Wal-Mart’s Green Mandate

On July 16, Wal-Mart Stores Inc. announced plans to develop a sustainable product index based on supply chain data collected from its worldwide suppliers. The announcement was made at a meeting with 1,500 Wal-Mart suppliers and associates at the retail giant’s headquarters.

“Society’s expectations of retail are changing in three fundamental ways,” said Mike Duke, Wal-Mart’s president and CEO. “First, the economic crisis is leading consumers toward a new normal, where they not only want to save money; they are getting smarter about saving money. Second, in this age of social networks and instant information, consumers increasingly expect more transparency on the products they buy. Today, there is no trust without transparency.

“There’s a third, longer-term shift,” continued Duke. “We’re living in a world of increasing population and decreasing natural resources: 6.7 billion people now live on this planet. Every second, four new human beings are born, and the global population is expected to reach more than 9 billion by 2050.”

These fundamental changes are driving the need for a rating system consumers can use to evaluate the sustainability of the products they purchase, Duke said. “Customers want products that are more efficient, that last longer and perform better,” he added. “And, increasingly, they want information about the entire lifecycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way.”

The five-year process will begin with a worldwide survey of Wal-Mart suppliers. The survey asks 15 questions about each supplier’s goals to reduce energy costs and greenhouse gas emissions, cut waste, enhance quality, responsibly source raw resources and produce products responsibly and ethically.

“The survey is a key first step toward establishing real transparency in our supply chain,” remarked John Fleming, chief merchandising officer at Wal-Mart.

“Like our customers, we now expect more of ourselves and our more than 100,000 suppliers around the world,” Duke added.

As the second step, Wal-Mart will create a Sustainability Index Consortium—a group of universities that will develop a global database of information on the lifecycle of products— from raw materials to disposal. Wal-Mart has provided initial funding for the consortium, which will be jointly administered by Arizona State University and the University of Arkansas. The retailer will also partner with one or more technology companies to create an open platform that will power the index.

“It is not our goal to create or own this index,” said Duke. “We want to spur the development of a common database that will allow the consortium to collect and analyze the knowledge of the global supply chain. We think this shared database will generate opportunities to be more innovative and to improve the sustainability of products and processes.”

The final step in developing the index will be to translate the information into a rating consumers can use to evaluate the sustainability of products. How the rating will appear on products has yet to be determined, but Wal-Mart said it could be a numeric score, color code or some other type of label.