Walmart’s Sustainability Index: The Hype and the Reality

Joelmakower Joel Makower analyzes the release of Walmart's Sustainability Index and its impact on the business community.  Walmart's Index will be another way to create the authenticity and transparency that consumers need when making decisions.  The Index does not rate products or companies though it might grow to that in the future.

Posted July 16, 09
By Joel Makower, Two Steps Forward

Walmart has just unveiled its new Sustainability Index, a project
that's been in the works for more than a year, but which is — finally,
after much anticipation and more than a little handwringing by
industry, activists, and others — part of the public discourse.

The advance stories over the past few days have been amped up to
the point of breathlessness, involving adjectives like "huge" (perhaps)
and "audacious" (probably), with one story suggesting the Index will
"shake the world" (um, no comment). Such hyperbole is understandable:
any green commitment that Walmart makes is potentially a big deal. But
now that reality has hit, it's time to take a more sober assessment of
what's really going on here.

I've been watching the Index unfold over the past year. I've seen
early iterations, talked to some of the many suppliers, nonprofits,
academics, and consultants that Walmart has engaged in this effort, and
viewed the final product.

My assessment: Like so many things related to both Walmart and
sustainability, there is both more and less going on here than meets
the eye.

The story in brief: Walmart's Sustainability Index is geared toward
creating a way to gather sustainability information about companies
and, eventually, products sold in Walmart stores. The Index will result
from a set of 15 questions Walmart is asking of its 60,000 or so
suppliers. (You can download the questions here – PDF.) It has asked for responses by October for its U.S. suppliers, later on for those elsewhere.

The 15 questions are grouped into four buckets: energy and climate,
material efficiency, natural resources, and "people and community."
That last category is particularly clever, as it allows the company to
demonstrate that its concern lies beyond environmental issues to the
broader arena of sustainability, which includes social issues, though
the five questions included in that bucket barely scratch the surface
of this topic. For example, they don't address most worker issues, like
wages, health care, and the right to air grievances, among many other
topics generally included in this arena.

Despite the much-ballyhooed launch, this isn't exactly new. The
company began using a similar set of questions with suppliers about a
year ago for its own private-branded products — so-called house brands
like Sam's Choice and Great Value; the company has around 30 such brands.
It started with dairy products, followed by textiles, which includes
both home furnishings and apparels. Toys and electronics follow. Many
of the manufacturers of those house brands are also major consumer
product brand manufacturers, so this won't be news to many of them.

Despite what the headlines have been saying the past few days, this
isn't a product-rating scheme — at least not yet, and likely not for
several years. For now, Walmart will be using the results of the
15-question survey to assess companies. The questions, as
you'll see, don't get down to the product level. In a second phase, the
company plans to develop more sector-specific questions — say, for
agricultural products or jewelry or electronics. Eventually, the
company hopes that the Index will address individual products. But
that's not currently in the works.

Another key point: Walmart isn't rating, grading, or ranking
companies, let alone products. It hasn't established a set of criteria
or set a bar for performance. This isn't an eco-labeling scheme.
Rather, it is a means for providing transparency about companies,
allowing them and others to compare companies to one another, showing
how each performs. The information will be one of many factors it will
use to assess companies. It may be a tiebreaker, all other factors
(price, quality, availability, etc.) being equal.

Walmart doesn't plan to say which companies are "good" and which
aren't. Its plan is to put the information out there and hope that
transparency foments competition. But that won't ensure that any
company will necessarily be "good." If, for example, all of the
companies in a given sector are doing poorly, but one is doing a little
less poorly, the least-bad one will rise to the top, though it may be
far from a "good" company. Once again, this is clever on Walmart's
part. While it can honestly say it is rewarding good behavior, it isn't
really setting a benchmark.

As for the 15 questions. Well, they're a start. Taken together, they
set a fairly middling bar, the kinds of things that some leadership
companies have been doing for a decade or more. And because they deal
with the company, and not its products, they omit some fairly critical
details. Among them: they don't mention toxic materials used in
manufacturing or in the products themselves. They don't talk about the
energy efficiency of products or their recyclability or other
disposition at the end of their useful lives. One need only compare
Walmart's Index to Nike's Considered Index,
which goes deep into product details, to see how relatively primitive
it is. There are equally good examples from several other companies.

Do such shortcomings render the Walmart Sustainability Index as
greenwash? No. This is a solid first effort. It's important to note
that over the past year, Walmart engaged some 20 universities, a
handful of environmental activist groups, associations like Business
for Social Responsibility, many of its key suppliers, and a small army
of consultants. Patagonia's iconoclastic founder, Yvon Chounaird, has
played a role. It's gone through a great deal of thinking and more than
a few iterations. (You can download a backgrounder on a slightly
earlier iteration of the Index here – PDF, that contained 16 questions.) This was not some slap-dash effort.

Walmart acknowledges the iterative process. Some of its staff have
told me privately, and quite proudly, that this is a "ready-fire-aim"
exercise — that the company wanted to get something out there, however
imperfect, and improve it as it got real-world use. That's admirable,
albeit risky, but that strategy underscores how the company has been
addressing most sustainability issues over the past three years: set a
big goal, rally the best minds (and persuade them to do a tremendous
amount of work at their own expense), make some choices, put it out
there, and refine. Hey, that's pretty much how Google made it big.

Much like Google, this effort will likely head down many innovative
pathways. For example, Walmart already is talking with Microsoft about
creating an open-source database and tools to make information about
companies and products accessible; no doubt, for consumers there will
eventually be an app for that.

And Walmart has made it clear that they don't want to own this. They
want it to live within some credible entity that will continue to
develop and deploy the Index. (The company isn't beyond starting its
own nonprofit if it isn't able to find one that suits its needs.) And
the company is working to bring in other companies — Best Buy, Costco,
Kroger, and Target have been part of the conversation — to adopt the
Index, too, creating even more purchasing power in the marketplace.

It's definitely a bold move, one that stands to raise the bar on
sustainability and transparency, empowering both retailers and
consumers to leverage their buying power to affect change. It stands to
spur innovation in products and processes. And it appears to be around
for the long haul. Walmart has gone well beyond talking the talk here.
It's changing the game. How quickly and dramatically the game really
changes will be something we'll all be watching, very closely.

Joel is co-founder and executive editor of Greener World Media, Inc., which produces GreenBiz.com and its sister sites, ClimateBiz.com, GreenerBuildings.com, GreenerDesign.com, and GreenerComputing.com. Joel is also the principal author of the annual State of Green Business report and the Greener by Design conference, both produced by Greener World Media.

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