Sustainable Product Index: Will Walmart's Initiative Create a New Industry Standard?

On a couple of occasions in this blog, I have discussed how multinational corporations are developing corporate responsibility programs in an effort to become better global citizens and increase value of their products purchased by customers. During a meeting with 1,500 of its suppliers, associates and sustainability leaders on July 16, 2009, Bentonville, Arkansas-based Wal-Mart Stores, Inc. announced a new initiative that will address the sustainability of their products.

According to the company's press release, the worldwide sustainable product index "will establish a single source of data for evaluating the sustainability of products." Speaking at the Sustainability Milestone Meeting, Mike Duke, Walmart's President and Chief Executive Officer, said, "The index will bring about a more transparent supply chain, drive product innovation and, ultimately, provide consumers the information they need to assess the sustainability of products. If we work together, we can create a new retail standard for the 21st century."

Walmart created a fact sheet (PDF) that provides details of the Sustainable Product Index including three reasons for creating the index:

• The world's population is increasing. It is estimated that the global population will reach nine billion by 2050;
• The world’s natural resources are decreasing. Natural resources for everything we grow, eat, drink, make, package, buy, transport and throw away is outpacing the earth's capacity to sustain it; and
• Customers want more efficient, longer lasting, better performing products. They want to know the materials in the product are safe, that it is made well, and the product was produced in a responsible way.

As explained in its press release, "Walmart 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 (PDF) 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 (reducing energy costs and greenhouse gas emissions); material efficiency (reducing waste and enhancing quality); natural resources (producing high quality, responsibly sourced raw materials); and people and community (ensuring responsible and ethical production).

During his presentation at the Sustainability Milestone Meeting, John Fleming, Executive Vice President and Chief Merchandising Officer for Walmart U.S. said, "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. 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, outlined in the company's fact sheet, Walmart "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. Walmart has provided the initial funding for the Sustainability Index Consortium, and invited all retailers and suppliers to contribute. The company will also partner with one or more leading technology companies to create an open platform that will power the index."

The final step consists of creating a tool for customers. This tool will "provide customers with product information in a simple, convenient, easy to understand rating, so they can make choices and consume in a more sustainable way. How that information is delivered to consumers is still undetermined, but could take the form of a numeric score, color code or some other type of label. The sustainability consortium will help determine the scoring process in the coming months and years."

Mr. Fleming also made an excellent statement saying "the merchant of the future will be focused on the entire product life-cycle management." Other retailers should take note of the buying trends that goes beyond price consideration. Customers will consider the raw materials, transportation, and people behind the manufacturing, shipping, distributing and selling of the merchandise.