Journal of Applied Economics and Policy Studies (2024) Volume 11
EWA Publishing
Published online: 22 October 2024
DOI: 10.54254/2977-5701/11/2024108
Copyright: © 2024 by the authors. Submitted for possible open access publication under the terms and conditions of the Creative Commons
Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).
https://jaeps.ewadirect.com
ESG Performance and Enterprise Competitive Advantage
Construction: A Case Study of Walmart
Yujin Mi
Department of Business Management, Chengdu University of Technology, China
mi.yujin@student.zy.cdut.edu.cn
Abstract.
This essay opens with an in-depth discussion of the growing importance of ESG concepts in modern corporate
management and highlights their significant role in promoting long-term corporate value creation. With the increasing global focus
on sustainability, ESG concepts have become an integral part of corporate strategic planning and operational decision-making.
Next, this article selects the global retail giant Walmart as a case study and uses SWOT analysis and other management tools to
analyse in detail how Walmart has effectively constructed and consolidated its competitive advantages in the highly competitive
market through the implementation of an active ESG strategy. The article specifically describes Walmart's practices on several
ESG dimensions, including but not limited to the implementation of environmental protection measures, active support to the
community, the enhancement of employee welfare, and the optimisation of corporate governance structure. In terms of
environmental protection, Walmart has significantly reduced the environmental impact of its operations through measures such as
reducing carbon emissions, improving energy efficiency and promoting sustainable products. In terms of community support, the
company has strengthened its ties with local communities and enhanced its brand image through various community programmes
and charitable activities. Employee well-being has been achieved through improved working conditions and career development
opportunities, which have not only increased employee satisfaction but also enhanced the company's attractiveness. The article
concludes by summarising the important contribution of Walmart's ESG practices to the company's sustainability and long-term
competitive advantage and suggests possible future strategic directions and recommendations for Walmart in ESG based on current
market trends and company performance. These recommendations are intended to provide valuable references and insights for
Walmart and other companies in their future strategic planning and decision-making processes, especially in terms of how to
balance economic efficiency and social responsibility to achieve long-term sustainable development. However, due to the
limitation of data and the depth of research on Walmart ESG, the article still has limitations.
Keywords:
ESG performance, Walmart, enterprise competitive advantage construction
1. Introduction
With the emergence and popularisation of ESG concept and practice globally, the need for companies to take on social
responsibility in a wider context has become a consensus among all sectors. Companies in the process of internationalisation not
only need to pursue financial performance and short-term economic benefits, as well as comprehensively assessing their own
performance in terms of the environment, social and governance aspects towards long-term sustainable development [1]. ESG
indicators have not only become an important indicator for investors to assess the long-term value of a company, but it also one
of the key factors for companies to gain competitive advantage and long-term sustainable development. Then what is ESG? ESG
has its origins in sustainability investing and socially responsible investing, with an early focus on excluding companies with
environmental, social or governance issues. In recent years, ESG has evolved to consider environmental and social issues at the
core of corporate strategy and is increasingly influencing investment analyses, processes and decision-making [2].
ESG is as well important in corporate management, especially for high-quality corporate development. ESG performance has
a positive impact on high-quality corporate development, especially environmental and social performance is more significant
compared to governance performance. Good ESG performance contributes not only to increasing firms' investment in innovation,
which in turn increases total factor productivity, but also is particularly significant in the case of state-owned enterprises (SOEs),
environmentally sensitive enterprises (ESEs), and in the case of low financing [3]. This also contributes to increasing the
competitive advantage of the firm.
56
| Journal of Applied Economics and Policy Studies | Vol 11 | 22 October 2024
The purpose of this paper is to explore how ESG can be a building block of Walmart's competitive advantage by analysing its
ESG performance as a global retail giant. As one of the world's largest retail companies, Walmart's practices, and achievements in
the field of ESG have not only had a profound impact on its own business but have also set industry benchmarks globally. From
environmental initiatives to social responsibility programmes to ambitious standards of corporate governance practices, Walmart
has demonstrated its commitment and achievements in ESG integration in several areas.
