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Wal-Mart Stores Inc. said today that it will require its suppliers to provide information about the environmental impact of their products and distill the data into sustainability ratings, akin to nutritional labels on food.
Wal-Mart is asking its top-tier suppliers to reply by Oct. 1 to 15 uniform questions that measure greenhouse gas emissions, solid waste production, water consumption and production ethics. The sustainability index will create a more transparent supply chain and drive product innovation, CEO Mike Duke told 1,500 employees and suppliers gathered at the company's Bentonville, Ark., headquarters today.
"We will help create a new retail standard for the 21st century -- there is no question about it," Duke promised.
For the index to be useful for customers, Duke said his company cannot act alone. Wal-Mart plans to create a consortium of universities that will collaborate with suppliers, retailers, nongovernmental organizations and governments to develop a global database of product lifecycle information -- from raw materials to disposal. Wal-Mart also plans to partner with one or more technology companies to create an open-source platform for the index.
"We see this as universal," Duke explained. "This approach would be used with all suppliers, all retailers, in all countries."
Wal-Mart's sheer size could help it push reluctant retail competitors to follow suit, said Wally Hopp, a professor who studies manufacturing and operations science at the University of Michigan's Ross School of Business. The world's largest retailer (NYSE: WAL) has more than 7,000 stores in 14 countries and more than 100,000 suppliers.
"It will have a ripple effect," he said. "When the big guy on the block does this, it makes everyone else nervous."
Wal-Mart recently conducted daylong training with some of its suppliers about the sustainability reporting initiative. Deb Rigling Gallagher, an assistant professor at Duke University's Nicholas School of the Environment, said she spoke yesterday with one of the companies -- a small business that supplies food to Wal-Mart.
"They felt the training was really useful, but they weren't sure they'd have the capacity to meet the requirements," added Gallagher, who runs the school's corporate environmental leadership program. "With small businesses, it's a matter of resources."
Wal-Mart's larger suppliers of organic food and clothing, she predicted, would have an easier time measuring their environmental footprint than suppliers of conventional goods.
Wal-Mart should pair its sustainability labeling with a broader educational component -- perhaps in-store pamphlets that provide information about consumer impacts on climate change and natural resources -- suggested the University of Michigan's Hopp.
"What Wal-Mart has going for it is a lot of foot traffic," Hopp added.
But even then, Hopp is still not convinced that providing customers more information would change what they buy or where.
"Will a customer be so off-put by the carbon footprint of an item at Wal-Mart that they'll go and buy it at Kroger instead?" he asked rhetorically. "Predicting the behavior of American consumers is what keeps us in business schools in business."
Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500
