ESG activities and reporting in the retail industry

- In the retail industry, important ESG-related measures and activities relate to carbon footprint, amount of electricity from renewable sources, diversity and equity in hiring and promotion, engagement in community activities to help the poor and homeless and ethics training among employees. We will look at specific measures in two categories, amount of worker compensation and reduction in operational waste. We will look at three retailers, Walmart, Target and Amazon. Now, you might recognize that Walmart and Target have very comparable operations, and as you will see, they report their ESG information in similar ways. Similar reporting formats make comparing the numbers much easier and substantially increases the informativeness of the numbers. Amazon's retailing operations are substantially different from Walmart and Target, so we shouldn't be surprised that the ESG information is also presented differently. But we will also see that beyond this difference in operations, the lack of mandatory ESG reporting standards means that the information that we get from Amazon is not easily comparable to what we get from Walmart and Target. Well, first let's start with worker compensation. Walmart and Target both report the average hourly wage of their in-store workers. For Walmart, the average wage was $14.50 in October, 2021. For Target, the number was a bit higher at $16.06. Now, it's interesting to note that Walmart appended a footnote to its report, which reads as follows. "As of October, 2021, after wage increases were implemented, the average hourly wage in the U.S. was approximately $16.40 per hour." Well, it seems clear to me that Walmart and Target are using the wage information in these ESG reports to present themselves in a good light to the public. And the good thing is that it's always nice for the workers to have their employers maneuvering to pay them higher wages. Instead of reporting an average hourly wage, Amazon reports this. "In the U.S., Amazon's starting wage is $15 per hour for all full-time, part-time, temporary and seasonal employees." To emphasize the global nature of its wage practices, Amazon also reports, "We also offer competitive starting wages around the world. Our starting hourly wage is 9.70 British pounds in the UK, 16 Canadian dollars in Canada, 12 euros in Germany and 10.67 euros in France. Now, all three companies also provide information about the diversity of their workforces. For example, in 2020, the percentage of managers who are women was 46% at Walmart, 56% at Target and just 29% at Amazon. The fact that these numbers are reported and that people like you and me are looking at them surely puts positive pressure on lagging retailers such as Amazon to increase their efforts to promote and recruit women managers. In the retail business, operational waste involves packaging items such as cardboard and plastic. Walmart and Target give details about the percentage of their operational waste that is diverted from just throwing it away into landfills into alternatives such as recycling, composting, clean incineration and recovery for reuse. For Walmart, the percentage is 78% in 2020, down from 80% in 2019. For Target, the numbers are 80.1% in 2020, up from 77.5% in 2019. Now, if you were the CEO of Walmart, would you want to know why the percentage was worse in 2020 compared to 2019? I would. Again, we see that Amazon's numbers are reported differently, in this case because the shipping-focused business model of Amazon is different. The focus at Amazon is on reducing the amount of packaging used in shipping. Amazon reported in 2021, "We have reduced the weight of outbound packaging by over 36% and eliminated more than 1 million tons of packaging material since 2015, the equivalent of 2 billion shipping boxes." Amazon also proudly reports, "Amazon's sustainability scientists have found that averaged across all basket sizes, online grocery deliveries generate 43% lower carbon emissions per item compared to shopping in stores." My impression is that ESG reporting is having a significant impact on the way that retailing companies are treating their employees and structuring their operations.