2. Literature Review
The development of ESG as a concept and field of practice dates back decades but has grown significantly in importance and
influence in recent years. The development process has evolved from environmental awareness and social responsibility to
corporate governance concerns, to international standards in the face of globalisation challenges, as well as investor and legislative
drivers. Social and consumer influence has also driven improvements in ESG, and technological advances have enabled companies
to track and report their ESG performance more effectively. Overall, ESG has evolved from an ethical obligation to a widely
recognised business practice, with far-reaching implications for companies' long-term economic performance and social impact.
ESG plays a fundamental role in corporate management and investment. At first, ESG factors help companies to identify and
manage potential environmental, social and governance risks. Effective practices help to mitigate legal, reputational, operational
and market exposures, thereby enhancing the long-term stability and sustainability of companies. In addition, investors are
increasingly focusing on the ESG performance of companies, believing that good practices can strengthen long-term value and
returns. Companies which focus on ESG issues are more competitive in terms of employee recruitment and retention, especially
attracting the younger generation of employees who value corporate social responsibility and commitment to sustainability.
Additionally, companies that actively promote ESG practices tend to earn the trust and loyalty of consumers, as modern consumers
favour brands and products that excel in environmental protection, social justice and transparency in governance. ESG has become
one of the key criteria by which investors and shareholders assess corporate performance, with many organisations requiring
companies to publish their ESG data and strategies to assess their risk management and long-term sustainability. As global
regulations increase ESG requirements, companies need to comply with relevant regulations and standards, while leading industry
players take a proactive approach to ESG practices, becoming industry benchmarks and leaders and shaping the direction of
sustainable development across the industry.
Overall, ESG factors are becoming increasingly important in corporate management. Environmental sustainability, social
responsibility and effective governance not only enhance a company's reputation and brand value, but also reduce business risks,
attract investors and consumers, and thus stand out from the competition in the marketplace [4]. The importance of ESG will
continue to rise as the global focus on sustainability increases.
There are numerous companies globally that are making efforts as well as practicing research in ESG. Costco, one of the main
competitors of Walmart, reduces its carbon footprint and resource consumption. The company reduces its environmental impact
by using energy-efficient lighting, optimising transportation and logistics, and promoting renewable energy [5]. In addition,
Microsoft has demonstrated its leadership in the ESG space through measures such as carbon neutral programmes, promotion of
digital inclusion and data privacy protection. The company continues to optimise its supply chain and energy use efficiency to
contribute to a positive impact on the global society and environment [6]. It is evident that companies are enhancing their
competitive advantage through active ESG practices and achieving long-term sustainable growth in the global market.
3. Key Indicators and Evaluation Methods
3.1. Key Indicators
1) Environmental Indicators: According to the GRI Standards [7], environmental indicators include carbon emissions and footprint,
energy consumption and efficiency, water management and efficiency, waste management and recycling rate.
(2) Social Indicators: According to SASB standards [8], social indicators include employee well-being and satisfaction, labour
rights and human rights protection, diversity, equity and inclusiveness, and community participation and support.
3) Governance Indicators: According to IIRC [9], governance indicators include, among others, corporate governance structure
and independence, diversity and independence of board members, ethical business practices and anti-corruption measures,
shareholders' rights and transparency.
3.2. Assessment Methodology
There are a number of international standards that help companies and investors to assess and compare the ESG performance of
different companies. For instance, Global Reporting Initiative (GRI) Standards is one of the most widely used ESG reporting
standards in the world to help organisations report on their economic, environmental and social performance. In addition to this,
Sustainability Accounting Standards Board (SASB) Standards, SASB standards focus on key ESG issues across industries and are
designed to help organisations identify and report on key ESG data relevant to their operations. Dow Jones Sustainability Indices
Journal of Applied Economics and Policy Studies | Vol 11 | 22 October 2024 |
57
(DJSI) is one of the world's leading sustainability indices, assessing the performance of the world's leading companies in the area
of ESG. In addition, Environmental Impact Assessments (EIAs), and Environmental Management System Certification (ISO14001)
can influence a company's ESG rating.
4. Analysis of Walmart's ESG performance
4.1. Walmart's Environmental Practices and Achievements
Renewable Supply Chain: Walmart's goal is to make sustainable choices an everyday choice for customers. This means identifying
priority environmental and social issues, working collaboratively to reconnect the supply chain, and monitoring and reporting on
progress. And Walmart's advantage in being able to achieve a renewable supply chain is that it is piloting it with its private label
brands. Many of Walmart's private label items such as coffee, tea, bananas, pineapples, and fresh and frozen seafood are or will
soon be 100 per cent certified by an independent third party, such as the Rainforest Alliance or the Forest Stewardship Council.
