Fighting Hunger or Causing Hunger: A Mid-term Look at Wal-Mart’s $2 billion Commitment

On May 12, 2010, in the U.S. Capitol, Wal-Mart Vice Chairman Eduardo Castro Wright made a stunning announcement. His company would donate $2 billion in food and cash over a five-year period to “fight hunger in America.” Key Congress members and anti-hunger organization executives gushed on stage about Wal-Mart’s leadership in this arena.

Fast forward two and a half years. We’re half-way through the time period of this commitment. How has Wal-Mart done on their pledge? It’s a good time to hold the retail giant accountable. According to the company’s Web site, it has distributed 594 million pounds of free food, about halfway toward their goal of 1.2 billion pounds. According to Mike Moran, Oregon Food Bank’s Food Resource Development Director, most of the food they receive from Wal-Mart is of excellent nutritional value, but no longer sellable because of looming expiration dates or declining quality.

With regard to its cash donations, Wal-Mart has distributed $122 million in anti-hunger grants, also about halfway toward their $250 million goal. Overall, the vast majority of Wal-Mart’s anti-hunger funding has been directed to food banks and food pantries. Of the grants listed in their 2010 and 2011 tax returns, 74 percent went to food banks and pantries, 12 percent to senior feeding programs, six percent to nutrition education, and the remaining seven percent to advocacy organizations. The choice of food banks and pantries as Wal-Mart’s primary non-profit partners is emblematic of the proclivity for corporate philanthropists to fund middle of the road organizations that deal with symptoms (hunger relief) instead of solutions (eliminating the root causes of hunger).

While corporate America has become more focused on using their donations as a tool for enhancing a company’s political and financial standing (known as strategic philanthropy), in general, these giving programs have not been completely subsumed to business interests. In Wal-Mart’s case however, the purposefulness of its giving transcends garden-variety strategic philanthropic goals of broadly building a firm’s image or improving employee morale. It is much more targeted, and as such more brazen than virtually any other company’s giving, except perhaps Phillip Morris (which used its giving programs to combat anti-smoking ordinances).

The company’s giving–for hunger and other causes–has dramatically increased in many cities. For example, in Boston, the company has increased its giving four-fold in 2011. Chicago and New York non-profits have seen similar influxes of cash. Accompanied by intensive PR and lobbying campaigns, the purpose of this giving is to overcome opposition from labor and environmental interests to the firm entering lucrative urban markets. The donations are intended, according to scholar Peter Dreier, as “honest graft” to buy the support or at least neutrality of nonprofit organizations, for the company’s expansion plans.

Deconstructing the Economics

How much is Wal-Mart’s $2 billion commitment actually costing them? After discounting tax deductions, reduced garbage pickup fees, and inflation, they are undoubtedly saving hundreds of millions of dollars. In addition to these savings and write-offs, the company benefits from its donations in a variety of ways.

Charitable giving programs not only can improve a company’s image, but they can also provide a buffer against future wrongdoing. Researchers at Brigham Young University measured the impact of negative events such as the initiation of a lawsuit, or announcement of regulatory action on stock values. They found that companies engaged in “social initiatives” preserved greater share value after these negative events than those who did not participate in “social initiatives.” They estimated that socially uninvolved companies lost on average $72 million per negative event as compared to $23 million for socially engaged firms. Given the number of class action lawsuits, bribery scandals and complaints by government agencies taking place against Wal-Mart, their philanthropy as reputation insurance could be quite valuable to their shareholders.

Wal-Mart’s donations help build a positive image of the company among consumers. Media coverage about the launch of the anti-hunger initiative as well as of grants to individual organizations create a “halo effect” for the company, reaching tens of millions of persons.

Wal-Mart’s business model depends on food stamps (SNAP) and food banks. They redeem an unknown but significant portion of SNAP benefits every year. In Oklahoma, Wal-Mart captured 42 percent of SNAP redeemed there between 2009 and 2011 according to the Tulsa World.  Leslie Dach, Executive Vice President at Wal-Mart commented that in some states the firm redeems up to 50 percent of SNAP benefits ($78 billion in 2011). With the federal government distributing $78 billion in SNAP in 2011, Wal-Mart’s share is probably around one third to one half of the SNAP totals, or $26-$39 billion annually.

Wal-Mart is well known for paying its workers low wages (averaging $8.81/hour) and for not allowing them to work enough hours to qualify for health insurance. The SNAP program helps their “associates,” 80 percent of which in some stores receive SNAP, make ends meet, allowing the company to continue its exploitative practices.

In this light, the few millions of dollars per year the corporation donates to anti-hunger groups to advocate on SNAP –among other federal food programs–falls squarely within their strategic interests. These contributions are not unlike paying a professional lobbying firm to do one’s bidding, except that the NGOs doing the lobbying have more credibility than hired guns.

The definition of philanthropy is “the desire to promote the welfare of others.” In the corporate world, this altruism is combined with the firm’s strategic interests, such as building its reputation. That is why corporate giving professionals often comment that their work is a tension between doing good and looking good.

Wal-Mart has taken this tension to the extreme. The corporation depends on the anti-hunger movement to feed its employees, to protect and grow its revenue streams, and to reduce its garbage pick-up costs. It’s as if anti-hunger groups were a paid contractor, an extension of their business. Their anti-hunger initiative appears to exist solely to serve the company’s business interests. Instead of being philanthropy, its $2 billion commitment is nothing less than public relations, influence buying, and greasing the skids to reduce opposition to their entrance into urban markets. It’s capacity building for a strategic partner to ensure that tens of billions of dollars continue coming their way from the food stamp program. It’s reputation building on the cheap.

If Wal-Mart were an innocuous company with a positive impact on its workers and the communities it serves, the nature of its giving program wouldn’t be so problematic. This doesn’t mean that the grants that the company makes are not for good causes.  But, because its core business model keeps its workers in poverty, on food stamps and receiving charity, Wal-Mart is a hunger-creating company, not a hunger-fighting company, as its publicity would have us believe. It is in this duplicity that its giving program transcends strategic philanthropy into the realm of shamelessness.