In 2006, I wrote a cover story for FORTUNE with the headline: Wal-Mart Saves the Planet. Since then, I’ve written dozens of stories about the retail giant. I’ve reported on Walmart’s impact on the gold mining industry (Green Gold in FORTUNE), its efforts to protect child laborers in Uzbekistan and salmon fisherman in Alaska (Walmart: A bully benefactor on Fortune.com), the launch of a path-breaking sustainability index (Inside Walmart’s sustainability index at GreenBiz), LED lights in Walmart parking lots, the company’s CSR reports, etc. I’ve been critical at times–pointing to Walmart’s BIG problem: climate change and writing that Walmart CEO (Mike Duke) has a problem with gays–but most of my coverage of the company’s sustainability effort has been laundatory.

Now here comes Stacy Mitchell, a smart reporter, with a six-part series in Grist called Walmart’s Greenwash: Why the retail giant is still unsustainable. She assails Walmart for promoting suburban sprawl, making only token efforts to buy renewable energy and selling cheap throwaway stuff. She also faults mainstream environmental groups for focusing “on the small bits of good that Walmart could do—reduce PVC in packaging, for example—while ignoring the much larger consequences of its ever-expanding business model.” She also says that she has been “shocked by just how much of a public relations boost the media have given the company and how little public accountability they have demanded in return.”

These are serious criticisms that deserve a responses. Stacy highlights some important points. Fundamentally, though, we disagree about Walmart, and this post (it’s necessarily longer than most) is an attempt to explain why. Some of our differences are probably a result of what psychologists called confirmation bias, which describes the way all of us seek out, sift through and read evidence in ways that confirm our preconceptions. Confirmation bias is a problem in journalism, politics, economics and even in the so-called hard sciences.

Stacy Mitchell

I’m sure that my experience with Walmart has left me vulnerable to confirmation bias. I’ve visited Bentonville, gotten to know executives at the firm, and the company has participated in Fortune’s Brainstorm Green conference, which I co-chair;  my career and reputation have been helped by my reporting on the company. I suspect the same is true of Stacy, who wrote a book in 2008 called Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses. She has “advised numerous communities on strategies and policies to limit chain store proliferation and strengthen locally owned businesses,” according to her bio.

So read on (skeptically) as I try to sort through some of the issues she’s raised.

Renewable energy: In an article headlined Think Walmart Uses 100% clean energy? Try 2%, Stacy notes that Walmart has been slow to adopt renewable energy. The company has several big, ambitious, stretch goals –  one  of them is to be powered by 100% renewable energy — and she writes, accurately, that  ”journalists often repeat these goals verbatim, so they function like stealth marketing slogans that infiltrate media coverage.” Stacy did her own calculation and found that a mere 2% of Walmart’s operations are powered by renewable energy.

That doesn’t even make Walmart No. 1 among retailers, let alone when it is compared to other big companies and government agencies. Walmart ranks No. 15 in EPA’s top 50 green power purchasers, and ranks No. 5 among retailers, behind Kohl’s, Whole Foods Markets, Starbucks and Staples–smaller companies that buy more renewable energy than the Bentonville behemoth.

I asked David Ozment, Walmart’s energy guy, about this, and he told me that the company expects to move up the list next year. Progress in such a big company takes time. “We’ve got to plant this forest, one tree at a time,” he said. Recently, Walmart struck a deal with Solar City to add solar photovoltaics to another 61 sites. Walmart is also one of the largest, if not the largest, customers of Bloom Energy, having installed Bloom’s fuel cells at 26 sites. It’s also  experimenting with on-site wind turbines at a couple of stores. So all the movement is in the right direction.

But the numbers remain small. Walmart and Sam’s Club have about 4,400 stores in the U.S.  The trouble is, as I wrote in GreenBiz last spring, that “buying renewable energy would drive up (Walmart’s) costs, with no tangible benefits to customers, and put the company at a competitive disadvantage.” Walmart’s not willing to do that.

Cheap stuff: In a story headlined Is Your Stuff Falling Apart? Thank Walmart, Stacy writes about a $6 toaster (!) and $10 jeans. Americans are not only buying more stuff, we’re throwing away more than ever, she reports–an average of 83 pounds of textiles per person, mostly discarded apparel, each year, four times as much as we did in the 1980s. She writes:

Where once we measured value when we shopped, Walmart trained us to see only price. Its hard bargaining pushed manufacturers offshore and drove them, year after year, to cut more corners and make shoddier products….