At the same time, nearly 80% of operational waste is diverted from landfills, nearly two-thirds of private label packaging is
designed to be recycled, reused or composted, we've reduced operational emissions by more than 20% since 2015, and nearly 50%
of global electricity comes from renewable sources [10].
Supply Chain Decarbonisation: Walmart launched the Gigaton Initiative in 2017, which aims to drive decarbonisation of the
product value chain through partnerships with suppliers, NGOs and other stakeholders [11]. Their goal is to reduce or avoid 1
billion metric tonnes (‘Gigaton’) of greenhouse gas emissions by 2030, with the aim of democratising climate action. Through the
Gigaton Programme, Walmart is encouraging suppliers to take action in six key decarbonisation action areas that are relevant to
their business. Over the past six years, Walmart has deepened and expanded their efforts by adding new tools, resources and other
opportunities to accelerate supplier engagement and impact.
4.2. Walmart's initiatives in social responsibility and social engagement
Combined with the CSR pyramid model as well as the stakeholder theory analysis, Walmart is generally responsible in terms of
social ethics, but still falls short. Socially, Walmart is committed to creating American jobs, achieving economic mobility and
inclusiveness by employing a diverse population, investing in local, diverse, or small businesses in Walmart's supply chain, and
committing to these goals by investing in American-made products, raising employee wages, providing scholarships, and
employing 250,000 veterans [12]. Ethically, Walmart is committed to meeting the specific social needs of the regions in which it
operates and does so by assisting with hunger and disaster relief and investing in the communities of its employees. Walmart
donated $100 million in community grants in fiscal year 2017 through the Walmart Foundation [12]. At the same time, Walmart
places a high value on the development of individual employees, and at Walmart, everyone has their own path to growth. We
promote a culture of promoting from within, giving employees the opportunity to progress from entry-level roles to top
management [13]. In addition, employees enjoy great benefits including health insurance, emotional health support, and financial
benefits.
However, Walmart continues to have problems with social ethics. For example, when developing in China, it did not fully
understand the Chinese supply chain and supplier culture. Walmart requires goods to be distributed according to U.S. standards,
while most Chinese suppliers are still in the early stages of establishing supply chain management and logistics networks, making
it difficult to match Walmart's strict management. Walmart used the retrospective method of determining commodity prices, which
was contrary to Chinese custom and made it difficult for Chinese suppliers to accept. Walmart began to allow purchasing staff to
charge suppliers for holiday events and refunds, leaving suppliers with very low profits [14]. In addition, Walmart has had trouble
with food safety issues. In Shenzhen, Guangdong Province, China, a Walmart shop was exposed for using expired meat for
prepackaged food [15], and there were major bribery issues in Mexico.
4.3. Governance structure and corporate governance practices of Walmart
Walmart's governance structure and corporate governance practices reflect the best standards of modern business. Its Board of
Directors, comprised of independent and executive directors, is responsible for setting strategic direction and overseeing the
company's operations, ensuring compliance with laws and regulations, and managing risk. The senior management team is
responsible for executing the strategies approved by the board and ensuring that the company's day-to-day operations and strategic
objectives are met. Walmart ensures transparency and financial health through internal controls, audits and risk management
mechanisms, while actively promoting social responsibility and sustainable development, engaging in community programmes
and promoting environmental protection. It works closely with its shareholders and holds regular shareholder meetings to share
financial performance and strategic plans to enhance long-term sustainability and shareholder value.
58
| Journal of Applied Economics and Policy Studies | Vol 11 | 22 October 2024
4.3.1. Walmart SWOT Analysis
4.3.1.1. Strengths
(1) Strong Board of Directors and Senior Management Team: Walmart has a Board of Directors consisting of experienced
independent and executive directors and an effective senior management team who can effectively lead and manage the company.
(2) Rigorous internal control and auditing mechanisms: The Company has established sound internal control and auditing
mechanisms to ensure operational transparency and financial health, and to effectively prevent and manage risks.
