retail news in context, analysis with attitude

Advertising Age has a piece about how Walmart has become a kind of private sector regulator, establishing standards for the products it buys and sells. Among the things that its suppliers have been “asked” to do: “Report their greenhouse gas emissions and establish targets for reducing them, invest in community-development activities where their plants are located and participate in creating an index by which the consumers can judge how sustainable their products are. If they make food products, they're also required to reduce sodium 25%, sugar 10% and all vestiges of industrially produced trans-fatty acids by 100% by 2015.”

According to the story, Walmart “clearly has been out in front of the rest of the industry on many issues. And unlike a government, it isn't bound by constitutional due process that bogs regulations sometimes for years. No Tea Party representatives are trying to withhold funds for its greenhouse-gas reduction plans. And with billions of dollars at business at stake for its biggest customers, Walmart wields a bigger stick than any fines a government can impose.

“To be sure, Walmart notes that its supplier-sustainability assessment, for example, isn't mandatory. Then again, it also notes: ‘We do intend to reward those suppliers who have measured impacts and show progress toward meeting stated reduction goals’.”

And, in some cases, Walmart has gone it alone - even if that has put it at odds with other industry players. The story notes that in coming up with its healthy foods initiative, “Walmart rankled some other members of a Food Marketing Institute committee it has served on, which, along with the Grocery Manufacturers Association, proposed a similar seal in October ... The FMI/GMA seal was set to appear early next year. Walmart plans to get is out by the end of this year.”

In another, related story this week, the New York Times notes that Walmart has banned the flame retardant polybrominated diphenyl ethers because of concerns that it poses “a significant risk to human health” - getting ahead of the federal Environmental Protection Agency (EPA), which is “working with manufacturers and has announced a voluntary phase-out of the most common form of the troublesome chemical that should take effect in several years.”
KC's View:
I think that it is important for companies to try to get ahead of the regulatory wave, to not depend on the government to create standards and mandates. If they do, maybe the government won’t. (Maybe it will anyway, but that’s another story.)

Some will argue that Walmart is making a mistake in being so aggressive in these areas, that it is getting away from the central business proposition that has made it successful. But I actually think that Walmart is playing a long-range game here ... that it understand that the sustainability concerns of the next generation of consumers will be of enormous consequence, and that it needs to be in synch with those shoppers. Plus, it helps the company’s image ... which is no small thing.