We are witnessing the US dairy industry rapidly aligning on sustainability in a way that will transform the industry, and potentially others. Credit for creating this momentum goes largely to Walmart’s new supplier engagement tool, the Sustainability Index.
This historic shift became apparent at a dairy summit held at Walmart’s home office in Bentonville, Arkansas, in May. Walmart and Sam’s Club brought together the dairy supply chain contributors to chart a course to improve communication all the way to the farm to encourage, enable, and track progress on the industry’s leading environmental issues. Having begun my own involvement in the dairy industry 20 years ago, I found it impressive and gratifying to be a part of this critical advancement in dairy sustainability.
Walmart’s Sustainability Index serves as the cornerstone of the company’s efforts to meet its larger sustainability goals and the dairy merchant team was one of the first to begin using the Index in the fall of 2012. With more products covered every 6 months, currently reaching 190 categories, Walmart’s goal is to have 70% of its products using the Index by 2017.
The Index is a set of category-specific questions about sustainability performance on key issues answered by Walmart’s suppliers twice each year. The questions are developed through the science-based, multi-stakeholder effort at The Sustainability Consortium (TSC). The current set of 14 Index questions for dairy align with research from the dairy industry that identified the category’s key environmental hotspots: cow manure; the many inputs required to make feed; and the gases cows produce during digestion (called enteric emissions); among other issues. Supplier responses to these questions form the basis of sustainability scorecards for each supplier and category. These scorecards drive Walmart’s product sustainability program as they quickly uncover improvement opportunities for individual suppliers and across entire categories.
Armed with this empowering information, the Walmart’s merchant teams have the ability to target key issues and effectively engage their suppliers. As a result, they have started employing the scorecards in their day-to-day business. The Index revealed the need for improved dairy supply chain communication on sustainability in order to get to critical changes at the farm-level. With over 70% of the carbon footprint coming from the farm and over 90% of water used to make the cow’s feed, improving farm practices is essential. “Dairy is a sales leader in the store and comes with a large environmental burden that we want to address in partnership with our suppliers for a more sustainable business,” notes Brittni Furrow, Director of Product Sustainability at Walmart.
US dairy industry groups have already conducted life cycle assessment studies to identify environmental hot spots and set a voluntary goal to reduce greenhouse gas (GHG) emissions from fluid milk by 25% by 2020. However, Walmart’s dairy buyers quickly realized that most of their suppliers are not aware of farm-level sustainability practices and are unable to answer the Index questionnaire. The suppliers that sell dairy products to Walmart and Sam’s Club stores represent much of the U.S. industry and its 65,000 dairy farms, but most of them don’t buy the milk used in their products directly from the farmer. There can be several steps between the dairy food company and the dairy farm, creating a significant hurdle for tracking and encouraging sustainable practices. Alisha Staggs, Project Manager at the Environmental Defense Fund notes that, “Without effective supply chain communication, it is difficult to spur and track meaningful environmental change where it matters most – at the farms that grow the feed and raise the animals.”
The dairy industry already communicates information through its supply chain about issues such as organic certification, hormone use, food safety, or antibiotic use. So attendees of the May summit convened by Walmart and Sam’s Club discussed ways to leverage these existing channels for sustainability communication. In addition, The Innovation Center for US Dairy has developed a sustainability data collection tool called Farm Smart that tracks resource consumption and waste on farms to obtain a carbon footprint estimate. The pieces of the puzzle are now fitting together and it appears that communicating farm-level sustainability information is entirely feasible, which can enable the changes needed.
The dairy industry had been taking important first steps with their research and data collection efforts, but it lacked impetus—a market partner with the influence of Walmart. And now that Walmart is using its pioneering tool to identify improvement opportunities and engage it suppliers, there is laser focus on the path toward revolutionary change. The Index revealed a critical gap in communication in the dairy supply chain that impeded progress on key on-farm issues. Now Walmart’s vast supplier base is moving in a coordinated direction that promises widespread, industry-level improvement. With Walmart’s merchant teams tracking Index scores and incorporating them into their business, the power of systematically assessing supply chain impacts through supplier relationships is coming to light. The Index will soon reach far beyond the dairy industry to touch the majority of Walmart’s vast supply chain and the potential for positive change that can result is staggering. Stay tuned.
Cheryl Baldwin, PhD, is a food sustainability expert and Senior Consultant for sustainability consulting firm Pure Strategies. The firm helps organizations improve environmental and social performance through green product design and production, sustainable materials, supply chain evaluations and transparent measures of progress. Pure Strategies’ clients include Stonyfield Farm, Millipore, Seventh Generation, Oakhurst Dairy, The North Face, and Walmart.