What Wal-Mart's Sustainability Index is ... and isn't

Date: 21 Jul 2009

Wal-Mart has released details of its Sustainability Index - its tool to engage its suppliers on key steps it is taking towards sustainability.

In advance of the launch, there was excited speculation that the Index would provide a rating system for the many thousands of products carried by Wal-Mart's stores. It doesn't.

What it does is very simple. It asks suppliers to respond to 15 key questions. The questions cover the suppliers themselves, not individual products, and range across energy and climate, material efficiency, natural resources and people and community.

They are straightforward questions. For instance, do you measure your greenhouse gas emissions? Do you set targets for reduction?

Just a bit of greenwash then.

Hardly. First of all, simple can be good. What you lose in the satisfaction of having comprehensively covered every issue under the sun you gain tenfold in clarity over your priorities.

The very reason for that excited chatter hasn't gone away. What Wal-Mart does creates waves because of its enormous position of influence in the world marketplace. When it decided that it wouldn't carry washing powders that weren't compacted, all the Unilevers and P&Gs had to come up with the goods. However big you are, you jump if you want to sell through Wal-Mart.

So here the company is sending out a clear message. It starts simple. It starts light touch.

You will not be delisted as a Wal-Mart supplier if you don't do well on the Index. The company is happy to know that the discomfort felt by the mere fact of not doing well - the implied threat of that scenario - will be enough to prompt a lot of proactive momentum to improve.

And that was always the prize.

When Tesco talked about introducing carbon labels for its products, people there agreed with me privately that such labels would not drive huge shifts in consumer behaviour. Instead, they said, the impact would be felt in the supply chain.

When nutrition labelling came in, suppliers began voluntarily to change the composition of their products. Why? Because as soon as the information was public, the direction of required travel was obvious. It didn't need to be spelled out.

Tesco very much assumed that carbon labelling would achieve a similar effect.

The problem is that drawing up a carbon profile of all products is quite an involved and complicated process. It is easier for Wal-Mart to begin its engagement at the company level.

The process is the same. Without requiring good performance, without even requiring participation, the implied direction of travel is nevertheless obvious.

That is why whilst nobody should hail the move as a revolutionary leap forward neither should they denounce it as lacking impact or serious intent. It is a start. That is all the company claims for it.

And it didn't just retreat into a smoke-filled room (wherever those are legal these days) to come up with the Index. Wal-Mart consulted with a range of academics, organisations such as Business for Social Responsibility, consultants, you name it.

Clearly, the benefit of a number of eyes was sought for the project. It needs to carry the credibility of external buy-in, not just the muscle of the company with its own suppliers. This reflects the company's stated wish that the Index will not stay with Wal-Mart, but will be taken on by an external body to become a standard tool for engagement.

That's when you know a company is serious about change. When they don't need to own the thing, but recognise the thing will work better if it is independent.

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