Wal-Mart President and CEO Mike Duke announcing the new Sustainability Index in July

Wal-Mart President and CEO Mike Duke announcing the new Sustainability Index in July

Two weeks ago, the U.S. super-giant Wal-Mart announced plans to develop a worldwide sustainable product index that will record the ecological impact of every product the retailer carries. The sustainability of a product’s history will then be translated onto a label which the customer can see as they make their purchasing decisions. This sustainability index would be the first of its kind utilized at such a large scale and the retailer hopes that the index will become a new international retail standard.

“Customers want products that are more efficient, that last longer and perform better. And increasingly they want information about the entire lifecycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way” says Mike Duke, Wal-Mart’s president and CEO.

Wal-Mart plans to roll out the initiative in three phases, starting with a survey of its more than 100,000 worldwide suppliers. This survey is composed of 15 questions (Wal-Mart questions (PDF)) and covers four areas: material efficiency; energy and climate; people and community; and natural resources. The survey includes questions about greenhouse gas emissions, the location of factories, water use and solid waste produced. Suppliers will use this survey in order to evaluate their own sustainability efforts, allowing for better transparency along its supply chain. U.S. suppliers are asked to complete the survey by October 1st and outside of the United States, timelines for suppliers will be created on a country-by-country basis.

In its second phase, Wal-Mart is helping develop a consortium of universities that will work together with retailers, suppliers, NGOs and governments to create a worldwide database of information about the lifecycle of products. So far, Arizona State University and the University of Arkansas have signed on to help administer the consortium and additional universities are in talks to join in, as well.

In its third and final phase, the consortium will develop an index which will translate the sustainability information of each product into a rating system that will allow customers to better understand the quality and history of the products that they are purchasing from its raw materials into the final product disposal. The format in which the information will be delivered to consumers is still under consideration but may come in the form of a color code, numeric score or other form of label.

So how does Wal-Mart’s announcement impact consumers who are not, as of yet, Wal-Mart customers?

Sustainability labels on products may lead to a shift in shopping habits similar to the effect of nutritional information provided on food products. Consumer surveys have shown for years that only a small segment of shoppers make their purchases based on values. However, many more shoppers would value shop if no additional effort was needed to gain such information and the prices remained comparable. As sustainability information for a product becomes readily available, suppliers will then have to alter their behavior in order to remain competitive with this segment of consumers or risk hurting their bottom line.

Furthermore, in an effort to broaden the number of participants and encourage universal transparency along its supply chain, Wal-Mart has implied that any of its suppliers who chooses not to take part in the new Sustainability Index initiative will become “less relevant” to the retailer. As the superstore pressures its 100,000 suppliers to adhere to the new standards, other discount retailers such as Big W, Target, and Kmart will likely follow suit.

While Wal-Mart is providing seed capital for the funding of the consortium, the database and index will neither be Wal-Mart created nor owned. This is important because the initiative can have greater global reach if it can be taken on as a new standard, requiring industry-wide collaboration and acceptance. According to Duke, “We can’t do this without partners. This cannot and should not be a Wal-Mart effort. It can’t be a U.S. effort. To succeed, the Index has to be global. It has to involve many stakeholders as vital partners.”

Unfortunately for those of us who are eager to see these labels on our products and, more importantly, see companies shift to more sustainable business practices, the new labeling system is not expected to be fully in place for another five years. And, the fact that Wal-Mart is a Goliath that almost breeds consumption and waste, the oxymoron of turning to Wal-Mart for the answer certainly won’t be lost on the more environmentally-minded consumer. However, despite the fact that there are no overnight miracles for making the market place more eco-friendly, it looks as though, with patience, the new Wal-Mart sustainability index has the potential to turn green into gold.

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