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WM Move to Grade Suppliers on Sustainability Affects Other Retailers

wm-meeting2Wal-Mart is set to announce a new sustainability index that will grade various suppliers and products by a range of environmental and sustainable factors.

The move, to be unveiled at a July 16 meeting in Bentonville, Ark., will lead manufacturers to label their products in such a way that lets consumers easily discern the sustainability of one product over the other, reports The Big Money.

With other retailers involved in the sustainability consortium that Wal-Mart is starting, the movement may become much larger in scope when all is said and done. Wal-Mart is mum on the details for now, but this event page shows a glimmer of what invitees to the meeting can expect. “Join us for a groundbreaking workshop to craft the sustainability index that Wal-Mart buyers will use to evaluate their 60,000 suppliers and the hundreds of thousands of products that end up on store shelves,” writes Matt Kistler, Wal-Mart’s Senior Vice President of Sustainability.

“We are assembling a diverse group of stakeholders to help ensure that we measure the sustainability of products in a way that is credible and highly scalable. You will work with Wal-Mart merchandise leaders, Wal-Mart suppliers, non-governmental organizations, scorecard thought leaders and other sustainability experts,” Kistler continues.

The $406 billion retailer has been building toward this moment for some time. First came its Sustainable Packaging Scorecard, which was unveiled in 2006 and went live in early 2008. As time went on, the goal was for suppliers to reduce the amount of packaging in their products, as well as the energy component and other negative environmental aspects of the packaging’s supply chain. Life-cycle attributes may well be part of the index, too.

For suppliers, the implications of Wal-Mart’s sustainability initiatives are clear – adapt and improve, or get thrown off the shelf. What is different about the July 16 meeting is its scope is so large that it may lead to a set of standards that extend beyond Wal-Mart. Indeed, Wal-Mart has invited Costco, Target and Kroger to join the sustainability consortium that will have a hand in crafting the index.

The consortium will be led by the University of Arkansas and Arizona State University. Additionally, faculty at Duke, Harvard, the University of Michigan, the University of California at Berkeley and Stanford have also been involved in planning the index, reports The Big Money. Among the major suppliers said to be involved are Unilever, Procter & Gamble, Tyson, General Mills and Tyson, among others.

Wal-Mart’s reason for forming the consortium may be because the retailer doesn’t want to be the sole arbiter of what constitutes sustainability in a product, according to the article, which quoted an insider as saying, “They are willing to get the ball rolling, but they want to hand it off to someone else.”

It’s predicted that the sustainability index may fall to a yet-to-be-formed group along the lines of the Marine Stewardship Council or the Forest Stewardship Council. Jon Johnson, who holds the Walton professorship in sustainability at the University of Arkansas, is leading the consortium, along with Jay Golden, an assistant professor in the school of sustainability at Arizona State. Johnson said the the index will be “comprehensive,” adding that, “Unless you look at the entire life cycle of the product, you just can’t measure the environmental impact.” Wal-Mart will provide a live Webcast of the meeting, which is from 9-11 a.m. (CDT), July 16. Click here to view the Webcast.

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3 thoughts on “WM Move to Grade Suppliers on Sustainability Affects Other Retailers

  1. Wal-Mart and others companies cooperating in these initiatives should be commended and recognized for the positive work they do. As leaders in the world from a commercial perspective, they have an enormous ability to influence change and consequently the ethical responsibility to do so.

    A question remains whether or not investors will continue to reward these moves as a sign of strong leadership and forward thinking. They should, of course, because they represent creativity and long term thinking.

    A question that still needs to be asked, however, is “How do we help Wal-Mart and it’s competitors to begin encouraging an even bigger shift in mindset, (i.e. how do they do encourage consumers to consume less)? For a company that has it’s basis in serving the customers wants and needs, this is an interesting challenge.

    I’m not necessarily suggesting that Wal-Mart provide less products to it’s customers, although that may be an end result of such a strategy. I’m certainly not suggesting that they loose market share. What I am suggesting is that truly forward thinking executives will be taking a long hard look at the long term global perspective and, if they are truly creative influencers of change, which I believe they are, they will start asking the questions about how to design their business models and strategies around global equity as well as sustainability?

    If every human being, in a growing global populuation were to be treated equitably, could they all be sustainably supplied with the numbers and types of products that we currently enjoy from companies like Wal-Mart? I ask this question, suspecting that we all know the answer (i.e. “not likely”) while conceding that I’m not personally an expert on the topic of resource consumption. I’ve heard statements from experts suggesting that we would need three earths in order to supply everyone with the amount of goods that we currently consume in developed nations.

    And while the current initiatives toward sustainability are laudable, will they go far enough to meet the future needs, or do we need our business leaders to create a whole new approach to business?

    There is no doubt that CO2 production on a per capita basis is already far too high in developed countries and it continues to grow in underdeveloped countries as demand for energy and goods also increase.

    My question is “What do we need our business leaders to learn from our past behaviours and results; current market reward systems, business strategies and production and consumption patterns, that will ensure their success long into the future and ensure that our future behaviours will be both sustainable and equitable?” We might also have our business leaders ask themselves, “How long do they have to effect the changes that need to be made and what actions do they need to take immediately to make these changes before additional irrepairable damage is done?”

    What ideas might they then come up with that will change their entire business model, encouraging cooperation and knowledge sharing, rewarding learning rather than imposing punative measures, incenting investors to consider the triple bottom line as mandatory vs. a nice to have, and considering the world as the market but in ways that allow sharing and distribution when necessary for equity while striving to preserve diversity, local use of resources and preservation of the global and local environments.

    What will allow our retailers to satisfy our needs and wants while giving us less “stuff” and reducing the net consumption of non-renewable resources to zero?

    What responsiblity do we place on the market system, the investor, the consumer, the suppliers, business leaders and the policy makers?

    The reality is that if we all wish to have a good world, and we all want to our children to have a good world, and their children, we all must play a part. But for those in influencial positions, let’s reward and encourage them when they take the lead and continuously challenge them to do even better.

    Garth Schmalenberg

  2. Why create another standard that will only be used at one retailer. What about one with broad market appeal, such as JumpGauge Interactive Labeling (http://www.JumpGauge.com/)? Consumers could use it at all retailers, not just Walmart. Interactive labeling also offers greater transparency and knowledge transfer than a simple questionnaire

  3. The impact of this sustainability index will have a global impact as one in five of China’s factories are thought to be in the supply chain of the goods Walmart sells. This could be the start of a true green revolution where finally big manufacturers and consumers take responsibility for their environmental impacts.

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