Tuesday, July 21, 2009

Wal-Mart Going Green and Its Effect

I touched on this yesterday in my piece about potentially picking up some Wal-Mart (WMT) shares (click here to read). Wal-Mart's initiative to require all its suppliers to disclose "ecological costs" (to borrow a quote from the blog linked below). When you look at all the suppliers Wal-Mart works with, not to mention the massive scale they operate on, this is a big step forward. Lately, Wal-Mart has been say to heck with waiting for Washington to act, because we all know of long that can take, and they usually don't get it right anyway. I found more information on this through harvardbusiness.org, via bloomberg.

Wal-Mart has just changed the game with respect to environmental issues. Now it doesn't matter whether Congress' new cap-and-trade law meets all its promises, nor whether the G-8 leaders dithered rather than acted on environmental issues.

Wal-Mart's unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labelling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

In practice, of course, we know that suppliers will change their practices to avoid embarrassing disclosures, and consumers will think twice about the choices they make. Consumer activists have been clamoring for information. At a recent conference discussing the company of the future, many seemingly informed people were astonished to learn how many gallons of water it took to make just one cup of Starbucks (or anyone's) take-out coffee - they had forgotten irrigation of coffee plants, fluids consumed by transportation of coffee and manufacturing of paper cups, and so forth.

We also know that the Wal-Mart concept is certain to be emulated by other retailers in their own ways. Who could possibly hold themselves up as Not-Green when over 130 million people visit a Wal-Mart store every week, according to company figures, and are made more conscious of environmental concerns? You can bet that a competition will ensue among retailers to out-do Wal-Mart in having the best green-oriented program. That might make "cheapest" the battle of the past and redefine "value" in the minds of consumers and the public.

The article is a good read, as is this blog post from Harvard Business "Leading Green".

So while people rip Wal-Mart for taking away manufacturing jobs in the U.S. (which we increasingly didn't seem to want by the way), stop and take a look at what they're actually doing. When you're looking for new initiatives to make broad changes, you should look to the leaders in business to get things done before you go waiting for Washington.

I still haven't picked up any shares, but have been actively watching.

Disclosure: None

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