Yes, it’s true: ‘Green’ is good for business. But this is true because, for the most part, only ‘green’ projects that are good for business (or required by law or Wal-Mart) get done.

I wrote these words back in February 2008 (see “Inconvenient Truths About ‘Green’ Supply Chain Management”) and the influence of the law and Walmart has grown significantly in recent days.  Last month, cap-and-trade legislation (Waxman-Markey) passed the House and the bill is now in the Senate.  Today, Walmart announced details of its Sustainable Product Index.

As I write this, I’m listening to Walmart’s Sustainability Milestone Meeting live webcast, which I assume will be archived for future viewing.  Mike Duke, Walmart’s CEO, quickly outlined the three steps the company is undertaking.  The first step is for suppliers to answer a 15-question questionnaire focused on waste generation, resource use and community involvement.

The second step is to create “a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products – from raw materials to disposal.  Walmart will provide the initial funding for the consortium, but it is not [its] intention to create or own this index. The company will also partner with one or more leading technology companies to create an open platform that will power the index.”

As I’ve written many times before, the lack of global standards and metrics is arguably one of the biggest factors preventing broader adoption of green supply chain practices (see “The Slow Progress of Green Supply Chain Management” and “More Green Supply Chain News“).

The third step is to leverage these standards and metrics to create “sustainability labels” for products “to provide customers with product information in a simple, convenient, easy to understand rating, so they can make choices and consume in a more sustainable way.”  In an article in today’s Wall Street Journal, John Fleming, Chief Merchandising Officer at Walmart, is quoted as saying, “I envision the day that you look at a piece of apparel, you flip a tag over, and learn about how sustainable it really is.  It would be like nutritional labeling is today. But there is some standardization that needs to take place.”

As the saying goes, the devil is in the details, and Walmart didn’t provide many details today.  But here is my initial reaction to Walmart’s plans:

• I applaud Walmart’s effort to work with various stakeholders to develop global sustainability standards and metrics.  Without standards, broader adoption of sustainability practices is not possible.  But as anyone who’s been involved with standards bodies knows, getting companies across different industries and geographic regions (as well as governments) to agree on anything is a very long and painful process.  And when you consider that sustainability is such a politicized topic, the challenge is even greater.  In my opinion, this step will take years (maybe a decade) to complete, if ever.
• Listening to some of the hype in the webcast (one presenter compared today’s announcement to our efforts to put a man on the moon in the 1960s ), I can’t help but think of Walmart’s plan to revolutionize supply chains with RFID technology several years ago.  It’s fair to say that what’s been accomplished to date is a mere fraction of what Walmart envisioned several years ago (if anything, Walmart has quietly backtracked from some of its RFID plans).  A big reason for the limited adoption of RFID is that many suppliers resisted it, despite Walmart’s threats.  Walmart is again making similar threats.  According to the WSJ article, “Wal-Mart insisted there will be no exemptions.  Asked what relationship Wal-Mart would maintain with suppliers that don’t supply the data, Chief Merchandising Officer John Fleming said bluntly, ‘We probably don’t have one.’”  Suppliers are certainly more receptive to supporting sustainability initiatives than they were RFID, especially with cap-and-trade legislation on the horizon.  But it wouldn’t surprise me if some suppliers push back on certain aspects of Walmart’s plan if the business case is one-sided-i.e., if it benefits mostly Walmart.

I’m sure we’ll learn more in the days and weeks to come, and we’ll certainly follow up with additional news and analysis.  But I’d love to hear from you.  What do you think of Walmart’s plans to develop a sustainable product index?  What opportunities and challenges do you see?  Will suppliers overwhelmingly support it or will they push back?  Post a comment and share your viewpoint!