Wal-Mart Stores Inc. is devoting a portion of its website to products from suppliers that meet certain sustainability milestones.
Products manufactured in "an environmentally and socially responsible way" will be part of the "sustainability leaders shop," Wal-Mart announced Tuesday during its 2015 Global Sustainability Milestone Meeting in San Bruno, Calif. More than 10,000 items carry a "sustainability leaders" badge, and there is no price increase for products that carry the distinction.
"We can use size and scale of our company, particularly related to the supply chain, to create more efficient, more effective, more sustainable systems," Wal-Mart CEO and President Doug McMillon said during the meeting, which was broadcast online.
The company sells about 5 million items online with the goal of reaching 10 million this year. About 3,000 of what the company describes as "unique products" are available as part of the Wal-Mart sustainability leaders shop.
A ratings system was designed by the Sustainability Consortium, a group founded in 2009 and described as being "jointly administered" by Arizona State University and the University of Arkansas. Wal-Mart, a founding member of the organization, has been working the past three years with suppliers, nonprofit organizations and others to build a sustainability index.
Collaborators on the sustainability measurement tools include more than 100 manufacturers, nonprofit organizations and academic researchers.
Sheila Bonini, CEO of the Sustainability Consortium, said the index is "based on science" and input from a "multistakeholder network." Bonini said the index takes into account environmental issues involving water, waste and carbon use but also considers labor, human-rights and animal-welfare issues.
Questions asked of suppliers are, according to the Sustainability Consortium, "designed based on review and analysis of peer-reviewed scientific research in topics relevant to that product category."
How meaningful the designation is can be hard to measure, said Urvashi Kaul, education manager for RFK Compass, a program that encourages investors to consider connections between sustainability and financial performance. RFK Compass is part of Robert F. Kennedy Center for Justice and Human Rights.
Kaul said Wal-Mart is taking important steps in bringing awareness to sustainability issues. It is unclear, though, how far down the supply chain the sustainability effects are measured, and Kaul said a best-in-class designation doesn't guarantee a supplier is necessarily a leader among its peers.
"My initial reaction is that, on a positive note, it's a good thing," Kaul said. "It tells us Wal-Mart is responding and putting an effort into something that is very important. There are some questions. How do they define sustainability? What is best in class? There is a difference between good social and environmental practices and being the best of the worst. There is a lot of gray area it leaves in place."
Specific items are not selected for sustainability scores, but the index instead grades manufacturers. Only manufacturers that score high on all products in a given category can earn recognition as "sustainability leaders."
The company said the badges are "intended to help identify companies leading in sustainability." Products made by a supplier with scores over 80 percent also qualify for recognition when multiple companies are ranked No. 1 in a category.
Identifying leaders in sustainability is helping create competition among Wal-Mart suppliers, said Laura Phillips, senior vice president of omnichannel assortments.
"It creates a race to the top," Phillips said. "It's all about our engagement with our suppliers. Helping them move further ahead. When they improve their product, we're excited about it. Our customers are excited about it. We sell more, and it really creates an advantage for us."
Wal-Mart began a push toward sustainability under former Chief Executive Officer Lee Scott. Since 2009, the company has been working with the Sustainability Consortium and three years ago began developing the index.
More than 700 Wal-Mart categories are covered by the index, the company said. By the end of 2017, the company's goal is to purchase 70 percent of the goods sold in the U.S. from suppliers who use the sustainability index.
Kaul said Wal-Mart's size and name recognition could have an effect on others in retail.
"Wal-Mart is huge. Huge," Kaul said. "If they do something, others might be inspired to follow suit, and this tells us they are paying attention."
Business on 02/25/2015