Wal-mart’s Sustainability Index

In previous posts I’ve written about efforts to develop scorecards and ratings for companies and individual products. These efforts try to quantify the environmental and social costs associated with production so that consumers can make better choices. While several of these initiatives are underway, including GoodGuide and ClimateCounts, none have the clout of Wal-Mart’s Sustainability Index.

While Wal-Mart has raised eyebrows with its sustainability efforts – goal of zero waste or push towards renewable energy – the most interesting and ambitious initiative so far is the Index. The goal is deceptively simple: ask suppliers to fill out a questionnaire about their operations and eventually products and give the information to consumers. Except that Wal-Mart has over 100,000 suppliers across the world, most of whom are more interested in unit costs rather than sustainability.

Wal-Mart is taking it one step at a time. First, phasing in the questionnaire with its U.S. suppliers and then moving on to others geographies. The resulting information will be kept in a centralized database, run by a third party consortium of universities, which will work with other suppliers, retailers and government organizations to expand the effort. The goal is to have a repository of information on the life cycle impact of products. By choosing to give up control of the database Wal-Mart is on a path to creating a competitive-collaborative platform, where competing retailers will work together to share information in order to green their supply chains.

The final piece is to pass this information on to consumers to enable them to make more informed decisions. At this point Wal-Mart has not yet said what this will look like. It could be a number like the one used by GoodGuide or a range such as the scorecard developed by ClimateCounts. The key will be to make the ratings visible and easy to understand so that shoppers can use them at the point of purchase.

Although Wal-Mart’s first step is in the right direction there is still an enormous amount of work to be done. The first iteration of the supplier questionnaire has just 15 questions in four categories. This leaves out a number of important sustainability measures, does not get down to the product level and ignores differences among industries. If the effort is to deliver truly accurate information, much more data will have to be collected – without overburdening already stretched suppliers.

While the Sustainability Index still has a long way to go the sheer fact that the world’s biggest retailer is driving the effort holds much promise. Many questions remain. Will Wal-Mart take the information into account when making its own purchasing decisions? Would the company discontinue a relationship with a supplier based on an index score? Or will Wal-Mart’s cost conscious consumers take into account the sustainability information when making purchasing decisions?