(3) Active social responsibility and sustainable development policies: Walmart is committed to social responsibility and
sustainable development, enhancing its image and CSR level by adopting environmentally friendly measures and participating in
community projects.
4.3.1.2. Weaknesses
(1) Complex Global Supply Chain Management: Walmart's global operations face complex supply chain management challenges,
which may lead to coordination and execution difficulties, affecting responsiveness and efficiency.
(2) Competitive Pressure in the Market: Competition in the retail industry is fierce, and Walmart needs to continuously innovate
and adjust its strategies to meet market changes and competitors' challenges.
4.3.1.3. Opportunities
(1) Global Market Expansion: Walmart has the opportunity to continue to expand its global market share, especially in emerging
markets, by adding shops and expanding its business through e-commerce channels.
(2) Technology Innovation and Digital Transformation: Walmart can improve operational efficiency, customer experience and
market competitiveness by leveraging technology innovation and digital transformation.
4.3.1.4. Threats
(1) Changes in policies and regulations: Changes in policies and regulations around the world may affect Walmart's operating
costs and market access conditions, increasing management complexity.
2) Economic Uncertainty: Fluctuations in the economic cycle, inflation or recession may affect consumer spending and retail
sales, negatively impacting Walmart's business.
Taken together, Walmart has established a solid foundation in its corporate governance structure and has demonstrated positive
social responsibility performance. However, the company faces challenges with the increasing complexity of global supply chain
management and competition in the marketplace. To address these challenges, Walmart can optimise its operating model by
actively adopting technological innovations and implementing effective strategic adjustments. This will not only help improve
operational efficiency and customer experience, but also better capitalise on market opportunities and effectively respond to threats
posed by potential economic and regulatory changes.
5. ESG's Competitive Advantage Relationship with Walmart
ESG factors are becoming increasingly important in corporate strategy, and for global retail giants like Walmart, actively practising
ESG is not just a responsibility, but a strategic move to enhance market position and brand value. By optimising its ESG
performance, Walmart has not only made significant progress in environmental protection, social responsibility and good
governance, but has also effectively enhanced its competitiveness and long-term sustainability.
Firstly, Walmart has achieved significant environmental impact reduction through its efforts in environmental protection, such
as reducing carbon emissions, promoting the use of renewable energy and reducing packaging material waste. Such environmental
measures not only help to reduce costs and resource wastage, but also enhance consumer recognition of its sustainable operations,
thereby strengthening its market position.
Secondly, Walmart's social responsibility efforts have strengthened its ties with its employees, consumers and the community
through measures such as improving employee benefits, supporting community programmes and promoting diversity and inclusion
policies. These initiatives not only help to enhance employee loyalty and consumer trust, but also establish a good corporate image
for the company and enhance its brand value and market competitiveness.
Finally, in terms of governance, Walmart has ensured the transparency and compliance of the company's operations through
the establishment of an efficient board structure and a transparent financial reporting system. Such good governance practices not
only enhance investor trust, but also help to reduce the legal and reputational risks faced by the company, thus enhancing market
competitiveness.
Journal of Applied Economics and Policy Studies | Vol 11 | 22 October 2024 |
59
Overall, by actively practicing ESG, Walmart has not only earned a sustainable advantage in the global retail market, but also
laid a solid foundation for future growth. By integrating ESG principles into its strategic decisions and daily operations, Walmart
has demonstrated its commitment to environmental protection, social responsibility and good governance, further strengthening
its position as an industry leader.
6. Walmart’s Competitive Advantage Construction
Walmart, as one of the world's largest retail companies, has a competitive advantage that is built and integrated in several ways:
1) Economies of scale and supply chain advantages: large-scale purchasing power. Walmart has gained a great cost advantage
through its huge purchasing volume and is able to purchase goods from suppliers at lower prices, which in turn provides more
competitive prices to consumers. Efficient Supply Chain Management. The Company has established a highly optimised supply
chain network, including logistics, inventory management and distribution systems, to ensure that products flow efficiently and
reach each shop in a timely manner, thereby reducing inventory costs and improving service levels.
2) Strong brand and market position: global awareness and trust. The Walmart brand enjoys wide recognition and a high degree
of trust around the world, which makes consumers more inclined to choose its products and services, thus increasing sales and
market share. Extensive distribution network. Walmart has an extensive network of shops around the world, covering both urban
and rural areas, which meets the shopping needs of different consumer groups and enhances its market penetration and influence.
