Walmart Unveils Sustainability Index

July 21, 2009

First it was radio frequency identification tags, then packaging. Now Wal-Mart Stores Inc. is leading an effort to save the world by creating a public sustainability index for consumer goods.

15 Questions for Suppliers

Energy and Climate
1. Have you measured your corporate greenhouse gas emissions?
2. Are you reporting your greenhouse gas emissions to the Carbon Disclosure Project?
3. What is your total annual greenhouse gas emissions reported in the most recent year measured?
4. Have you set publicly available greenhouse gas reduction targets?

Material Efficiency
1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured.
2. Have you set publicly available solid waste reduction targets?
3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured.
4. Have you set publicly available water use reduction targets?

Natural Resources
1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety?
2. Have you obtained third party certifications for any of the products that you sell to Walmart?

People and Community
1. Do you know the location of 100 percent of the facilities that produce your product(s)?
2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
3. Do you have a process for managing social compliance at the manufacturing level?
4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
5. Do you invest in community development activities in the markets you source from and/or operate within?

The Bentonville, Ark., retailer on July 16 announced plans to develop -- in cooperation with suppliers, universities and other sustainability leaders -- a worldwide sustainable product index that it will use to rank suppliers, much as it has been doing with its Packaging Scorecard.

“Customers want products that are more efficient, that last longer and perform better,” Mike Duke, Walmart’s president and CEO, said in the webcast announcing the effort. “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.

“We do not see this as a trend that will fade. Higher customer expectations are a permanent part of the future,” Duke continued. “At Walmart, we’re working to make sustainability sustainable, so that it’s a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption.”

The company will introduce the initiative in three phases, beginning with a survey of its more than 100,000 suppliers around the world. The survey includes 15 questions that will serve as a tool for Walmart’s suppliers to evaluate their own sustainability efforts. The questions will focus on four areas: energy and climate; material efficiency; natural resources; and people and community.

The company will ask its top tier U.S. suppliers to complete the survey by Oct. 1. Outside the U.S., the company will develop timelines on a country-by-country basis for suppliers to complete the survey.

“The survey will include simple but powerful questions covering familiar territory, such as the location of our suppliers’ factories, along with new areas like water use and solid waste,” said John Fleming, chief merchandising officer for Walmart U.S. “The questions aren’t complicated but we’ve never before systematically asked for this kind of information. The survey is a key first step toward establishing real transparency in our supply chain.”

As a second step, the company is helping to create a consortium of universities – Arizona State University and the University of Arkansas will jointly administer the consortium -- that will collaborate with suppliers, retailers, non-governmental organizations and government to develop a global database of information on the lifecycle of products, from raw materials to disposal. Walmart is providing the initial funding for the Sustainability Index Consortium, and all retailers and suppliers are invited to contribute.

The company will also partner with one or more leading technology companies to create an open platform that will power the index. A key goal, Duke said in the webcast, will be establishing a single source of data for evaluating the sustainability of products.

“It is not our goal to create or own this index,” said Duke. “We want to spur the development of a common database that will allow the consortium to collect and analyze the knowledge of the global supply chain. We think this shared database will generate opportunities to be more innovative and to improve the sustainability of products and processes.”

The final step in developing the index will be to translate the product information into a simple rating for consumers about the sustainability of products – apparently a label on the product. This will provide customers with the transparency into the quality and history of products that they don’t have today, Walmart officials said.

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