Walmart and its Sustainability Index

January 19, 2010 - 10:51

Consumers look at food’s packaging to find its calorie, protein, fiber and cholesterol content. Then they weigh that information with the price and decide which products to purchase. Walmart envisions consumers looking at a product’s sustainability index rating in and weigh that with price to decide what to purchase in a similar way.

An important part of Walmart’s efforts is giving consumers an easy-to-understand, uniform system for judging a product’s worth in terms of sustainability. At this point you may be thinking, “But consumers don’t know what sustainability means!” Which is true. But another important part of Walmart’s program is educating the consumer. The compact fluorescent light bulb phenomenon is testament to how Walmart can affect consumers.

What’s the Motivation?

Walmart does not seem to be hiding much about their plans or motives for this effort. There is a great deal of information on their website, www.walmartstores.com/sustainability, with several specific product examples they’ve already worked on. They have also been open in different public forums; Walmart’s management seems to think that they’re responsible — because of their position as the world’s largest retailer — for spearheading changes needed for long-term environmental protection.

A second motivation should be no surprise: Reducing a product’s impact on the environment will also reduce its cost. Another motivation, which hasn’t come out in press releases or on the website — but has been discussed in other forums — is that this is an offensive move against their competition. The whole sustainability effort and publicity campaign enhances Walmart’s image with the consumer, which has been an issue. The effort also keeps the marketplace dynamic and makes it more difficult for the competition to keep up or take an advantage of a Walmart weakness.

How Will it Work?

There are three steps in Walmart’s sustainability index initiative:

Perform supplier assessments. Initially, this is a 15-question survey Walmart is asking suppliers to complete. Representatives have stated that suppliers’ cooperation and their sustainability performance will be judged along with that of the individual products. They are also placing expectations on suppliers to develop the ideas, production changes and particular products that support Walmart’s efforts to have a more sustainable product line.

Create a life cycle analysis database. Walmart started a sustainability consortium to develop this database. The consortium is led by groups at Arizona State University and the University of Arkansas. There are several other companies supporting this activity as well; the consortium is an open scientific process not controlled by Walmart, which is an important quality.

Develop a simple tool for customers. Walmart has indicated that they do not know the final form this will take. But a simple system for consumers will greatly reduce the ability of competing companies or products to make unsubstantiated or frivolous claims of sustainability, cutting down on greenwashing.

Walmart representatives emphasize that they will not own the Sustainability Index; they invite other retailers to participate in the development of the program. Whether other retailers participate in the development may not be too important. Walmart plans to promote the index so heavily that other retailers may be forced to adopt it. If you are a Walmart supplier, this program obviously will affect you. If Walmart can force other retailers to adopt the system — and that’s a strong possibility — then suppliers to all major retailers will eventually participate.

Staying Transparent

Environmental claims must stand up to public scrutiny. Using the university-led consortium protects Walmart from claims that the system is not scientifically based and designed only to support their current efforts. The consortium is also critical to protecting them against claims of greenwashing. Walmart will require suppliers to make information on their products and sustainability actions and claims publicly available on a simple web site. Walmart has explored this idea with a few major suppliers and knows companies can do this without giving away product secrets. This will allow Walmart to claim to critics that all the information is available, and put significant pressure on suppliers not to cheat.

SIDEBAR

Evaluating a Life Cycle

A critical component of Walmart’s sustainability index is the life cycle assessment. For suppliers, LCA and how Walmart will use it puts the onus on them to understand the environmental impact of their inputs.

The LCA idea started to emerge before Walmart got involved. Research in this area generally indicates that most products’ greatest environmental impacts are at the beginning and end of their life cycle. That is, during production and when used or disposed of by consumers. The developing model for most products is that there is greater potential efficiency and reduced environmental impacts in a centralized production system rather than a decentralized (locally produced) system. The Walmart folks are smart; they have done enough preliminary work to know that when the sustainability index is finished, it will support their business operation plan.

A problem that will develop is that the centralized production system will be criticized by those who are proponents of the locally produced concept. Walmart and other retailers will probably attempt to play both sides of this fence: They’ll use centralized production for most products but play up the alternative sustainability of the few that are sourced locally.

Expand Your Knowledge

To find out more about these sustainability initiatives, go to the web.

Walmart’s Sustainability HQ: www.walmartstores.com/sustainability

Sustainability Consortium (Arizona State University and University of Arkansas): www.sustainability consortium.org

Life Cycle Assessment (EPA): www.epa.gov/nrmrl/lcaccess

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