While there are certainly factors beyond Walmart that have contributed to this ever-expanding avalanche of consumption, the company has been a major driver of the trend. Its growth and profitability rest on fueling an ever-faster churn of products, from factory to shelf to house to landfill.

This, too, is an important point. If Walmart and its suppliers make things more efficiently, but the company sells more and more and more things, the planet probably will be worse off. (I say “probably” because if goods sold by Walmart merely  displace goods made more inefficiently  by others, the planet could actually be better off.) But the bigger question here is, who’s responsible for what Stacy describes as “this ever-expanding avalanche of consumption?”

It doesn’t please me to say so but people who buy cheap, throwaway stuff do so because they want cheap, throwaway stuff, or because they can’t afford to buy more expensive, durable stuff, like a Patagonia jacket or the $249 All-Clad Deluxe Slow Cooker that I was eyeing the other day at Williams-Sonoma. The Hamilton Beach slow cooker  at right sells for $14.88 at Walmart.

Markets are far from perfect, goodness knows, but retail markets are more competitive and transparent than most. People get what they want, for the most part. Saying that Walmart “trained us” to see only price reminds me of the argument that big-box stories destroyed Main Street, or Amazon and Barnes & Noble put the independent bookseller out of business. No, they didn’t–their customers did.

The sustainability index: At Grist, Stacy’s story is headlined:  Walmart’s promised green product rankings fall off the radar. She writes: “Was the index just a PR ploy from the start?”

Oh, come now. If this was a PR ploy, the index has been an even bigger flop than the critics would say.  After all, the green product rankings have fallen off the radar, as the Grist headline notes.

One reason you haven’t heard much about the index is that it takes an enormous amount of work to do science-based, life-cycle analyses for tens of thousands of consumer products–that’s the goal of the project. This is going to take time, and it is going to be controversial, but the fact is that the undertaking has won broad-based support not just from Walmart suppliers who, arguably, could be muscled into joining, but from competitors including Best Buy, Kroger, Marks & Spencer and Safeway. Seventh Generation, Stonyfield Yogurt and NGOs including Environmental Defense Fund, NRDC and the World Wildlife Fund are also working with the university-based Sustainability Consortium. This is a big deal.

“So far this has done little to alter business as usual,” Stacy writes. Uh, no. People I respect–I’m thinking here about Hunter Lovins, Catherine Greener and others–who spend their lives working with companies to improve environmental performance tell me that Walmart’s efforts to green its supply chain, including the index, have already had a big impact on the entire consumer products industry.

Suppliers in China are taking note, too. For a nuanced look at Walmart’s impact there, read How Walmart is Changing China, a terrific piece by Orville Schell in The Atlantic. He writes admiringly of the work being done by Walmart but ends on a somber note:

However smart, prescient, and successful Walmart’s sustainability efforts actually turn out to be, just how “sustainable” is the whole bloody global-retail proposition that lies at the heart of the company’s amazing progress? Maybe Walmart’s new initiatives will pencil out in a business sense for the company and, within the terms of the current retail game, even serve as a model of good environmental stewardship. But will the hyperactive retail-consumption model that it has pioneered for global consumers pencil out for the world?

…The bitter reality is that even if unrestrained consumerism becomes less environmentally destructive per unit of production than it was in the past, it is still unsustainable in the long run. So even as this most innovative of corporate and statist green strategies may represent an environmental breakthrough and good business for Walmart, and good politics for the Chinese government, it may nonetheless end up being very bad business for humankind.

What Walmart can’t do: If you pay attention to Walmart, you can’t help but be impressed by its size and power. Schell, a veteran journalist, describes it  “as a corporate entity larger in scope and logistical complexity than any other in human history.” He writes: “Compare Walmart’s annual revenue with the GDP of sovereign nations, and it ranks in the top quartile.”

But it’s easy to overestimate Walmart’s power. This, I think, gets to the heart of the differences between those of us (like me) who believe that Walmart is part of the solution to the world’s environmental problems and those (like Stacy) who believe it is the cause of those problems.

