Published on: July 16, 2009The New York Times this morning reports that Walmart plans to lay out a plan today that will “encourage” its suppliers to provide information about their products’ social and environmental impact, creating an electronic indexing system that will make a wide variety of sustainability issues accessible to shoppers. The process will begin with the company asking its 100,000 suppliers 15 questions about specific sustainability practices, requesting that the information be sent back by October.
“We have to change how we make and sell products,” Walmart CEO Mike Duke plans to tell employees and suppliers at a meeting later today, according to remarks obtained by the Times. “We have to make consumption itself smarter and sustainable.”
The general consensus seems to be that while Walmart hopes that eventually other retailers will adopt the index, at the moment it is pretty much the only retailer that can create and enforce such standards – and even then it will not be easy, since there will be resistance to developing sustainable production and distribution because of cost concerns, and resistance to putting all that information on an index and could be seen as leveling the playing field among manufacturers.
“The first question is always, ‘It’s going to cost more,’ ” John E. Fleming, Walmart’s chief merchandising officer, tells the Times. “But you know, I think we’ve demonstrated time and time again, if you reduce packaging, if you reduce energy, the costs go down.”
Walmart will not force suppliers to contribute to the index, but has said that those resisting the call will gradually become less relevant to the chain’s ongoing operations.
- KC's View:
- While on the face of it this would seem to be yet another step in the reinvention of Walmart, make no mistake about it – Walmart sees a long-term advantage in creating this index. The company firmly believes that more sustainable products end up reducing costs, and it believes that taking this approach will broaden its appeal to consumers that sometimes are skeptical about the motivations driving the Bentonville Behemoth.
What’s going to be interesting is how all these manufacturers answer the 15 questions. I suspect some of them will find out things about their production processes that they weren’t aware of…which, in the end, is part of the point.
Interestingly, there is a piece in Business Week describing Walmart’s exacting standards when it comes to supplier agreements. These are going to change with the new sustainability index. They are only going to become more so.