Skip to content

OM in the News: Is Wal-Mart’s Sustainability Index Sustainable?

July 20, 2011

Two years ago, Wal-Mart CEO Mike Duke dropped a bomb on the retailing world when he announced that his firm would be creating a “sustainability index” to measure the environmental and social impact of every product sold in its stores. Wal-Mart had not suddenly turned green (see our blog of  May 17, 2011 )–it turns out that a vast amount of money is to be made by reducing energy and waste up and down the supply chain. Duke’s message suppliers was clear: “Treat the planet well and get prime access to its 200 million customers each week; pollute and despoil, and you will be shunned”.

But as Fortune (July 25, 2011) reports, Wal- Mart had no idea how hard the job of creating the index would be.  Five million dollars into the project, it has only examined 7 products closely so far. The trouble with a scoring system (and others have tried it), is that in the end consumption is about trade-offs. How much phosphate was used to make a laundry detergent? How much waste was generated by the zipper factory in China? Is soil erosion less important than carbon emissions? A company may get high marks for recyclable packaging, but Stonyfield reduced its carbon footprint by switching to yogurt cups that aren’t recycled. (Cups made from plants, it turns out, generate fewer greenhouse gasses than recycled plastic ones). And Patagonia’s switch to organic cotton for jeans (from synthetic fabrics) now requires 1,200 gallons of water to manufacture a single pair!

Many companies in the developing world don’t even recognize the words “corporate sustainability policy”. Hank Paulson says he asked the manager of a Chinese factory about the belching smoke pouring out of his plant. The response: “See those two camels and a goat? When they fall over from pollution, we turn off the factory”.

Discussion questions:

1. Why is the index so hard to create?

2. Name some products with trade-offs that would impact their score.

Advertisements
No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Supply Chain Management Research

Andreas Wieland’s supply chain management blog for academics and managers

better operations

Thoughts on continuous improvement: from TPS to XPS

%d bloggers like this: