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, the Index 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 such "radical 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 for what that behavior should look like.
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.
Good job balancing some skepticism and the excitement that this announcement justifiably evokes. Your last paragraph puts it very well. We can't have a sustainable world w/o a sustainable Wal-Mart, so this is an important and necesary - but not sufficient -step.
Posted by: chris | July 16, 2009 at 10:22 AM
The WSJ described this as a product labeling initiative in which the first step is a preliminary questionnaire (http://bit.ly/5uwm2). I'm no Walmart booster, but by firing a shot across their suppliers' bow with the announcement of an eventual product qualifying and labeling system they're definitely moving the ball forward.
Their decision a decade ago to require suppliers to provide bilingual product information had a huge effect on how suppliers manage product-related collateral.
By the way, Walmart's dropped the dash in their name. Think of all the ink that'll save.
Posted by: Chris Harges | July 16, 2009 at 10:41 AM
What about sustainable living wages and benefits for Wal-Mart employees? What about the destructive effects on the ecosystems of local business where Wal-Mart operates? It's not sustainable to deplete human and social capital. The focus on product sustainability is welcome in its own right, but also appears to serve the purpose of drawing unwelcome attention away from Wal-Mart's own practices and systemic impacts.
Posted by: Halim Dunsky | July 16, 2009 at 10:42 AM
I really enjoyed this informative and balanced post. It's true this is a bold and important step but simply the beginning. I am happy to hear Wal-Mart does not intend to own this and that they have brought Best Buy, Costco, Target, and Kroeger into the conversation.
Posted by: jackie | July 16, 2009 at 10:46 AM
Whilst this is a good starting point, it is beyond me why it takes a large international company with so much dollar collateral such a long time to move to the point of accountability.
What's being proffered here? Walmarts organisational procurement, human rights issues, fair trade, employment rights, land banking?
One of the critical sustainability issues for a retailer, one that immediately can and should be transparent, is accountability for what they sell because unless these are sustainably produced, then it is just all greenwash.
If Walmart really wanted to get things square for the environment and human rights, then it can take a bold step and get rid of all the stuff it lists that damage both.
Posted by: Susie Hewson | July 16, 2009 at 11:11 AM
Nicely done Joel.
Balanced, informative, behind the scenes, optimistic. In this case I think the reality and the hype are pretty well matched. This is a huge turning point in consumerism. Juggernaut Walmart is taking a stand and is pointing a new direction for business. Yes it is a first step, yes it has a lot of room for improvement.
With respect to the labor issues, people need to remember this index set of questions is not owned nor solely created by Walmart, but rather a consortium of sustainability leaders who were looking across both a broad, international, and cross industry perspective. These are much more challenging to qualify and quantify universally.
Thank you Joel for your continued leadership in this space.
Matthew Rochte, LEED AP
Sustainability/CSR Consultant
http://www.OpportunitySustainability.com
http://twitter.com/mrochte
FYI as of 13:20ET your link to the index pdf does not work.
Posted by: Matthew Rochte, Opportunity Sustainability | July 16, 2009 at 11:24 AM
Thanks, Joel.
This is a well-balanced capture of the complex process that is setting up an evaluation process, enrolling input and ideas, then deploying it all in one of the world's largest commercial systems.
I greatly appreciate Walmart's efforts in taking a supporting, validating and leading position in sustainability over these four years or so. Of course there are many other leaders that have come before them. Walmart is standing on the shoulders of individuals and organizations you mention in your post, among many others. Many of whom are far out in front of this latest announcement from Bentonville.
There are, as well, so many other organizations who have a long way to go toward transforming their environmental impact. This next step by Walmart and the many participants in their process will help to bring us all along.
Joe Rinkevich
SciVera, Inc.
http://www.scivera.com
Posted by: Joe Rinkevich | July 16, 2009 at 12:58 PM
Why create another standard that will only be used at one retailer. What about one with broad market appeal, such as JumpGauge Interactive Labeling (http://www.JumpGauge.com/)? Consumers could use it at all retailers, not just Walmart. Interactive labeling also offers greater transparency and knowledge transfer than a simple questionnaire
Posted by: Chris Glennon | July 17, 2009 at 12:40 PM
thanks for this analysis of walmart's efforts -- it's helpful to hear the good and the bad.
what stands out to me is the "iterative process" approach which walmart is taking -- it's unusual for such a large company to tackle such an important issue with a "ready-fire-aim" approach. sure, google has perfected this imperfect m.o., but it's quite a departure for walmart. it certainly leaves them vulnerable to criticism, but if the end goal is getting it right, perhaps this is the best way. i'm eagerly waiting to see how this unfolds...
Posted by: Denise Lee Yohn | July 19, 2009 at 08:33 AM
Thank you, Joel, for a characteristically well-written piece of old-fashioned journalism: balanced and informative. Judging by the excited headlines that greeted Walmart’s announcement I thought I had missed an anniversary moon landing.
Peter T. Knight
Context America, Inc.
Posted by: Peter T. Knight | July 23, 2009 at 09:58 AM
Hi,
If you’re interested CNBC is airing an original documentary, “The NEW Age of Walmart” which premieres Wednesday, September 23 at 9P ET on CNBC. The show will discuss the store’s new green policies with the CEO. Check out the sneak peak here: http://bit.ly/12Tnlw
And for more info:http://bit.ly/l8okr
Thanks so much and good luck with your work.
Posted by: CNBC | September 18, 2009 at 09:08 AM