile.

Part of the goal of the trip was to start developing a consensus on what needs to be done to make salmon farming sustainable in Chile, across a wide group of constituencies. The Wal-Mart staff members were in the group for a couple reasons, according to Leape, Pizarro, and others: to learn the dimensions of both the industry and the problems, and to hear for themselves what Chileans have to say.

Wal-Mart, according to Leape, realizes that issues around salmon farming in Chile are a potential flashpoint for it, a vulnerability, a food version of the Kathie Lee Gifford problem. Indeed, for most of 2005, Wal-Mart was in quiet but consistent conversations with several environmental groups to try to understand what kind of standards, and what kind of enforcement, would solve the salmon-sourcing problem. The conversations are a delicate dance, especially in a year when in the United States, the Sierra Club and two major unions joined forces to create an organization to publicly challenge Wal-Mart across a broad front of its practices.

The environmental groups in conversations with Wal-Mart want to bring along the big company toward a view that it can, that it must, use its power to solve some of the environmental and labor problems that the industries it relies on create. They think Wal-Mart could ultimately do for corporate environmental stewardship what it has done for corporate productivity and efficiency. Wal-Mart wants to be seen as taking criticism seriously, and it wants to be seen as a responsible citizen. But the environmental groups don't want to be duped, or co-opted, by a Wal-Mart campaign that turns out to be more public relations than substance. And Wal-Mart does not really know that much about taking "externalities" into consideration in managing where its products are coming from and how they are made. If salmon poo needs to be cleaned up and properly disposed of, well, that's not a way of making salmon cheaper -- it's potentially a way of making salmon more expensive. And Wal-Mart must surely be worried that once you open the door to considerations other than what's required by law, to considerations other than what's required to improve efficiency and decrease cost -- well, where will the demands end? What won't people ask of Wal-Mart?

Indeed, it is possible to argue that it's not Wal-Mart's job to worry about salmon farms in Chile. Protecting the waters of Chile, and the workers of Chile, is the responsibility of the government of Chile. Wal-Mart's job is to obey the law, and to deliver low prices. That, in fact, is pretty much how things have looked from Bentonville for forty years. But the global economy is turning out to be much more complicated.

In Chile, according to four people who were with the group, the Wal-Mart staffers were reserved, polite, and kept their own counsel. They listened, but revealed little.

At one meeting, Rodrigo Pizarro got to speak directly with the Wal-Mart representatives. "I was very insistent to them about the social conditions of the workers," says Pizarro. "My impression is, they were very impressed by the sanitation conditions of the processing plants they were taken to. But they were surprised by the claims of the labor issues. On the other hand, they were very polite and willing to understand the issues."

The Wal-Mart representatives got a potent illustration of the importance of the labor problems. The meeting was interrupted by labor unions coming into the building and holding a rally inside to protest the working conditions at the salmon-processing facilities. Pizarro says the concerns of the workers cannot be lightly brushed over.

"What I told the Wal-Mart representatives," Pizarro says, "is that I am convinced if the labor conditions are the way they are, it wouldn't be surprising to me if an American consumer found a nail or a knife in their fillets. Once Wal-Mart realizes that the same workers who are producing the food product may sabotage it, then surely, for their own self-interest, they will have an interest in seeing labor conditions improved.

"When I said that to them," says Pizarro, "clearly they were more interested."

Leape, of the National Environmental Trust, is not directly involved in Wal-Mart's conversations about the salmon standards, but he knows the people who are. "Wal-Mart will adopt standards. The question is how strong they will be," Leape says flatly. "They dictate terms to their suppliers all the time -- how to produce it, what should be in it, what they'll pay for it. They've got a responsibility, if they want a sustainable product."

Pizarro, too, is optimistic. "We don't have to impose very high conditions to make a considerable improvement in people's lives," he says. "What I would say is, in a global economy, we're all globally responsible. I think Wal-Mart will make changes. It has to."

From the outside, the changes look easier to impose than they will be. For Wal-Mart, it's not simply about adding a few new bullet points to the existing list requiring companies to deliver products on time, on price, packaged the way Wal-Mart requires. Using Wal-Mart's purchasing power to improve the environmental and working conditions under which those products are produced requires a radical shift in thinking at the home office, a willingness to admit that not every cost squeezed out is good. But forty years of discipline and culture at Wal-Mart, from the buyers in Bentonville out to the pallets lined up in Action Alley of every store, runs counter to the hopes of Rodrigo Pizarro.

Pizarro knows one point of leverage that Wal-Mart never ignores: shoppers. And he thinks if American consumers understand what's required to deliver salmon at $4.84 a pound, they won't think the price is worth the cost. "I wouldn't think American parents would want to feed themselves or their children with something being produced by a worker who is miserable, and who works in terrible conditions," says Pizarro. "And I don't think Wal-Mart should tolerate that."

Excerpted from "The Wal-Mart Effect: How the World's Most Powerful Company Really Works -- and How It's Transforming the American Economy" by Charles Fishman. Reprinted by arrangement with the Penguin Press, a member of Penguin Group (USA), Inc. Copyright (c) Charles Fishman, 2006.

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