Imagine, for a moment, that Walmart shut down tomorrow. Would the world become less globalized? Would people buy and shop less? What would take its place–locally-owned, small-scale merchants or other big-box stores like Costco or Target? Would Walmart’s 2.1 million workers be better off? How about its 200 million customers?

Walmart didn’t just spring, fully-formed, from the mind of Sam Walton. It grew into the world’s biggest company because it served people’s needs. Maybe not mine–I’ve spent less than $100 in my life at Walmart. Certainly not Stacy’s. But hundreds of millions of  people, not just in the U.S. but around the world, shop at Walmart, in large part because the company has enabled them to buy things that were once beyond their reach. Walmart isn’t a bunch of conniving businessmen in Bentonville, Arkansas. Walmart is us.

It should go withouit saying that Walmart didn’t create consumption or globalization. Nor can it stop them. All it can do is try to make consumption and globalization more sustainable and humane.

As Elizabeth Sturcken of the Environmntal Defense Fund, who works with the company, put it:

Is Walmart still unsustainable? Yes? Probably 95% of our consumer goods, and retail and supply chain system is. But does anyone have more power to change that system than Walmart? No.

It’s not all good or all evil. As usual, the reality is more complex.

So, by all means, let’s hold Walmart accountable.

Let’s ask its top executives–notably, Mike Duke–to speak more publicly and forcefully about sustainability, so that everyone in the organization understands that it matters.

Let’s ask Walmart to build sustainability metrics into its compensation system. There’s no more powerful signal to employees that a company cares about going green.

Let’s ask Walmart to set near-term targets for buying renewable energy or reducing waste to put more teeth into those long-term aspirational goals.

Let’s ask Walmart to begin a conversation with its consumers about what to buy and what they can afford.

And by all means let’s ask Walmart to be a louder voice in public policy debates about energy and climate change.

But there’s no point asking Walmart to stop being Walmart.

Arguably, Walmart has done more than any environmental group, politician, government regulator or Silicon Valley clean tech firm to nudge the U.S. economy towards sustainability in the last five years.  Walmart’s 2011 Global Responsibility Report, published last week, makes clear that despite the recession and some revently rough going for the company–lately its stock has lagged the S&P500 –Walmart is pushing ahead towards its big goals: To generate no waste, to be 100%-powered by renewable energy, and to sell lots more products that sustain people and the environment.

Yet a closer look at the report demonstrates that there are limits to what any company, even one as vast as Walmart, can do. Most of its environmental gains have come from doing what Walmart has always done very well–driving efficiency in its stores and supply chain. When sustainable initiatives cost more money, as they sometimes do, progress has been halting.

Still, Walmart deserves at least two cheers, maybe two-and-half for its efforts, particularly in the current, dispiriting political climate.

As Elizabeth Sturcken of the Environmental Defense Fund, which works closely with Walmar, told me:

Leadership on environmental issues is coming from Bentonville these days, not from Washington. Some people in Washington want to roll back basic environmental protection on clean air and clean water, saying it’s bad for business. Our work with Walmart proves that’s not true….Generally,  all the signs that I see are full speed ahead.

Andrea Thomas, who has led Walmart’s sustainability work for the past six months, made a similar point. The company set big, bold, broad goals back in 2005, without knowing how it would meet them. Since then, it has discovered unexpected business benefits.

Rather than being paralyzed by (the goals), they ignited  a lot of energy behind doing experiments, trying different things. Today, there’s a lot of interesting work going on, not just in the U.S., but all over the world. I’m very encouraged by the progress we’re making.

Here’s one success story from the report, a promising new initiative and an arena in which Walmart’s progress appears to have stalled:

Walmart recycling with "super sandwich bale"

Waste: WMT has turned its garbage into an asset, just by thinking about the stuff it throws away in a more disciplined fashion. Across California, more than 80% of waste has been diverted from landfills and made into something else, turning what was a cost center into a source of new revenue.

Said Thomas: “We would pay for people to haul our trash away. And we paid to put it in a landfill. Now people are paying us.”

Success hasn’t come as easily as it sounds, of course. To help find an outlet for food waste, Walmart’s foundation donated 100 refrigerated trucks to food banks. “ Now they have a means to pick up and deliver some of the food that we can’t use in the stores, but that’s still good food,” Thomas said.

