In effect, Wal-Mart was telling its suppliers that to get its business, suppliers must make their operations environmentally friendly and socially responsible, and ensure that their suppliers' business practices and operations are greener than they ever have been.
The nagging question, however, is whether Wal-Mart and its supplier base can pull this off. Or, will this become another RFID misadventure for its suppliers--too much money, too short a deadline and too little ROI.
"Given the time lines that Wal-Mart specified in this initiative," says AMR Research VP Noha Tohamy, "saying that this is a hard task is an understatement. It's going to be near impossible to do some of the things they outlined."
Wal-Mart's Green Strategy -- Why Now?
In announcing the new green and product safety policies and requirements of its suppliers, the world's largest retailer is aiming to do many things.
No doubt, a driving force behind a greener Wal-Mart--especially with the thousands of Chinese suppliers it works with--is to improve Wal-Mart's battered corporate image in the United States and abroad by holding suppliers to stricter manufacturing, product safety and environmental requirements. CEO Scott receives much of the credit for taking this critical first step, says Tohamy. "All along, Lee Scott has been pretty committed to this goal," she adds.
In past speeches, Tohamy notes, Scott and other Wal-Mart execs have noted that sustainability and environmentally friendly business practices not only align well with what customers want from retailers, but they "can align well with profitability and good business sense," she says.
Wal-Mart's new standards can also be classified as risk management. China, as a nation of consumer-product good (CPG) manufacturers, has become a supplier to the world. And Wal-Mart tops the retailing list: 70 percent of commodities sold at Wal-Mart are made in China. Furthermore, if Wal-Mart was its own economy, it alone would rank as China's eighth-biggest trading partner, ahead of Russia and Canada, according to China Business Weekly.
But Chinese suppliers' reputation for manufacturing operations is anything but green and product safety has been a serious issue, especially for the past couple of years.
"In our research," Tohamy says, "China has been damned up and down as the main source of risk when it comes to product quality, to IP infringement, to supplier failure when it comes to product defects."
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