Technology and data-driven operating model: advanced data analytics and artificial intelligence technology. Walmart has
optimised its inventory management, market forecasting and customer personalised marketing through big data analytics and
artificial intelligence technologies, enabling it to respond more quickly to changes in market demand and improve sales efficiency
and customer satisfaction. E-commerce and mobile technology innovations: The Company continues to invest in online retail and
mobile payment technologies, expanding its online sales channels and enhancing the ease of interaction and experience with
consumers.
Diversified Product Portfolio and Services: Broad product assortment and brand coverage. Walmart offers a diverse range of
products covering a wide range of categories, including food, household products, and electronics, to meet a variety of consumer
needs and preferences. Value-added services and added value. In addition to merchandising, Walmart provides value-added
services such as financial services, pharmacy services and healthcare services to provide consumers with an all-round shopping
experience.
Through the construction of the above competitive advantages, Walmart not only establishes a leading position in the retail
industry, but also is able to continue to increase its market share and adapt to market changes, maintaining long-term
competitiveness and sustainable development.
Walmart's competitive advantage strategy in ESG has had a profound impact on its market positioning, brand differentiation
and consumer recognition:
Market Positioning and Strategic Differentiation: Emphasis on Sustainability. Walmart has strengthened its leadership position
in the global retail market by actively practising environmental and social responsibility, such as reducing its carbon footprint,
promoting renewable energy and supporting supply chain transparency. This sustainability strategy not only meets modern
consumer expectations of corporate social responsibility, but also enables it to differentiate itself in a highly competitive market.
Brand differentiation and reputation management: enhancing brand value. Walmart has built a corporate image based on
responsibility and transparency through its long-term commitment to ESG practices. This brand image not only enhances consumer
trust in its products and services, but also earns it a competitive advantage in the marketplace, especially in the retail space where
consumer brand loyalty is relevant.
Consumer recognition and market response. Enhancing the Consumer Experience: Walmart's ESG practices are not only
reflected in the company's internal operations, but also enhance the consumer experience through direct interaction with consumers.
For example, by offering sustainable product choices, supporting community projects and improving working conditions, Walmart
enhances consumer recognition and goodwill towards its brands.
Market Response and Competitive Advantage: Consumers are increasingly inclined to support companies that excel in
environmental and social responsibility. Through its ESG advocacy and actions, Walmart attracts a larger group of environmentally
aware and socially responsible consumers, thus expanding its market share and consolidating its competitive advantage in the
market.
In summary, Walmart has not only gained significant advantages in market positioning and brand differentiation, but also
enhanced consumer recognition and loyalty to its business through its committed ESG strategies and practices. These measures
have not only helped to enhance the company's long-term competitiveness, but also pushed the entire industry towards a more
sustainable direction.
7. Conclusion and Suggestion
Walmart has demonstrated significant performance and competitive advantages in the ESG area, with key findings including its
enhanced environmental responsibility by reducing its carbon footprint and promoting sustainable sourcing, as well as its social
60
| Journal of Applied Economics and Policy Studies | Vol 11 | 22 October 2024
responsibility by supporting community projects and upgrading the working conditions of its employees. In terms of governance
practices, following the exposure of food safety issues, Walmart decided to introduce new technologies such as blockchain to
enhance food transparency and traceability. In addition, they established the Walmart Food Safety Collaborative Centre (WFSCC)
in 2016 with the aim of enhancing food safety and security [16]. These types of decisions involve a variety of aspects such as new
technology adoption, resource investment, and partnerships, and must be thoughtfully considered by senior leadership. The
creation of a WFSCC also requires thorough market analysis and evaluation to determine the best response strategies and partners
[17]. Analysis of the external environment shows that the health awareness of the Chinese population has increased significantly
[18]. Such decisions by Walmart can help to enhance its CSR image and improve its credibility and image in China. However,
procedural decision-making may lead to a lack of consistency and standardisation as standards and methods may differ between
decision-makers, affecting the company's consistency and traceability in terms of food safety (Su, 2023). Walmart has established
effective monitoring mechanisms and ethical standards to safeguard the company's transparency and integrity. Future research
directions include deepening sustainability management in the supply chain, strengthening community engagement and project
impact assessment, enhancing the transparency and effectiveness of corporate governance, and exploring the application of new
technologies in ESG practices, which will help Walmart to further enhance its leadership and performance in the ESG field.
