Greening Wal-Mart’s Supply Chains

While the new year is inspiring individuals and businesses to think about going green, some corporate giants have already made green resolutions and are delivering the goods.

One driving force behind this shift toward sustainability may come as a surprise to shoppers: Wal-Mart. The retail colossus, long criticized for using its heft to obstruct workers’ access to unionization, adequate health care and better wages, and to push big box stores into communities, wiping out small businesses, is now using its clout to send sustainable ripples all the way down its supply chains.

At the heart of its effort is a scorecard that will eventually measure the environmental and social impact of each item on store shelves.

In 2005, Lee Scott, Wal-Mart’s former CEO, laid out the company’s environmental goals: to produce zero waste, to be supplied by 100 percent renewable energy, and to sell sustainable products.

Towards these ends, Wal-Mart launched its global Sustainability Index initiative last July to create more transparent supply chains, promote product innovation and provide customers with information about the sustainability of products. The initiative involves three stages: supplier assessment, a life cycle analysis database, and the creation of a tool for customers.

Supplier Assessment

In the first phase, Wal-Mart is surveying its approximately 100,000 global suppliers with 15 questions focused on energy and climate, material efficiency, natural resources, and people and communities.

This summer, U.S. suppliers for Wal-Mart and Sam’s Club were sent surveys asking if they had measured their greenhouse gas emissions, what their emissions levels were, if they had reported them to the Carbon Disclosure Project (the largest database of corporate climate change information), and if they had set goals for emissions reduction. The survey questioned them about their waste and water use, and reduction targets for both, and about addressing environmental compliance and product safety with their direct suppliers. Finally it asked if suppliers could ensure that facilities making their products were in compliance with local laws concerning working conditions.

Suppliers will see how they compare to other suppliers in their category and are rated “above,” “on” or “below” target. Wal-Mart will use the surveys to “identify leadership” and, within the next two years, intends to reward suppliers who are measuring their environmental impacts and making progress towards meeting sustainability goals.

“If a supplier chooses not to participate, they will simply be considered not a leader and their scores will reflect that in the future,” said Rand Waddoups, Wal-Mart's senior director for sustainability.

But with so much business at stake, what supplier wouldn’t move quickly to comply with Wal-Mart’s drive for sustainability?

Almost all the top-tier suppliers returned their surveys by Oct. 1 and are currently working with Wal-Mart to engage other suppliers and eventually other retailers.

The 15-question sustainability survey focuses on a supplier’s business as a whole. It isn’t perfect: The responses are accepted in good faith, and since the survey doesn’t examine actual products, it doesn’t take into account toxic materials or the amount of water used in creating specific products, or the safety, energy efficiency and recyclability of products. Suppliers will soon be asked to provide additional information about their products, however.

Life Cycle Analysis Database

In creating the Sustainability Index, Wal-Mart joined with universities, suppliers, retailers, NGOs and government officials to form the Sustainability Consortium (SC).

The SC is headed by Jay Golden, assistant professor on the Sustainability-Barrett Honors College faculty at Arizona State University, and Jon Johnson from the Sam M. Walton College of Business at the University of Arkansas.