Wal-Mart Pushes the Green Agenda

It happened in 2003, Wal-Mart declared that it would require all of its vendors to use RFID tags in their packaging by the end of 2006.

Said tags would allow the retailer to wirelessly track all inventory in real time, thereby saving millions of dollars in inventory-management costs and hugely simplifying its logistics. On the negative side, the cost and burden of integrating RFID into a product’s packaging would largely be borne by suppliers.

2006 has come and gone and RFID is far from being ubiquitous on Wal-Mart’s shelves. A new mandate at Sam’s Club, a Mal-Mart subsidiary, calls for RFID to be present in all of its products by 2010. Will the mandate be heeded this time? Unclear. However, both initiatives have caused a flurry of innovation around RFID technologies and the world will probably be the better for it.

Miguel Bustillo recounts today on WSJ.com how Wal-Mart has announced that it will “build what it terms a comprehensive sustainability index, that measures the environmental impact of each product [it} sells. For example, an index might flag how much each contributes to global warming and if it contains wood harvested in ways that deplete natural stocks.” Each product will have to have a label explaining where it falls within the index, in other words, how green it is.

I have no doubt that Mal-Mart’s initiative will spark a flurry of innovation in sustainable product design. Given the retailer’s clout, the net long-term impact on the environment should be positive. What I worry about is small suppliers’ ability to cope, in the midst of the current downturn, with the increased cost of materials and changes in their processes.

Sometimes, it takes drastic measures, like Wal-Mart’s recent mandate, to bring positive change. In this case, I would favor a solution that does not put a further squeeze on small business: how about a public-private partnership where businesses that place high on Wal-Mart’s sustainability index get a fiscal “vacation.” I can’t think of many better ways to invest public resources.

Read Bustillo’s article here.