Supporting small, local farms: Last fall, WMT announced an array of targets related to agriculture. In the U.S., the company promised to double sales of locally-sourced produce, so that it accounts for 9 percent of all produce sold by the end of 2015. Globally, WMT said it will sell $1 billion in food sourced from 1 million small- and medium-sized farmers in emerging markets by the end of 2015.

To achieve those goals, Thomas told me, WMT has to simplify its supply chain to deal directly with farmers and eliminate some middlemen. “The logistics aren’t as difficult as you might think,” she said. “The farmer can actually drop off produce at the distribution center or at the store.”

If all goes according to plan, WMT  should be able to sell fresher, local food at lower prices, and eliminate some of the greenhouse gases generated by a global supply chain for food. Like the waste initiative, the agriculture initiatives mostly dovetail nicely with the culture of efficiency at Walmart.

Clean energy: To achieve its goal of being powered by 100% renewable energy, WMT has made its fleet, stores and distribution centers more efficient. But its commitment to wind and solar power  has been limited because they cost more than electricity from fossil fuels. The report says:

During FY11, we successfully completed several renewable energy projects, including the installation of 35 solar projects in Arizona, California and Puerto Rico. Eight of the solar projects installed in FY11 utilized thin-film solar, which created manufacturing jobs and accelerated this new technology’s entry to market. We installed seven fuel cell projects in California this year and completed two microturbine wind projects on the parking lot light poles at the Walmart in Worcester, Mass., and at the Sam’s Club in Palmdale, Calif.

This is all to the good. By buying renewable energy in selected markets, WMT will help bring costs down. But because wind and solar power generally cost more than electricity from coal, nuclear or natural gas in most places, WMT can’t or won’t buy clean energy on a  scale that matters. (If the company says in its report how much of its energy now comes from renewable sources, I couldn’t find it. I’d guess it’s well under 10% of  WMT’s total energy spend, but I’m ready to be corrected.) Buying renewable energy would drive up its costs, with no tangible benefits to customers, and put the company at a competitive disadvantage, as the company says in the report:

In our efforts to ensure our operations are contributing to everyday low prices for our customers, it has sometimes been difficult to find and develop low-carbon technologies that meet our ROI requirements.

This, then, is where we run up against the limits of efficiency and, more broadly, what any company can reasonably be expected to do to become more sustainable.

More broadly, it’s a reminder that the rhetoric of green business — how green is gold, how green is green, how clean energy will generate jobs and growth — hasn’t always served the cause well. Sometimes, indeed often, “green” is more expensive than “brown,” or to be more precise, the full costs of “brown” (air and water pollution, GHG emissions) aren’t captured in its price. This is why policy matters. This is why we need to price carbon emissions into the energy economy.

Put another way, so long as environmental leadership is coming from Bentonville and not Washington, we’re in trouble.

Walmart and GE are the superpowers of corporate sustainability. They have enormous impact (WMT) and influence (GE). Recently, I hosted a dinner about sustainability for Motorola where an executive named Bill Olson described how the company developed its Eco-Moto W233 Renew carbon neutral, energy efficient, environmentally friendly phone. To do so, Motorola needed a company that would sell it recycled plastic for the phone. That was GE. It also needed a retailer to enthusiastically sell the phones. That was Walmart. In fact, as Bill recalled, WMT exec told him that giant retailer would before long be selling nothing but “green” phones.

The point is, WMT and GE are changing business, often in unseen ways. So it’s worth keeping up with their efforts to meet their own ambitious sustainability goals. Where are they succeeding? Where are they falling short? How strong is their commitment?

WMT’s 2010 Global Sustainability Report, which was released recently, provides a snapshot of the retailer’s work. The 47-page report (available here) is, if nothing else, a reminder of the scope  and depth of WMT’s efforts—the company is buying renewable power, reducing packaging, reducing waste, making its fleet more efficient, and selling more sustainable products, and not just here in the U.S.

Here are some highlights:

Bentonville Buddies: Mike Duke and Environmental Defense Fund's Fred Krupp

When CEO Mike Duke took over last year from Lee Scott, there were questions about his commitment to the sustainability efforts. He now appears to be a believer. In the introduction to the report, he writes that  WMT has been able to “broaden and accelerate” its commitment to sustainability even during the recession. And he says:

Sustainability continues to make Walmart a better company by reducing waste, lowering costs, driving innovation, increasing productivity and helping us fulfill our mission of saving people money so they can live better.

