Wal-Mart: from zero to hero?

For years, Wal-Mart was attacked for exploiting its staff and suppliers. But now the world's biggest retailer has stopped fighting its critics and started listening. By Stephen Foley

At Wal-Mart, they have been packing up the war room and standing down their elite troops.

For many years, the world's largest retailer had been the bête noire of the liberal left, attacked for exploiting its workers, ruining its suppliers, destroying communities, harming the planet. Documentary-makers lined up to produce attack films such as Wal-Mart – The High Cost of Low Prices and Store Wars. Unions and other activists teamed up to launch online campaigns such as WakeUpWalMart and Wal-Mart Watch, aimed at highlighting the company's ills.

And yet now, without anyone really have realised, the steam has gone out of the movement. Wal-Mart is talking to its critics, rather than attacking them, and it has taken healthcare issues and environmental initiatives more seriously. The jury is still out on whether these moves are enough to mollify critics, but moves they undoubtedly are.

As shareholders and thousands of employees gather in Arkansas for the company's annual meeting today, executives are planning for just as much celebrity razzamatazz as usual, and slightly less of the external controversy.

Fewer Americans might now sign up to the notion that Wal-Mart is evil; a handful might even sign up to a notion that Wal-Mart could be part of the solution to many of the problems facing the US and the planet.

And so it is that Wal-Mart has been able to wind down the expensive counter-revolutionary war it was forced to launch in 2005, when the firestorm of criticism was at its worst. The war room, with its dozens of extra public relations staff drafted in from the PR agency Edelman, is no more. Also disbanded is Working Families for Wal-Mart, the lobby group it set up to argue that the benefits of the company's "everyday low prices" trumped the means by which it got those prices so low.

It is no coincidence that with the winding-down of the war comes an improvement in financial performance. Wal-Mart shares hit a four-year record yesterday. Same-store sales figures showing growth of 3.9 per cent in May – well over twice what Wall Street had been predicting – show that American families are trading down to discounters such as Wal-Mart, and that Wal-Mart itself has finally got its act together after years when it made a confused lunge for more upmarket business.

Joseph Beaulieu, retail analyst at Morningstar, said that the horrendous publicity never actually hurt Wal-Mart sales directly, but that it did contribute to a poor performance that has only been reversed in the past year. "The battles were certainly a distraction, taking management's attention away from operational issues. For a couple of years, Lee Scott, chief executive, seemed to have been more like a PR guy for the company, fronting his own publicity campaign."

Sam Walton, the late founder, whose ghost hangs over Wal-Mart still, was a stickler for low prices, driving costs out of the business and squeezing the pips of suppliers. In the environmental movement, Mr Scott has found an opportunity to drive out more costs and win plaudits from the green movement. The company has been economising on fuel, converting its haulage fleet and saving electricity in stores and warehouses, and winning green plaudits in the process. It has also found a profitable business opportunity from bringing low-energy light bulbs and other green products to the American masses.

In healthcare, too, it has made changes. There have been some improvements to its employee healthcare plans, and the company has joined a coalition of businesses lobbying for the federal government to introduce universal healthcare. Unveiling the initiative,the Better Health CareTogether coalition, Mr Scott was making common cause with unions such as the Service Employees International Union, which funds Wal-Mart Watch, and Mr Scott has met regularly to flesh out healthcare policy with Andrew Stern, the SEIU's combative president.

Meanwhile, Wal-Mart has dramatically expanded its own pharmacy business and started filling prescriptions for common drugs for as little as $4, in what it has spun as its contribution to making healthcare affordable for the millions without any or adequate insurance – and, it says, for its employees.

"Wal-Mart has done a great job with its public relations – it has spent a lot of money on it – but the perception is very different from the reality," warned Meghan Scott, deputy campaign director at WakeUpWalMart. "It says it has made vast improvements to its healthcare plan, but it still fails to cover almost half its employees. It says it is winning plaudits for environmentalism, but its own sustainability report shows its carbon footprint has gone up in every region of the world. I know from speaking to people in the trenches that Wal-Mart's employees are not feeling any more valued now than they did three years ago."

David Nassar, executive director of Wal-Mart Watch, also said there was much pressure still to be applied, but that its criticisms will necessarily become more nuanced. "Today we use methods that, while every bit as intense, are different from those we used in 2005," he said. "When this organisation was started it was necessary and critical to raise the profile of the campaign in order to get Wal-Mart's attention. Today, as a result of all the critics who have worked on this campaign, there is already more awareness among consumers and communities about Wal-Mart's business and labour practices. That makes it harder for them to get away with all the things they do wrong and forces them to change."

Wal-Mart said it has made genuine improvements to employee benefits, with cheaper health insurance and shorter times before newly hired staff qualify. It has also stepped up charitable work to help communities.

Mr Beaulieu said Wal-Mart's actions had been a mixture of successful public relations and genuine movement.

"The current management team has been very conciliatory in talking to its critics and has been much more savvy about how they talk about the diversity of their staff and the benefits they provide," he said. "I do think they have bought into a lot of the green initiatives, such as reducing energy use and stepping up recycling efforts. Even their push into organics, although it never took off, I think they were genuinely serious about it."

With healthcare moving up the political agenda ahead of the presidential election, and Wal-Mart at least offering to be part of the brainstorming of a solution – which is bound to have to include big employers as well as the medical industry, insurers and the government – the company might just be at the start of a step change in its reputation. In the meanwhile, the cash-strapped, debt-burdened American consumer is just grateful for those low prices.

Wal-Mart slips on Costa Rica banana skin

Asda, owned by Wal-Mart, pulled out of an important meeting about labour rights in Costa Rica's banana industry last week, soon after launching a renewed price war on bananas in the UK.

It is understood that the diktat for Asda not to attend came from Wal-Mart, but UK rival Tesco attended the meeting. The NGO Ban-ana Link organised the event, which was also attended by the GMB union, banana suppliers and Costa Rican industry representatives.

The revelation raises questions about Wal-Mart's commitment to international labour standards – an issue that will be raised, although not in relation to Costa Rica, at its annual shareholders' event today. The timing of Wal-Mart's decision not to attend the meeting is also unfortunate for Asda because on 21 May it cut the price of a kilo of bananas from 77p to 72p, which was matched by rivals Tesco and Morr-ison. Sainsbury's, which sells only Fairtrade bananas, also followed with a 5p price cut.

Banana Link co-ordinator Alistair Smith said he found out that no one was attending from Wal-Mart or Asda just three days before the meeting took place on 28 May. He said he was disappointed by the decision but reserved his most critical comments for Wal-Mart's strategy towards workers in the banana industry. He said: "There is a split between the ethical standards people, who want to see a deal on ethical standards, and the commercial people who just want to drive down price to an unsustainably low level for everyone, particularly the plantation and pack house workers."

An Asda spokeswoman said: "While we had planned to attend the meeting in Costa Rica, we had to cancel when we realised we did not have the right senior managers due to attend."

James Thompson