Wal-Mart Green Vision Index: Supplier beware or supplier prepare?

the Sustainability Index unpacked by Roberto Michel

http://www.mbtmag.com/blog/Operation_Green/22491-Walmart_s_green_index_vision_supplier_beware_or_supplier_prepare_.php


Roberto Michel
Walmart's green index vision: supplier beware, or supplier prepare?
August 28, 2009

As I wrote about earlier this week, Walmart and a consortium of academic sustainability experts and others are working on a green product index. While my request for an interview with Walmart hasn’t panned out, their video presentations from the July announcement around the green product index point to an ambitious vision for how this index could be used.

In one particular presentation, John Fleming, Walmart’s Chief Merchandising Officer, talks about the Sustainability Index and how an index tag might one day be used in a retail setting. With a smart phone app, says Fleming, a consumer could point a smart phone to a green product tag on a pair of jeans and see information about the cotton that went into those jeans and the mileage consumed to get the product into the store, and maybe even a picture of the cotton farmer. While Fleming says it might take years to evolve to this level of eco-merchandising, he adds that “it’s really not that far off.” Just having eco-labels, he says (not the smart phone part) might be only five years off, and certainly will happen within 10 years, Fleming states.

The video is worth a look for some understanding of Walmart’s vision on eco-labeling. They seem serious about it, and as Fleming points out, already have racked up green successes such as moving the laundry detergent market to more concentrated formulas and compact packaging, and its suppliers of flat-panel TVs to sets with 30 percent higher efficiency.

Part of Fleming’s talk is about the importance of being able to appeal to the next generation of consumers, but for sure, green product indexing is important for suppliers too. While nothing is set in stone yet with the index initiative, if the vision extends to being able to see where raw materials came from for goods on a particular store shelf, or to track product “mileage” for those goods, that tends to raise the bar for the level of materials tracking data that suppliers are able to make available.

In a column for the Ross Thought in Action publication from the University of Michigan’s Ross School of Business, Professor Tom Lyon, director of the Frederick A. and Barbara M. Erb Institute for Global Sustainable Enterprise at the school, notes that Walmart’s potential move into eco-labeling would impact suppliers. “They’re going to have to put in place much better tracking systems, and they’ll need really good IT systems,” he writes. “I think this puts additional pressure on the small guys. The game really moves more and more to the large-scale suppliers that can afford the fixed cost of putting in a good product-tracking system. This approach will increase costs for the suppliers in the short term. It’s conceivable there will be some economies of scale for the suppliers, especially if they have their own suppliers further upstream. That way large suppliers can use the same kind of energy-efficient, materials-reduction strategies that Walmart wants to use.”

I couldn’t agree more that the development of green index labels puts the onus on suppliers to have even better traceability systems. I also agree there are potential benefits to suppliers, not only for their own green goals like reducing emissions from their upstream supply activities, but also from being able to precisely correlate raw materials sourcing to manufacturing metrics like scrap or rework on specific production orders. Of course, better traceability has long been needed for product safety reasons like food recalls. Green is another reason to prepare for, and not just beware of, an era of very high expectations for materials traceability.