Game On: Why Walmart is ranking suppliers on sustainability

Published on GreenBiz.com, April 15,2013

By Mark Gunther

“Since launching its sustainability program in 2006, Walmart has reduced energy consumption in its stores, installed solar panels on its rooftops, curbed emissions from its trucks and recycled millions of tons of its trash. Now that the world’s biggest retailer has streamlined its own operations, it is turning its attention elsewhere – actually, almost everywhere.

Since last fall, Walmart has rolled out what it calls a supplier sustainability index to thousands of suppliers, asking them pointed questions about their operations and prodding them to better understand and manage their own supply chains.

It’s Walmart’s most ambitious environmental project ever, and if all goes according to plan, it will change the way all kinds of consumer products – clothes, toys, electronics, food and beverages – are made. The typical Walmart stocks 125,000 to 150,000 products (!), and the environmental and social performance of most companies that make them soon will be rated and ranked in Bentonville, Ark.

So Walmart is asking lots of questions of its suppliers. Among them:

How can wheat be grown with less water and fertilizer? How can chemicals of concern by removed from toys? What mining practices were used to extract copper, gold and silver for computers or jewelry? What percentage of your televisions sold last year were Energy Star certified? Do the grapes in a bottle of wine come from a farmer with a biodiversity management plan? How much water was needed to produce those polyester pants?

A Fiendishly Complicated Undertaking

If this sounds like a massive and fiendlishly complicated undertaking, well, it is. It has been in the works since 2009, when Walmart unveiled The Sustainability Consortium, a nonprofit coalition led by the University of Arkansas and Arizona State University that was set up to provide scientific research to undergrid the effort. Since then, a few other retailers (Tesco, Kroger, Ahold, Best Buy) and dozens of consumer product brands (Coca-Cola, Disney, Kellogg’s, Mars) have signed on to the consortium.

Working with research produced by the consortium and its scientists, Walmart last year sent questions to suppliers in about 200 product categories. Hundreds more will be surveyed this year. The surveys will cover about half of the products sold in Walmart, which had revenues of $468 billion last year.

Walmart is ranking its suppliers, from best to worst in each category. The rankings will be shared with its buyers, who are known as ‘merchants’; theydecide what gets onto store shelves and play a vital role inside Walmart. The merchants, in turn, will be compensated in part based on the sustainability performance of their category.

Jeff Rice, who as senior director of sustainability at Walmart oversees the index, told me that it had four broad goals:

• To improve the environmental performance of its most popular products.
• To further integrate sustainabiltiy into Walmart by giving responsibility to the merchants.
• To drive a productivity loop that reduce costs and ultimately benefits customers.
• To increase customer trust in Walmart and its brands.

As always with Walmart, the opportunity is to drive change at scale. ‘We’re really trying to accelerate the scale of sustainability innovation, not just identify green niche products,’ Rice said.

Will it have an impact? It’s too early to answer that question with any certainty.

Several Walmart suppliers who were willing to talk – any many were not – told me that the index will help build a stronger business case for their own sustainabiltiy efforts. ‘The index challenges us to continually improve,’ said Kim Marotta, chief sustainability officer at Miller Coors, which is working with the farmers who grow its barley to reduce their use of water and pesticides. It also helps her make the case inside the company that ‘sustainability is very important to our business,’ she told me.

Dave Stangis, vice president of corporate responsibility at Campbell’s Soup, believes the index will make a difference. ‘The index validates people who are doing the good work. It’s a wakeup call to others,’ he said. Campbell’s, he said, is working with The Sustainability Consortiium to develop a mapping tool that will help buyers of agricultural commodities such as soybeans, sweet potatoes, or sugar beets avoid purchasing them from places with water risk, or where biodiversity is threatened. ‘We’re trying to be cognizant of the priorities that Walmart has, as well as those of our other customers,’ he said.”

To read more from companies that don’t think it makes a difference, the rest of the article is available HERE.