Wal-Mart's Newest Venture: Supplier Friend or Foe?
July 22, 2009 - The media is abuzz with news about Wal-Mart's latest undertaking: A worldwide sustainable product index that aims to establish a single source of data for evaluating the sustainability of products. In a nutshell, the three-phase plan looks like this:
1. A 15-question survey that will serve as a tool for Wal-Mart's 100,000 suppliers around the world to evaluate their own sustainability efforts. The questions will focus on four areas: energy and climate; material efficiency; natural resources, and; people and community. Surveys are expected to be complete by October 1, 2009.
2. The creation of a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products -- from raw materials to disposal. Wal-Mart has provided the initial funding for the Sustainability Index Consortium, and invited all retailers and suppliers to contribute.
1. A 15-question survey that will serve as a tool for Wal-Mart's 100,000 suppliers around the world to evaluate their own sustainability efforts. The questions will focus on four areas: energy and climate; material efficiency; natural resources, and; people and community. Surveys are expected to be complete by October 1, 2009.
2. The creation of a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products -- from raw materials to disposal. Wal-Mart has provided the initial funding for the Sustainability Index Consortium, and invited all retailers and suppliers to contribute.
3. The development of the index which will translate the product information into a simple rating for consumers about the sustainability of products.
According to Mike Duke, Wal-Mart's president and CEO, "Customers want products that are more efficient, that last longer and perform better. Higher customer expectations are a permanent part of the future. At Wal-Mart, we're working to make sustainability sustainable, so that it's a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption."
Not surprisingly, the plan has been met by the public and media with mixed reviews, labeled every which way from "audacious" to "game-changing" and compared often to Wal-Mart's 2003 RFID mandate. Here is what industry bloggers are saying about the initiative:
- "Wal-Mart's unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change... Today Wal-Mart reminds us that a new kind of capitalism is possible in which big companies can use their power constructively, for the good of society and to move on issues that are still largely unaddressed by government. Clearly self-interest still prevails; Wal-Mart would not be taken the labeling action, with all of its complications, if its decision-makers did not see a definite commercial market benefit. We should applaud Wal-Mart for joining the vanguard and leading a new parade. First for the green program and all that might follow from it. Second for showing that a new model of principled, not just greedy, American capitalism can take shape." -- Rosabeth Moss Kanter, the Ernest L. Arbuckle Professorship, Harvard Business School
- "I applaud Wal-Mart's effort to work with various stakeholders to develop global sustainability standards and metrics. Without standards, broader adoption of sustainability practices is not possible. But as anyone who's been involved with standards bodies knows, getting companies across different industries and geographic regions (as well as governments) to agree on anything is a very long and painful process. And when you consider that sustainability is such a politicized topic, the challenge is even greater. In my opinion, this step will take years (maybe a decade) to complete, if ever." -- Adrian Gonzalez, Logistics ViewPoints
- "All in all, this is one heck of an ambitious project, one that will doubtless take months to pull off. But it would (again) establish Wal-Mart as a differentiator in the retail world. Now, the interesting part will be how other retailers, or the suppliers themselves, will be able to use this information." --Heather Clancy, SmartPlanet.com
- "The company's grand plan has the potential to transform retailing by requiring manufacturers of consumer products to dig deep into their supply chains, measure their environmental impact, and compete on those terms for favorable treatment from the world's most powerful retailer... Still, measuring the sustainability of a flat-screen TV, a trampoline, a backpack, a baby stroller or a bag of poultry feed -- all of which are sold by Wal-Mart -- is a whole lot more complicated than certifying a fishery or forest. Wal-Mart plans to use a tool known as Life Cycle Assessment, which is designed to measure the full environmental impact of a product through manufacture, use, and disposal." -- Marc Gunther, The Big Money
- "As for the 15 questions. Well, they're a start... They don't mention toxic materials used in manufacturing or in the products themselves. They don't talk about the energy efficiency of products or their recyclability or other disposition at the end of their useful lives. One need only compare Wal-Mart's Index to Nike's Considered Index, which goes deep into product details, to see how relatively primitive it is." -- Joel Makower, Greenbiz.com