22 July 2009 18:40 [Source: ICB]
The world's largest retailer's new sustainable product index will have broad implications throughout industry
Doris de Guzman and Joseph Chang/New York
IN A long-awaited move, US retailing giant Walmart announced plans to develop a worldwide sustainable product index for its supply chain. The initiative from the world's largest consumer retailer will have broad implications for many manufacturing sectors, including the chemical and plastics industries.
The company unveiled its plan in a meeting with 1,500 of its suppliers, associates and sustainability leaders at its headquarters in Bentonville, Arkansas earlier this month.
"Increasingly, [customers] want information about the entire life-cycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way," said president and CEO Mike Duke.
"In this age of social networks and instant information, consumers increasingly expect more transparency on the products they buy. Today, there is no trust without transparency," he added. The initiative will be implemented in three phases, starting with a survey of its suppliers, which number more than 100,000 around the world.
The survey includes 15 questions that will serve as a tool for Walmart's suppliers to evaluate their own sustainability efforts.
The questions focus on four areas: energy and climate; material efficiency; natural resources; and people and community (see list). Walmart will ask its top-tier US suppliers to complete the survey by October 1, 2009. The company will develop timelines on a country-by-country basis for suppliers outside the US to complete the survey.
As a second step, Walmart will create a consortium of universities that will collaborate with suppliers, retailers, non-governmental organizations (NGOs) and governments to develop a global database of information on the life-cycle of products - from raw materials to disposal.
Duke said he wanted the index to be shared globally as a common database.
"With this index, our customers will be even more in charge as they can access this data," he said. "The index can help raise the quality and lower costs for our products. It will also create even more innovation throughout the supply chain."
In the final step, the sustainability information will be transformed into a simple rating for consumers.
Measuring product sustainability has been the most difficult challenge for Walmart over the past few years, said Duke. However, the CEO noted his degree in industrial engineering from Georgia Tech will help in this effort.
"Most of you know that I'm a retailer at heart, but you may not know that I'm an engineer by training. My Georgia Tech roots run deep, and the engineer in me likes data," he said. "I like research. I like metrics. More than anything, I love an elegant process for arriving at innovative solutions that are both profitable and sustainable."
ACC COMMENDS INDEX
Walmart has led the way among big-box retailers in terms of setting product policies. Chemical industry associations such as the American Chemistry Council (ACC) have recognized this trend and have boosted their focus on engaging retailers.
"ACC commends Walmart's efforts to promote sustainability through product decision-making that includes a range of life-cycle considerations and greater transparency," said the group. "The Sustainable Product Index will facilitate a more comprehensive approach to product evaluation, as well as collection of information used in evaluating the sustainability of products."
The ACC said it has long supported life-cycle research and development of products that promote the environment while conserving energy, such as solar cells, wind turbines and insulation. It pointed out that a new life-cycle analysis by global consultancy McKinsey found that for that every unit of greenhouse gas (GHG) emitted by the chemical industry, society saves more than two units of GHG emissions, and may save even more in the future.
"Sustainable chemistry requires strong partnerships between our companies and other industries and the federal government," said the ACC. "We look forward to working with Walmart as they develop the Sustainable Product Index."
WALMART SUSTAINABLE PRODUCT INDEX: 15 QUESTIONS FOR SUPPLIERS
Energy and climate: reducing energy costs and greenhouse gas (GHG) emissions
1. Have you measured your corporate GHG emissions?
2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project?
3. What is your total annual GHG emissions reported in the most recent year measured?
4. Have you set publicly available GHG reduction targets? If yes, what are those targets?
Material efficiency: reducing waste and enhancing quality
1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured.
2. Have you set publicly available solid waste reduction targets? If yes, what are those targets?
3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured.
4. Have you set publicly available water use reduction targets? If yes, what are those targets?
Natural resources: producing high-quality, responsibly sourced raw materials
1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety?
2. Have you obtained third-party certifications for any of the products that you sell to Walmart?
People and community: ensuring responsible and ethical production
1. Do you know the location of 100% of the facilities that produce your product(s)?
2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
3. Do you have a process for managing social compliance at the manufacturing level?
4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
5. Do you invest in community development activities in the markets you source from and/or operate within?
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