Wal-Mart’s “green” push a game-changer

Posted by Daniel Palmer on 23rd July 2009

News of Wal-Mart’s latest sustainability push may have been lost amidst news of swine flu and economic recovery here in Australia, but their decision is likely have a major impact on the food and grocery sector around the world.


For the last couple of years there has been talk of so-called ‘eco-labels’, which would highlight the environmental impact of each product on the grocery shelf. The notion has had its detractors, who point to issues of measurement, testing and cost as reasons to prevent such labels entering the mainstream environment.

But last week’s groundbreaking announcement by the world’s largest retailer will set the ball rolling. For those who missed it, Wal-Mart plans to develop a worldwide sustainable product index that will see an eco-rating placed on all grocery products sold at their stores. The initiative will take up to a decade to complete and will occur in three phases.

First, they plan to survey all their suppliers around the world – no mean feat given they are linked to around 100,000 companies.

The 15 question survey will serve as a tool for Walmart’s suppliers to evaluate their own sustainability efforts. As a second step, the company is helping create a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products – from raw materials to disposal.

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.

Competitive Advantage

Analysts in the US see the move as a great way for the retailer to enhance their environmental credentials and, consequently, separate themselves from their competitors in the years ahead. Some, however, believe it is a little too far ahead of its time and argue that consumers are too focussed on price in the midst of the worst American recession for decades to care about sustainability.

However, market research suggests that people haven’t forgotten about sustainability during the downturn and Wal-Mart is adamant – and rightly so – that the “green” trend is here to stay.

“Customers want products that are more efficient, that last longer and perform better,” Mike Duke, Walmart’s president and CEO, noted. “And increasingly they want information about the entire lifecycle of a product so they can feel good about buying it.”

Heightened consumer expectations were “a permanent part of the future”, he suggested.

Rest assured, the world’s largest retailer is not doing this on a whim in a bid to simply do something different to the competition. They have done their homework and discovered that Generation Y – their future customer base – is likely to be loyal to firms seen to be doing the right thing.

“…There’s a generation that’s coming up behind, and they care deeply about this,” Chief Merchandising Officer John Fleming said on a webcast. “This is the No. 1 issue on college campuses today, regardless of what happens with the economy, because they know this is their future.”

And Marshal Cohen, chief industry analyst at market research firm NPD Group, agrees.

“Wal-Mart is very smart right now in looking at the future,” he told Reuters. “They have to do everything they can from every direction, long and short term, in trying to find a way to sustain the momentum that they’ve been able to build during these challenging times.”

Mr Cohen added that their commitment to eco-labels will enable them to position itself as the leader in the retail space when it comes to the green movement.

“Somebody’s going to do it, and they want to be the first,” he said. “It’s about beating out the competition.”

Worldwide Impact
Wal-Mart’s global influence is among the greatest of any company and, as such, their eco-label scheme could yet see the development of a global standard.

“It is not our goal to create or own this index,” Mr Duke advised. “We want to spur the development of a common database that will allow the consortium to collect and analyse 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.”