Two months ago, Wal-Mart made an announcement that could set off an ecological earthquake: the giant retailer disclosed it was co-operating with an academic consortium to develop a sustainability index for rating its hundreds of thousands of products.
Just weeks after Wal-Mart’s announcement, the Harvard Business Review featured a cover story proclaiming that sustainability has become the key to successful corporate strategy. The article, co-authored by the University of Michigan-based strategy maven C.K. Prahalad, proclaimed that the next business model must be green and touted ecological innovation as the coming driver of economic growth.
Wal-Mart has handed the environmental movement a new tool for ameliorating the human footprint: using an emerging generation of information systems to create market pressures to upgrade the ecological performance of commerce and industry. This strategy entails making life-cycle-assessment data for products transparent - that is, labeling them with a sound, independent rating so shoppers can easily take the ecological impacts into account as they decide what to buy.
Indeed, the Wal-Mart announcement has thrust what once seemed merely an intriguing idea into a market reality companies will have to deal with - not just in tomorrow’s strategic plans, but in today’s logistics and operations. Wal-Mart’s 100,000-plus suppliers (and the likes of Procter & Gamble counts as just one) will be required to reveal their products’ ecological impacts or have them dropped from the retailer’s stores worldwide.
“A year ago I was just beginning to talk with folks at Wal-Mart about the concept of life-cycle assessment,” says Gregory Norris, an industrial ecologist who teaches at the University of Arkansas and the Harvard School of Public Health. “Now they are using the tools to do pilot life-cycle assessments on their own products. This has gone from talk to action.”
Norris heads the development of Earthster, an open-source information system designed to evaluate a product’s life-cycle assessment relative to industry norms and help suppliers and bulk buyers to spot ecological upgrades that will improve the product’s rating. Norris, a member of the Sustainability Consortium that Wal-Mart has partnered with, envisions Earthster as capable of creating industry averages for a given product, enabling manufacturers to spot where they need to improve and helping companies find suppliers who can offer upgrades on a given ecological impact.
A pilot project now underway with Earthster involves seven products from Wal-Mart. The intention is to make the system scalable, so that one day all items in Wal-Mart’s aisles will have a sustainability rating, starting with the retailer’s 3,500 house brands. “We expect usage to scale exponentially by next year,” says Norris. “Because Wal-Mart has so much influence, other big companies are looking into this, too.”
Roughly 20 per cent of factories in China are said to be somewhere in the supply chain for Wal-Mart’s suppliers. “If this comes to the Wal-Mart supply chain,” Norris comments, “it’s on its way to the global economy”.
The index will produce a sustainability rating label that retailers will post as a single number or symbol next to an item’s price tag. The Sustainability Consortium, which is developing the index and is centred at Arizona State University and the University of Arkansas, envisions the system as a new industrial standard, one that many retailers beyond Wal-Mart will adopt, and that companies and other organisational purchasers will use in business-to-business buys.
A prototype for just such a sustainability index is already in operation: GoodGuide.com, launched earlier this year, aggregates more than 200 databases - from the global warming evaluations of companies compiled by ClimateCounts, to government listings of toxic chemicals - into a single rating on a 10-point scale.
The advantage of an all-in-one rating is this: say you’re buying a wood product that has won Forest Stewardship Council approval - but you also want to know how it rates on chemicals of concern, how workers are treated, and its carbon footprint. GoodGuide, developed by a team led by industrial ecologist Dara O’Rourke of the University of California at Berkeley, tells you all that, and much more - either in a single summative score (on a 1 to 10 scale), or broken down into sub-ratings in environmental, health, and social categories - and, if you’re determined to dig down to details, with transparency about how the ratings were arrived at. So far GoodGuide rates 70,000 or so individual products, with more in the pipeline.
According to O’Rourke, GoodGuide.com has had more than two million web users since its launch in October of 2008. A survey reported at a September meeting of the Grocery Manufacturers Association found even during the economic downturn two-thirds of shoppers say they now find it more important to purchase products with health and environmental benefits.