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Walmart’s Impact (3)
By Claus Schafhalter | March 2, 2010
Walmart, the largest US-retailer, makes another move to get more sustainable. This time the targets are specific popular product categories and their suppliers. Suppliers are asked to examine and reduce their carbon footprint by using less energy, less packaging, more efficient processes, etc.
It sounds good and it is good, at least in my opinion. However, if you are one of the suppliers targeted you might feel differently. Walmart makes it clear that they expect greener products from their suppliers. But beware, any costs related to make the products differently will be the responsibility of each supplier.
You can see this initiative from two different perspectives:
1) It is a great idea that an organization as important as Walmart starts an initiative to reduce the carbon footprint of the products it sells. Who could argue with that?
2) A Walmart supplier most certainly already faces high pressure from Walmart to supply goods at rock bottom prices. The supplier likely already analyzed processes to find efficiencies and savings. Following this thought, further efficiency improvements to reduce the carbon footprint might not be cost efficient any more. The reason is that at a certain level of efficiency the costs to improve efficiency go up while the additional savings go down. This has a lot to do with how we account – or better do not account – for environmental costs. The cost a polluter has to pay for pollution is still not anywhere near to the real cost of polluting.
If you are a supplier you need to get more green, at least you need to appear more green in Walmart’s eyes. To get there you have the choice to really get more sustainable, which will cost you money. Or you try to compensate for these costs and cut some corners elsewhere. For instance reducing quality of your product.
You don’t think so? Well, it happened before, in a different context. When car manufactures were forced by increased competition to bring down their costs substantially, they pressed their suppliers to reduce costs. Costs came down, quality of their products too. Which lead to some interesting unintended consequences.
Hopefully Walmart recognizes that they are in this together with their suppliers. And hopefully Walmart offers more than only pressing their suppliers into a greener future. Partnering with suppliers to achieve a common goal would be an important step, I think.
Claus Schafhalter, Sunogos
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