Walmart has upped the ante with its Green supply chain efforts, for the first time drawing a line in the sand with regard to adoption of its Sustainability Index for suppliers.
In a speech in China last week, Walmart CEO Mike Duke said that the retail giant plans to have at least 70% of the products it procures being covered by the index, which the company uses to help suppliers reduce greenhouse gas emissions, use less energy, reduce the amount of packaging used, and other Green goals.
Walmart is said to have more than 100,000 suppliers, as many as 20,000 of them in China, and the fact that Duke went to Beijing to make the speech seems likely to have been sending a message to many of those vendors there. Walmart of course has both direct suppliers in China as well as indirect suppliers that are making products for brand companies that do business with Walmart.
The Walmart index was first launched in 2009 to much fanfare, but to date just around 500 suppliers are using the tool to work with Walmart on improving products and processes around sustainability goals. This index asks 15 questions of suppliers, grouped into four categories:
1. Energy & Climate
2. Material Efficiency
3. Nature and Resources
4. People and Community
Though there is a level of pressure for vendors to participate, and there were implication all along that failure to participate could at some point jeopardize a vendor's standing at Walmart, Duke really for the first time made it clear that suppliers not adopting the index could see their products removed from Walmart shelves.
"This will send a clear message to the Walmart supply chain that if you want to grow and partner with us for the long term, you will engage with us on the sustainability index," Duke said in his speech.
Duke said the retailer's toy buyers visited Chinese factories recently "with the index in hand" to analyze energy usage at the facilities and analyze whether the plastics used in the toys were safe for workers and the local environment.
Duke also said that starting in 2013, Walmart will use the sustainability index to influence the design of its US private brand products.
Also announced was that another 100 product categories will soon be brought into the index, joining the 107 or so that are already part of the program. Walmart buyers in these areas will be trained on how to use the index.
Walmart gave a recent example of how this can work, saying it identified opportunities to reduce greenhouse gas emissions and save energy from laptops.
"Only 30% of laptops sold at Walmart were using 'advanced power management' -- a feature that switches the computer to a lower power state when it's idle or used at a reduced energy capacity," Duke said. "The industry had a standard for activating 'sleep' mode when a computer's system is in 30 minutes of inactivity. Walmart's computer buyer asked suppliers, when possible, to shorten the time to 10 minutes of inactivity. Walmart now has a goal for 100% of the computers it sells this holiday season to have advanced power management as the default setting."
Index Now Plays a Role in Walmart Performance Reviews
In what will probably play in the end an even bigger role, Walmart buyers will now have their efforts to use the index to drive green improvements factored into their overall performance reviews.
That change came as some suppliers and outsiders questioned whether the index and other green factors were ever really a factor in the decisions of Walmart buyers.
The performance evaluations for buyers will only include a handful of these green targets, but will be enough of the total review that buyers will clearly understand their importance to their overall performance appraisal, Walmart's Sustainability director Jeff Rice recently said.
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