References
[1]
Chen, H., Kuo, T., & Chen, J. (2022). Impacts on the ESG and financial performances of companies in the manufacturing industry based
on the climate change related risks.
Journal of Cleaner Production, 380
, 1-13.
https://www.sciencedirect.com/science/article/pii/S0959652622045243
[2]
Bergman, M. S. (2020). Introduction to ESG. https://corpgov.law.harvard.edu/2020/08/01/introduction-to-esg/
[3]
Ge, G. (2022). Does ESG performance promote high-quality development of enterprises in China? The mediating role of innovation
input.
Sustainability, 14
(7), 1-24. https://doi.org/10.3390/su14073843
[4]
Porter, M. E., & Kramer, M. (2011). The big idea: Creating shared value. How to reinvent capitalism—and unleash a wave of innovation
and growth.
Harvard Business Review, 89
, 62-77.
https://www.researchgate.net/publication/272576643_The_Big_Idea_Creating_Shared_Value_How_to_Reinvent_Capitalism-
and_Unleash_a_Wave_of_Innovation_and_Growth/citations
[5]
Costco. (2024). Welcome to Costco customer service.
https://customerservice.costco.com/app/answers/answer_view/a_id/1007368/~/what-is-costco%E2%80%99s-sustainability-
commitment%3F
[6]
Microsoft. (2024). Environmental sustainability report. https://www.microsoft.com/en-us/corporate-
responsibility/sustainability/report?msockid=2ec116b94e3c6a0539ea048f4f5a6bac
[7]
GRI. (2022). The global standards for sustainability impacts. https://www.globalreporting.org/standards
[8]
SASB. (2022). SASB standards overview. https://sasb.ifrs.org/standards/
[9]
IIRC. (2022). The Integrated Reporting Framework is now part of the IFRS Foundation. https://integratedreporting.ifrs.org/
[10]
McKinsey & Company. (2023). Walmart: Working toward becoming a “regenerative” company.
https://www.mckinsey.com/industries/agriculture/how-we-help-clients/natural-capital-and-nature/voices/walmart-testing-what-a-
regenerative-company-means-in-practice#/
[11]
Walmart. (2023). Environmental, social, and governance highlights. https://mco-image.walmartmobile.cn/image/Compliance/fy2023-
walmart-esg-highlights.pdf
[12]
Harrison, V. (2019). Legitimizing private legal systems through CSR communication: A Walmart case study.
Corporate
Communications: An International Journal, 24
(3), 439-455. https://doi.org/10.1108/CCIJ-12-2018-0124
[13]
Walmart. (2024). Working at Walmart. https://corporate.walmart.com/about/working-at-walmart
[14]
Hung, H. C., Tsai, Y. S., & Wu, M. C. (2014). A modified Lotka–Volterra model for competition forecasting in Taiwan’s retail industry.
Computers & Industrial Engineering, 77
, 70-79. https://www.sciencedirect.com/science/article/pii/S0360835214002770
[15]
Liang, F. (2014). Wal-Mart caught in food safety scandal in Shenzhen. https://www.globaltimes.cn/content/875374.shtml
[16]
Walmart. (2024). Access to safer, healthier food and products. https://corporate.walmart.com/purpose/community/access-to-safer-
healthier-food-and-products
[17]
Walmart. (2024). Apply to be a supplier. https://corporate.walmart.com/suppliers/apply-to-be-a-
supplier#:~:text=Our%20suppliers%20fit%20into%20multiple%20categories%2C%20and%20together%2C,up%20a%20pool%20of%2
0over%20100%2C000%20businesses%20worldwide
[18]
Xinhua. (2021). Health awareness among Chinese people rises in 2020.
https://english.www.gov.cn/statecouncil/ministries/202104/01/content_WS6065bb26c6d0719374afbeac.html
Journal of Applied Economics and Policy Studies | Vol 11 | 22 October 2024 |
61
Copyright: © 2024 by the authors. Submitted for possible open access publication under the terms and conditions of the Creative Commons
Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).
https://jaeps.ewadirect.com
