Chief executive of Wal-Mart (NYSE: WMT - News) Lee Scott is returning to what he calls "the details". Recently, that meant sitting down to sample pies at the unassuming corporate headquarters of the world's largest retailer in Bentonville, Arkansas.

"We go out to the competition and we buy pumpkin pies," he says. "And then we set them in the office next door, and we sit down and we taste pumpkin pies. And we talk about why this one's different from that one, and what goes into it."

That Mr Scott has time to sit down and taste some pie is a sign that life at Wal-Mart may be settling down, at least a little. "In the last nine months, I've been able to spend more time walking back into the merchandising area, and asking them what's happening, and what's selling, and what's happening with inflation, and those kind of things," he says.

Four years ago Mr Scott, who has been Wal-Mart's chief since 2000, launched perhaps the most dramatic transformation in US corporate history. His ambition was to turn a company focused on low prices, with $375bn in sales last year, into a leading business advocate for environmental and social sustainability - responding to a hitherto unremitting wave of criticism from socially concerned investors and environmental campaigners.

At the same time, the company's more than 3,500 US stores - which account for two-thirds of its sales and three-quarters of its operating income - responded to increasingly sluggish sales with their own drastic changes. The retailer created a new marketing department and refashioned its traditional "pile 'em high, sell 'em cheap" model in favour of a new "customer focused" approach to store design and merchandising. Wal-Mart USA, headed by Eduardo Castro-Wright, abandoned its traditionally centralised business structure that used to require all its regional managers to be based in Arkansas.

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When you look at what Mr Scott has had on his plate in recent years, it is easy to see why he may not have had much time for pie tasting. In 2006, there was the criminal conviction of Tom Coughlin, former vice-chairman, for embezzlement, and the closure of operations in Germany and Korea. There has also been an ongoing political campaign against the retailer by two leading unions, not to mention the devastation caused by Hurricane Katrina in 2005 and a moribund share price.

But things now seem to be looking up. The retailer's shares hit $54 last week, their highest level for more than three years, as investors bet Wal-Mart's low prices will help it outperform the competition in the current downturn. The US stores, Mr Scott argues, are seeing the benefits of the operational changes, while Wal-Mart's new company slogan embraced last year - "saving people money so they can live better" - seems fitted to the times. Wal-Mart is slowing its expansion in the US and speeding up its growth overseas, opening its first wholesale stores in India this year.

"What I say is thank goodness we're positioned this way with the economy as it is today," he says. Mr Scott is known for his affable low-key style and an apparent sincerity that helped him to win the trust of activist investors and other vocal critics of the company as he embarked on his drive to refashion Wal-Mart's reputation. The manner befits his role as heir to the Wal-Mart myth of the company leader as everyman in the tradition of Sam Walton, the resolutely down-to-earth founder who opened the first store in 1962 and who died in 1992.

Mr Scott maintains Walton's oldoffice, overlooking the company car park, in a headquarters building that once served as a schoolbook warehouse. In New York he might wear a suit but in Bentonville he favours a casual jacket and no tie. When he became chief he abandoned his BMW in favour of a Volkswagen Beetle, now exchanged in turn for a more sustainable hybrid Lexus SUV.

When Mr Scott, on the surface a classic company insider (see left), took over from David Glass as CEO in 2000, he said he did not see any need to change things. "I just knew that we had this thing that worked. And, if we just kept doing it and doing it well, we had success," he says.

But with hindsight, he now realises that Wal-Mart was losing direction after the dynamism of its rapid expansion across the US in the 1990s. "You go through the S curve that people talk about. The founder creates this idea. Then you get a group of people that replicate, replicate, replicate. And then you reach a point where the world's changed so much that your model just can't be replicated. And then youtrail off.

"But when I took this job I didn't even know about an S curve. I didn't realise that I was a replicator."

As Wal-Mart expanded in the US it was facing what Mr Scott once called a "barrage of negatives" from the unions and other critics that was threatening to slow its US expansion. Traditionally, the retailer had always ignored its critics. It used to have only a tiny public relations department, always argued that it only answered to its customers, and largely stayed away from Washington DC.

But, says Mr Scott, Wal-Mart had to change the way it dealt with the outside world to become, as he repeatedly says, more "sophisticated". It now has one of the largest media departments of any US company, and spends millions on lobbying in Washington.

"It didn't matter if we said 'well, we're just from Arkansas', it just wasn't going to play. No matter how much we hoped the attention would go away, the world was different. And all of us had to grow and change."

At the end of 2006, as the reputational battle continued and the Wal-Mart share price continued to languish, there was speculation on Wall Street that Mr Scott might be on his way out. But he has continued to enjoy the backing of the company's board and of the Walton family, which still controls about 40 per cent of its shares. Rob Walton, Sam's eldest son, is chairman of the board and has played an important role in encouraging the company's sustainability drive.

Mr Scott admits that it is possible he might not have survived in a fully public company. He says: "I think that is a fair question, and I don't know the answer to it . . . I think there is a strength in having a family ownership that demands that management do the right thing for the long term."

Politically, the reputational strategy seems to be working. Wal-Mart executives have admitted they were concerned that the union campaign against it could make the company a target for Democrats in the run-up to November's elections. But, he says, "we have not been the centre post of anybody's election campaign".

Personally, Mr Scott says the most difficult part of the transformation was the period of going out, week after week, to talk to some of Wal-Mart's fiercest critics. "I had to go out every day and meet people who just did not like us ... the accumulation of that period of time was difficult.

"I actually have a childhood that's given me a great capacity to accept criticism," he says with deadpan humour. "So I wasn't overly sensitive to that. But it was clear that two or three years of going out each week and talking to another group that doesn't like you takes its toll." In May, 2006, he took an unusually long month's break, with the support of the board, apparently to recover from his efforts.

While Mr Scott is the public face of Wal-Mart, he is quick to say he does not "run" the company. "If you've gone out and hired the best, then why in the world do you think that your general knowledge supersedes their lifetime of experience within a specific area?

"You tend to maybe round off, or resettle a direction, or reshape a little bit. But in general there's not much of saying: 'You're going in the entirely wrong direction.'"

He characterises this as "leadership by erosion", trying to steer people, while at the same time allowing his team space. "I think the most difficult thing about my job is having the level of talent we have today, and finding yourself disagreeing with them and allowing them to go the direction they want to go. I find it very difficult," he adds with sardonic stress. "But it does happen and, quite honestly, it works well."

Mr Scott was raised just 70 miles away from Bentonville, in a small town in south-east Kansas. His predecessor, Mr Glass, came from Mountain View, Missouri, a three-hour drive from company headquarters. It seems likely the next chief will come from further afield (although Mr Scott quips: "We're looking for someone from Booneville" - a small town in Arkansas).

He points to the range of talent being developed overseas, where Wal-Mart's country heads have authority over their businesses and the opportunity to develop a full range of skills - ranging from store operations to real estate. Mr Castro-Wright, for instance, came from Wal-Mart's Mexican subsidiary, now the largest retailer in the country. Mr Scott says the company is now trying to give greater responsibilities to its US divisional heads in an attempt to provide a similar range of challenges.

In the meantime, he wants his executives to "be building a management team that can work in a much more complex, sophisticated environment".

The challenges ahead include further international expansion, and the continued effort to grow in the US.

"I don't think I'm naive about the challenges," says Mr Scott. "But I'm really optimistic about the positioning of the company today."