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Barbara Farfan

U.S. Green Retailing Update: Will Wal-Mart Profit From High Supply Chain Standards While Its Own Environmental Standards Are Low?

By July 20, 2009

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The U.S. retail industry and the world was buzzing last week after Wal-Mart staged a high profile meeting with its suppliers and employees, where it revealed plans to create a universal sustainability rating system for products sold in Wal-Mart stores worldwide. A standardized index to rate products on environmental and social impact, and a labeling system that reveals those sustainability ratings to consumers will hold its supply chain accountable to high environmental standards. Green retailing will be more than just a concept.

The idea was called ambitious and admirable by some, audacious and arrogant by others. The word that comes to my mind is "curious."

One of the first steps in this major green initiative is for suppliers of Wal-mart products to answer a 15-question survey pertaining to energy, waste, natural resources, and ethical production. I'm curious how Wal-Mart corporation itself would answer its own question #2 which asks "Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)?"

Back in 2007 Wal-Mart announced that it was partnering with the CDP to measure the energy efficiency of its supply chain. "This is an important first step toward reaching our goal of removing non-renewable energy from the products Wal-Mart sells,” the company's chief merchandising officer was quoted as saying at that time.

What about removing the non-renewable energy from its own operations? Wal-Mart is still ranked #15 on the EPA's Green Power Purchasers list, well behind much smaller chains like Kohl's and Whole Foods. So while Wal-Mart itself has not reduced its own corporate greenhouse gas emissions nearly as much as it could have, the company is intent on making sure that its suppliers do that very thing. That seems like a curious double standard.

Wal-Mart has 4,100 buildings in the U.S. None of them have received LEED certification from the U.S. Green Building Council yet. Also, in the past two years, 22 global retailers have been recognized by the Association for Retail Environments for their green interior and exterior design. Wal-Mart is not on that list either. The energy consumption and natural resource practices of its suppliers are going to be scrutinized and held to high standards. Wal-Mart's standards for its own operations, however, seem curiously low.

I'm curious about who is going to take responsibility for verification of all this supplier-supplied data. I'm also curious how many suppliers will fudge the facts if there isn't a stringent global governance infrastructure in place.

By spearheading this retail sustainability effort, Wal-Mart has taken on a role that normally would be played by a government-controlled entity. Since Wal-Mart's $410 billion sales in 2008 were larger than the gross domestic product of 39 countries of the world, in a fiscal sense, the company qualifies as its own country. So, now Wal-Mart is a self-appointed governing entity for the world's supply chain. I'm curious if having a private enterprise in that position is disconcerting to anybody but me.

One of the statements made by Wal-Mart CEO Mike Duke last week was also very curious... more...


July 20, 2009 at 9:07 am
(1) Neal H. Levin says:

Excellent and fair analysis, Barbara. While I don’t fault any enterprise for making large profits while being both environmentally and socially responsible, Wal-Mart has been slow to be either, except where forcing suppliers to do so for them. Recall the RFID debacle, which I recall having put many suppliers out of business.

Also, though I do not agree that a behemoth like Wal-Mart should not be the uber-cop of what is and what isn’t sustainable, I too am curious as to what “standard” they will apply and whether they are ready to be truly honest about some of their top selling products. Moreover, I can’t fathom why it would take up to 5 years to come up with a “standard” when there are more than ample jumping-off points presently. To gather those and agree on what is and what is not “responsible” should not take that long. Perhaps Wal-Mart simply needs that amount of time to sweep it’s own floors.

Curious indeed, though it’s a time of great opportunity for both Wal-Mart and its suppliers if the commitment is truly as they say.

July 20, 2009 at 8:45 pm
(2) T. Mullen says:

This seems to me to be a case of Big Brother acting like Big Father. Way too much “do as I say and not as I do”.

It’s easy for Wal-Mart to ask suppliers to change, but as you have noted, they are slow to change anything that might affect their bottom line.

I agree that this is driven by Wal-Mart and not its customers. Green alternatives are available in most categories and while sales are growing, Seventh Generation is still lagging behind P&G in terms of market share.

My big fear is that major suppliers will use this to “Green-Wash” their products by claiming changes that are not really good for the environment or the customers who use them.

As always, you have to keep one eye on Wal-Mart no matter what they say.

July 21, 2009 at 10:12 am
(3) John says:

If it is not profitable, provide a ustainable ROI, then by definition an action is not sustainable. So with its 4,100 stores, and 1.5 million employees, and razor-thin margins, is it really surprising or hypocritical for the Queen Mary of retailers to be unable to turn her ship on a dime?

August 6, 2009 at 6:57 am
(4) Amit says:

Well Retail insutry is directly related to the buying habit and purchasing power of every common person. Hence the big bosses has to think very carefully in order to make themselves confortable in the market specially at this the most negative part of the decade.

January 2, 2012 at 8:39 pm
(5) Cora Lanphere says:

I created the Sustainability Index idea while in graduate school at the University of Arkansas, Fayetteville during the Fall of 2007. At that time I was teaching American National Government and was about to enter my fifth and final semester of my M.P.A. program. About a week after I gave an hour long public presentation of my Sustainability Index (which included the opinion that it could not be implemented without the support of a large chain like Wal-Mart) my class was closed for the next semester without a single word said to me. I begged for a reason why and was never given one. I was so depressed to lose my class that I dropped out, only to realize two years later what had happened when Wal-Mart came out with this as if it were their idea. At this time it was 2009 and I was working at the UA library, never having finished grad school. My HR Head advised me to contact the professor that got credit for the index, which I did to ask him how he came to the idea. This, as it turned out, was considered harassment and I lost a second job.

So now a once promising youngish person is unemployed, maybe forever since library skills are considered obsolete after two years not working. So I would say that Wal-Mart’s chances of being sustainable in any way are close to nil considering how they treated the source of “their” idea, much less how they are going to “implement” it, if ever.

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