That’s about as good a summary of the business case for sustainability as you’ll find.

WMT is going well beyond “green.” Working on its own and with other retailers, WMT is conducting audits of factories in its supply chain, particularly in China, to make sure they comply with social and human rights standards. By 2012, the company says, “all direct import suppliers” (as opposed to suppliers to its suppliers” will be required to “source 95 percent of their production from factories that receive one of our two highest ratings in audits for environmental and social practices.” WMT is also pushing suppliers to achieve higher standards of product safety, quality and energy efficiency.

Wal-Mart’s environmental efforts are truly global.  The company is uying solar and wind power in Mexico, sourcing local food in China and India, and analyzing the life cycle impact of consumer products in Brazil. Alleviating hunger has become a goal of WMT’s charitable efforts, and so with CARE it is backing education, job-training and entrepreneurial programs for women in Peru, Bangladesh and India.

The company reports not just on victories but on frustrations. As you’d expect, WMT touts gains in such areas as fleet efficiency and building super-efficient, green prototype stores but it also admits where it has fallen short. But the company also said it was unable to meet a goal of eliminating PVCs from store-brand packaging because it couldn’t find a suitable alternative.

It’s harder than it should be to get a sense of WMT’s overall progress and impact. As Elizabeth Sturcken of the Environmental Defense Fund says in a Greenbiz story about the report, the report lacks context that would enable readers to assess WMT’s progress. WMT, for example, talks about keeping waste out of landfills but Elizabeth writes that

we’d like to see a report of the total volume of waste produced annually, and the change in total volume from 2008 to 2009. We’d like to know whether Walmart’s waste reduction and diversion efforts are actually resulting in a net reduction from one year to the next.

Similarly, I couldn’t figure out what percentage of WMT’s energy consumption comes from renewable energy. (I’d guess it’s very, very small.) And I’m still confused by WMT’s reporting on its carbon footprint. The company says (on p. 33) that it reduced its emissions by 5.1% in 2008, when compared to 2005, but the company also says (on p. 6) that “our company’s absolute GHG footprint continues to rise.” It’s clear that emissions per $1 million of sales are falling, and that’s progress of a sort.

WMT is just getting started. All signs are that WMT is committed to sustainability over the long term, and that’s exciting. Its efforts to measure the environmental impact of individual products are just getting started. There’s lots of room for improvement around packaging. Over time, WMT is going to democratize and popularize the idea of  “green.” Check out these shelves of GE compact fluorescent bulbs.

As Elizabeth Sturcken writes:

From what we see on the ground, Walmart is indeed working hard to “broaden and accelerate” their sustainability efforts, as CEO Mike Duke says.  The folks working on this at Walmart have taken to proudly wearing buttons emblazoned with a “37” representing the number of Walmart sustainability goals (though there are actually 38 with the new climate goal added in).  It’s a symbol of how intently they are focused on moving forward to meet those goals.

Five years ago, few believed that WMT would have come this far.

Until now, Walmart’s bold sustainability efforts were marred by a glaring omission.

The $405-billion a year retailer has worked hard since 2005 to save energy, reduce waste and sell more sustainable products.

But it resisted pressures to reduce or hold steady its own greenhouse gas emissions. In fact, its carbon emissions have grown, as the middle graphic below shows. (There’s a cleaner version in WMT’s responsibility report, here.) When it comes to global warming, Walmart would appear to be doing more harm now than it was three or five years ago.

Today, Walmart made its first major commitment to reduce greenhouse gases–although, in typical WMT fashion, rather than set a tough goal that might affect its own growth curve, the company plans to turn up the pressure on its thousands of suppliers to reduce their emissions.

Here’s how a press release from Walmart and its lead environmental partner, Environmental Defense Fund, explained it:

Walmart today announced a goal to eliminate 20 million metric tons of greenhouse gas (GHG) emissions from its global supply chain by the end of 2015. This represents one and a half times the company’s estimated global carbon footprint growth over the next five years and is the equivalent of taking more than 3.8 million cars off the road for a year.

