Wal-Mart orders suppliers to go green, some see red

Wal-Mart has never been shy about telling its suppliers to make a big change, such as RFID tags. But its newest mandate to suppliers -- a "green" product rating system -- could be particularly complex and costly to achieve, some analysts say.

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Joel Makower, a green business analyst and executive editor at GreenBiz.com, points out more critically on his blog, "Like so many things related to both Wal-Mart and sustainability, there is both more and less going on here than meets the eye."

"Despite what the headlines have been saying the past few days, this isn't a product-rating scheme-at least not yet, and likely not for several years," Makower writes. "Wal-Mart isn't rating, grading, or ranking companies, let alone products. It hasn't established a set of criteria or set a bar for performance. This isn't an eco-labeling scheme."

Wal-Mart's sustainability index "is a means for providing transparency about companies, allowing them and others to compare companies to one another, showing how each performs," he adds. "The information will be one of many factors [Wal-Mart] will use to assess companies. It may be a tiebreaker, all other factors (price, quality, availability) being equal."

When Wal-Mart Says Jump, Suppliers Say...

Of course, there is virtually no downside for Wal-Mart in leading this sustainability initiative, as analysts have pointed out.

However, once again, it is Wal-Mart's suppliers that will feel the pain of forced change, questionable benefit for their businesses and new financial burdens. "This is one small step for Wal-Mart and one giant leap for Planet Earth," writes Moss Kanter. "It is also one enormous demand on suppliers, among them many small companies that will feel crushed by the giant's new non-carbon footprint."

So what will this cost a Wal-Mart supplier? Bruce Richardson, AMR Research's chief research officer, points out in a blog that one retail consultant estimates that a new labeling and redesign system can add 1 percent to 3 percent to the cost of a product.

But just how much do consumers actually understand or care about carbon-emission labels? In an interview with CIO.com, Edgar Blanco, a research associate at MIT's Center for Transportation and Logistics, noted that "consumers have expressed in surveys that they are interested in this, but in the key moment of purchase, it's unclear how much more they are willing to pay. And that's what companies are struggling with."

As for now, Wal-Mart executives will bask in a greenish glow and the company's fledgling environmentally-friendly status.

"Wal-Mart has gone well beyond talking the talk here. It's changing the game," writes GreenBiz.com's Makower. "How quickly and dramatically the game really changes will be something we'll all be watching, very closely."

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