Despite its best efforts to reduce packaging, and sell compact fluorescent lightbulbs and despite the fact that it has become the world’s largest consumer of organic cotton, few consumers think of Walmart as an environmental company. But last Thursday the company made a move that will have sweeping environmental impact. Walmart announced that it will eco-label every product in its stores, which will push its 100,000 vendors to be both greener and more transparent about their supply chains.
It's a colossal project, as each manufacturer will have to calculate and disclose the full environmental cost of making each product they sell at Walmart. Walmart will then distill that information down into some kind of easy-to-understand label. According to Walmart executives, the eco-rating system will eventually appear next to the price on every product in Walmart stores worldwide. Asked what relationship Walmart will maintain with suppliers that don't supply the data, Chief Merchandising Officer John Fleming said: "We probably don't have one."
The challenge is daunting, even for companies like Patagonia, Timberland, Keen, PMI, GoLite and others that have been working hard to understand and evaluate their impact for years. Timberland launched it’s own nutritional-style eco-label a couple of years ago for footwear. GoLite is launching its own labeling scheme later this year, but even the companies with the most knowledge about their supply chain have holes in their data and little information about individual products. The elephant in the room: how Walmart and its suppliers will verify the data they do collect, as there is currently no third-party verification system. If Walmart posts eco-labels that turn out to be bogus, their good intentions could in fact be damaging. Although Walmart advisers envision spot audits and plans to occasionally dissect products to determine what they contain, they say transparency is what will ultimately curb potential cheating by suppliers. The data Walmart gathers and the labels they create will be open-source—available to anyone from Greenpeace to Costco to Best Buy.
“Customers want products that are more efficient, that last longer and perform better,” said Mike Duke, Walmart’s president and CEO in a press release on Walmart’s website. “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.
“We do not see this as a trend that will fade. Higher customer expectations are a permanent part of the future,” Duke continued. “At Walmart, we’re working to make sustainability sustainable, so that it’s a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption.”
Walmart is starting with a 15-question survey focused on four areas: energy and climate; material efficiency; natural resources, and; people and community. As a second step, the company is helping create a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the life cycle of products--from raw materials to disposal. Walmart has provided the initial funding for the Sustainability Index Consortium, and invited all retailers and suppliers to contribute.
The final step in developing the index will be to translate the product information into a simple rating for consumers about the sustainability of products. Some products could have labels as soon as 2011, but the index won’t likely be in place in any significant way until 2014 or 2015.
"You can design something that is carbon neutral, that does not contribute to climate change, and yet is still detrimental to human health in other ways," said Jay Golden, a professor at Arizona State University who will be co-chairman of a consortium that will help Wal-Mart compile the data and design standards. "So you have to look comprehensively at what sustainability really means, and that is what Wal-Mart is trying to do here in a very big way."
The index will judge products not only by the environmental cost of producing them, but also by the impact over their life span. Company buyers will be judged in part by whether they improve the ratings of the products they purchase from suppliers over time.
"A lot of suppliers are scared, but there is an opportunity here for them," said Michelle Harvey of the Environmental Defense Fund, which has worked with Wal-Mart in the past and is assisting on the project. "I think the most significant improvement will come before the consumer ever sees a score," she said.
Eventually, through product labels, the experiment will test whether consumers pay more for environmentally superior products. Walmart does not believe consumers now are prepared to pay much more, but it believes that will soon change.
Its ultimate goal: Walmart is working to be supplied by 100 percent renewable energy, create zero waste and sell sustainable products, according to a statement on its Sustainability page.