Wal-Mart's plans to develop a "green" label for products sold in its stores could become a headache for many supply chain managers —and not just for those in the retail industry. The final implications of the initiative have the potential to reach beyond the superstore and its partners.
In case you missed it, this past July, Wal-Mart Stores Inc. announced that it would require its suppliers to provide information about their environmental practices. The retailer's eventual goal is to develop a new sustainability index, which would provide the basis for a label informing consumers about a product's environmental impact.
As a first step toward the development of this index, the retailer will survey all of its 100,000 suppliers worldwide. The 15-question survey asks whether a supplier measures its greenhouse gas emissions, solid waste generation, and water usage, and whether it has established reduction targets in those three areas.
The data gathered from those surveys will be used to develop labels for products sold in Wal-Mart's stores. The company is funding a consortium of universities that will work with the retailer, its suppliers, and governments to develop the label content and design. Chief Executive Officer Michael Duke has said he expects the index to be completed in five years.
Wal-Mart's labeling scheme is not without precedent. Two years ago, the U.K. government launched an initiative to create a label that would show consumers the amount of greenhouse gases expended in bringing a product to the store shelf. But Wal-Mart's plan, with its emphasis on air, solid waste, and water, go far beyond those in the United Kingdom and Europe, which have focused strictly on carbon dioxide.
As has so often been the case in its history, Wal-Mart is being a pioneer. The retailer no doubt assumes that at some point, governments around the world will mandate that companies generate less waste, water, and greenhouse gases in their supply chains. When they do, they will need a means of measuring those reductions. Because of its early adoption of an environmental labeling regime, Wal-Mart would be in a position to benefit by offering its model for promoting sustainability to governments for their consideration and possible adoption.
That would, of course, give Wal-Mart a big advantage, as it would already have implemented the standard throughout its supply chain. In effect, a de facto private- industry label standard would become a de jure standard for the public and industry.
When most governments develop regulations, public hearings are required to give all affected parties a voice in the proceedings. I'm not advocating in any way that any government should get involved at this point. Industry or professional groups, however, do need to step forward and get involved right away. We must ensure that sustainability metrics and pollution-reduction targets affecting the supply chain make sense for all companies—including Wal-Mart.