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Attention Wal-Mart Suppliers: Get Green

September 27th, 2007 · by Tim Minahan · 2 Comments · enviro/social sustainability, supply management

After making commitments to reduce energy consumption, packaging, and waste within its own operations, mega-retailer Wal-Mart this week announced plans to green its supply chain. Following in the footsteps of other multinationals — such as Hewlett-Packard and Airbus – that are using environmental and social responsibility as part of their supplier selection and performance measures, Wal-Mart is now looking for suppliers to produce more environmentally responsible products. The initiative, while only in the pilot stage, could have dramatic implications for manufacturing, product engineering, and supply management strategies across multiple industry sectors.

Wal-Mart says it will begin measuring the energy and resource consumption of about 30 of its key suppliers, including CPG giants, Procter & Gamble, Unilever, and Dial Corporation. The nation’s largest retailer will also encourage suppliers to use more environmentally friendly and sustainable materials and manufacturing methods.

Company officials stopped short of saying that Wal-Mart will use these eco-audits to select suppliers. However, other commitments by the retailer suggest that this is a forgone conclusion.

As reported here earlier this year, Wal-Mart has committed to cutting packaging waste at its stores by 25% within three years. The retailer also vowed to double the fuel efficiency of its truck fleet within 10 years and eventually operate entirely on renewable energy. More recently, Wal-Mart agreed to participate in the Carbon Disclosure Project, an investor group that is pushing greenhouse-gas emissions disclosures on the basis that they have a tangible impact on a company’s financial performance. Such measures would require Wal-Mart reduce the carbon footprint of its supplier operations as well as its own.

The impact of Wal-Mart’s green plans are already visible in the market and on its store shelves. Earlier this year, Wal-Mart worked with suppliers of its private-lable toys to eliminate excessive packaging. The retailer found that each year these actions save $2.4 million in shipping costs, 3,800 trees, and one million barrels of oil.

Wal-Mart, which sells 25% of liquid laundry detergent in the U.S., also used its muscle to encourage CPG giants Procter & Gamble and Unilever to replace bulky plastic jugs with concentrated versions of all its liquid laundry detergents. Concentrated detergent saves on water. The smaller package saves on cardboard and plastic packaging, energy, shipping costs, and shelf space. This week, Wal-Mart, announced plans to extend this strategy to all its detergent vendors.

In the end, Wal-Mart views these moves as money savers for customers, its own operations, and its suppliers. In making the announcement this week, Wal-Mart CEO Lee Scott said, “We simply don’t want our customers to have to choose between a product they can afford and an environmentally friendly product.”

The implication to the broader business community is vast. If history is any indication, Wal-Mart’s sustainability strategy will likely spur (dare I say, force?) other companies — particularly those in the consumer goods and food and beverage sectors — to develop, manufacture, and source in a more environmentally and socially responsible manner.

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2 responses so far ↓

  • 1 Supply Excellence » Wal-Mart Eco Plans Sparks Supplier Revolt // Oct 4, 2007 at 1:23 pm

    [...] As profiled here, the retailer last week announced plans to extend its environmentally responsible business practices to its supply chain. The pilot program, which encourages suppliers to lower power consumption and waste and produce more environmentally responsible products, received kudos from environmental groups and a boost of confidence from investors. Yet, lobbyists representing Wal-Mart suppliers claim the program runs afoul of corporate ethics. (How’s that for irony?) [...]

  • 2 Supply Excellence » Supply Management Success Strategies for 2008 // Jan 3, 2008 at 12:18 pm

    [...] Embrace sustainable supply strategies: Last year I predicted that 2007 would be the year that environmentally and socially responsible supply strategies go mainstream. And many of you didn’t believe me. Well, moves by Hewlett-Packard, Wal-Mart, Sun Microsystems, and others clearly indicates that the sustainability movement has already begun. This year, tighter environmental regulations from China and the U.S. (coupled with the need to offset supply price increases and risks) will drive most of you to employ sustainable supply strategies. The smarter in the bunch will find ways to leverage these approaches to lower supply costs, secure supply, and drive greater sales and profits. [...]

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