The footprint of Walmart’s global supply chain is many times larger than its operational footprint and represents a more impactful opportunity to reduce emissions.

You can think of this as the biggest carbon offset in global history, and I’m being only partly facetious when I say that.

Walmart wants to grow–the company is expanding in the U.S., and elsewhere in the world–and it will likely grow its own carbon footprint, directly and indirectly, as it sells more stuff and builds new stores, most in suburbs and rural areas, surrounding by acres of parking.  But the companies that supply WMT–that is, Procter & Gamble, Unilever, Clorox, Coca-Cola, PepsiCo, Kraft, General Mills, Sony, Apple, HP, Dell and hundreds more, all of whom must be wondering about their carbon emissions right now–will be asked to make things more efficiently, use less energy, buy more recycled content and the like.

As Leslie Dach, a top Wal-Mart executive, put: “It is really a Wal-Mart approach to solving a problem…The size and scale of this company can be put to use to make a real difference in the world.”

That’s no doubt a good thing. Better, as one of my sources told me, to improve practices at 10,000 factories around the world than simply to make WMT’s operations more efficient.  “Sensational” was how Fred Krupp, the president of Environmental Defense Fund, described it, during a lovefest with Walmart CEO Mike Duke, which was webcast on Treehugger, of all places.

Duke praised EDF, saying: “Our NGO partners have pushed us and been patient with us.”

Krupp returned the favor. EDF has planted two staffers in Bentonville, Arkansas, to work closely with WMT, and he said: “I don’t think there’s any better money we are spending anywhere.”

Specifics about how the carbon reduction effort would work were few, understandably so since it is new.  “This is uncharted waters,” said Elizabeth Sturcken of EDF. (Here is her excellent analysis, with some detail on initiatives in packaging and around dairy products.) Right now, there’s little data available to measure the carbon impacts of the products that Wal-Mart sells, particularly if you want to include how they are made, shipped, used and thrown away, as WMT does.

Walmart said it would start with the products that have the most “embedded carbon” and seek GHG reductions thatn are “economically viable.” The company has already had success getting suppliers to use smaller packages, from concentrated detergents to lighter-weight DVD cases.

Walmart itself, though, wants to get bigger. Duke was straightforward about this. “We are a growth company,” he said. “We want to add square footage. That’s the reality of our business.”

Critics are unsatisfied. Here’s reaction from Stacy Mitchell, a senior researcher with the New Rules Project, a program of the Institute for Local Self-Reliance:

By focusing on suppliers, Wal-Mart continues to deflect attention from the enormous greenhouse gas implications of its own business model. Wal-Mart is rapidly expanding in China, Mexico, and other countries, where it is destroying neighborhood businesses and replacing them with an auto-oriented form of big-box shopping that is highly polluting. Under Wal-Mart, local and regional systems of economic production and distribution are giving way to global supply chains, which almost invariably means longer distances and greater fuel consumption.

She’s got a point, but the story is more complicated, for a couple of reasons. (Warning: geeky analysis ahead.) First, look at the graphic on the far right, above. Walmart is reducing its GHG emissions per unit of sales, meaning that it’s more efficient. So, if its competitors are not doing as well in terms of efficiency, and if it takes market share away, then it’s possible that WMT can sell more stuff and the planet will be better off. For example, if Walmart sells lots of Fair Trade coffee, and the locally-owned convenience store around the corner sells less conventional coffee, that’s a good thing. Local isn’t necessarily better.

Second, and paradoxically, Walmart is actually becoming more local. For example, Walmart has made a concerted effort to buy more from local farmers. Corby Kummer has a terrific article about this in the current Atlantic, in which he asks: Will Walmart and not Whole Foods save the Small Farm and Make America Healthy? The company, he reports, “wants to revive local economies and communities that lost out when agriculture became centralized in large states.” Best quote in the story is from Michelle Harvey of EDF who says: “It’s getting harder and harder to hate Walmart.”

True enough. Nevertheless, in my ideal world, Walmart would set a cap on its own emissions, sell used goods as well as new, nudge people to buy vegetables instead of meat, and share profits with its workers.  In today’s world, Walmart will try to grow (profits) and shrink (pollution) at the same time. That’s about all we can ask of a big company until we, collectively, can find a way to decouple economic growth from environmental harm. That’s a job too big even for Walmart.