First, Wal-mart got on board with healthcare reform. Now the New York Times reports that it seeks to push environmentally sustainable products. At this rate, Wal-Mart might be in danger of becoming the sweetheart of progressives, instead of being a constant target of their criticism.
According to the Times, tomorrow Wal-Mart will announce a new indexing system to help consumers understand the environmental impact of everything they buy. I believe providing consumers additional information to evaluate which products to purchase is a laudable goal. I just have a few questions/concerns about how it will turn out.
Will Anyone Care?
According to the Times:
In the short term, the sustainability index would be meant to give store buyers a system of measurements to help them decide which products to put on their shelves, so that determining which products are "greener" is no longer solely the consumer's burden.
Right -- if consumers really care. If two products have the same price and quality, but one is more sustainable, I imagine most consumers would be swayed by environmental impact. But what happens if better sustainability proves more expensive? For example, would you be willing to pay 50 cents more for a cup of yogurt that got a higher sustainability score? Maybe you would, but maybe someone else would not. I find it a little difficult to believe that a higher sustainability score will drive many people to purchase products of otherwise equal quality at a higher price -- especially at Wal-Mart, a place people shop to find the lowest prices.
The Times also asserts:
In the long term, the index will drive competition to create more sustainable products. Right now, there is no universal metric to help manufacturers make decisions based on what is best for the planet.
Right -- if producers see that consumers really care. For example, if the products with the highest sustainability scores suddenly start jumping off the shelves, then companies will definitely take note. If the change in sales is negligible for those with higher scores, then I'm not so sure. We would all like to believe that companies really care about sustainability, and some do. But more care about profit.
Producers Have Reason Not To Participate
What happens if producers don't participate? Some will, no doubt. Others will probably choose not to play along. Wal-Mart cannot really force companies to participate. Presumably, their score will just be listed as "unknown." Unless firms are certain that their practices stress sustainability better than their competitors (and few can be), their response might be not to risk getting a bad score. As a result, those firms might logically choose not to participate.
Auditing Producers' Claims
Here's how Wal-Mart will gather the information to form their program's scores, according to the Times:
To make it happen, Wal-Mart is expected to ask its more than 100,000 suppliers to provide details about their supply chains. It will also team up with scholars, environmental and social groups, and other retailers.
It sounds to me like Wal-Mart is going to rely on the companies to provide the information. Auditing that information would be very costly, so I assume that Wal-Mart will take those companies at their word. This clearly creates a situation where companies may lie about their sustainability and not really improve their practices. I'm not sure how to fix this other than if Wal-Mart audited all of its vendors' claims, which seems unlikely.
Will Its Competitors Follow?
The article seems to believe that other retailers will also show the Wal-Mart's sustainability index on the products it sells. Target comes to mind. But Target and others could have an incentive to ignore Wal-Mart's index. For example, what if Target said to lower scoring producers: "Listen. We aren't going to worry about any sustainability score mumbo jumbo. But we want better pricing than you give Wal-Mart, since they do."
I know we all want to believe we live in a world where that could never happen. But I don't know of any legal consequences facing Wal-Mart's competitors if they took that approach. Such a strategy could cause most consumers to flock to their stores instead for lower prices. That could lead to Wal-Mart abandoning this initiative. If consumers truly demand sustainability scoring, regardless of price, then this won't happen. I'll be curious to see how it all turns out.
Hello,
You seem to forget or ignore (perhaps you find it distasteful) that marketing is about demand creation, not simply about responding to "what consumers want." "What consumers want" is a very complex, but very dynamic question--not a static one nor one that even consumers themselves can often answer accurately. I think the idea here is not that "consumers really care about sustainability" but that if Walmart executes well consumers will over time start to care about sustainability and Walmart will leverage this for competitive advantage. You are putting the egg before the chicken. Walmart has the market power to impact what consumers want, not just respond to it. In early 2007, it wasn't clear that consumers wanted CFLs. Walmart still exceeded their goals and sold over 100M in less than a year.
Clearly today consumers not only don't care about the relative sustainability of the consumer goods they buy, they literally can't care, because they have no visibility at all into the sustainability of the goods they buy. First step is making the invisible visible. That is what Walmart is doing. If they pull it off, it will have a very large and positive impact.
Daniel, The Big Money, who I write for, but not on this topic, actually broke this story in advance of the Times or any other outlet:
http://www.thebigmoney.com/blogs/sausage/2009/07/14/mainstream-media-mum-wal-mart-scoop
Also, to your last point, TBM's Gunther reports that, "Wal-Mart doesn't ultimately want to own the sustainability index, which is why it is forming the consortium. "They are willing to get the ball rolling, but they want to hand it off to someone else," an insider says."
I think that will eliminate much of the incentive Target or any other competitor would have to ignore this index, and any incentive a supplier has to cheat on it, since being caught would mean not just alienating the largest buyer in the world, but also any other buyer, like Target, who uses the index, too.
I like that your first reaction was Will Anyone Care? It seems that if any other company were doing this, that question wouldnt even be posed, but Big Bad Wal Mart has to endure more scrutiny. Will Anyone Care? Of course, but thankfully, we already have a similar situation unfolding in the marketplace right now- Organic Food. Most people I know have already drawn lines in the sand over whether they will pay more for organic or stay with the lower priced non-organic choice. Everyone, though, cares about it, whether they buy organic or not.
Also, using this to predict that Target will suddenly begin demanding lower prices from its suppliers, and therefore, in its stores, is pretty far fetched. I'm sure there are plenty of differences between the way Wal Mart and Target deal with suppliers for this to already have happened.
Wal Mart will still rule- and people will still complain about their commitment to health care...? Wait, how about their stance to inform the public of the environment impact of its prod..ok, um, we're going to need a different angle. Unions. We've always got Unions.
I have a feeling that WalMart can do this and work with the Employee Free Choice Act and still make a killing as we transition to a wind-powered public-option world where plastics come from liquefied coal, not oil. In fact, they can probably bring manufacturing back to the U.S. that way, and still make nice profits. It's all about the consumer spending, and WalMart employees are in many ways the baseline model consumers.