Wal-Mart Prompts Suppliers to Go Green

Brent Felgner, Maria Weiskott, July 30, 2007

In the 1980s, it was UPC barcoding. Over the last several years, it's been a push for RFID. Wal-Mart suppliers have always felt pressured for lower prices and greater efficiencies. Now the giant retailer is "encouraging" its thousands of vendors to ratchet back their packaging, all in the name of sustainability.

The company wants to achieve a 5% reduction in packaging by 2013. To get there it has created a mini-infrastructure to help its suppliers and potential suppliers along. It uses the same style of carrot-and-stick methods Wal-Mart has always been known for. A vendor scorecard evaluates suppliers' progress and, beginning next year, the retailer will fold those results into its buying decisions.

"We're talking about using a packaging scorecard in terms of measuring Wal-Mart suppliers," said Andy Ruben, vp of corporate strategy and sustainability. "Fifty-thousand Wal-Mart suppliers now have access to that scorecard. And it's going to be one of the factors that our merchants start using starting February 1 of '08 [to evaluate select suppliers]. We've seen more packaging innovation in the past few months than we've seen in the last few years."

The effort will impact some home textiles products, principally sheeting and comforter sets. Most bath products, like towels, rugs and accessories, are commonly sold with little or no packaging.

Still, many textiles companies will be impacted.

Welspun, expanding its sheet business, has consumer research that supports the move. "The one thing you hear consistently is that one of the biggest issues in products is their effect on the earth," said marketing director Bob Hamilton. "When we asked people, what's more important: products that are good for you or products that are good for the Earth, they chose 60-40, the environment over personal."

In the broader packaging effort, vendors are even being encouraged to buy Wal-Mart's recyclables to use in their manufacturing and packaging. To that end, Wal-Mart stores and Sam's Clubs are now utilizing "Eco Super-Sandwich Bales." This update of the typical store cardboard box-baling operation uses two outside layers of cardboard to sandwich a center 20- to 40-inch seam of plastic-bagged recyclables like paper, plastic wrap, film, bottles, cans and books. Labeled and trucked to a contract recycling center, it enters the stream from which Wal-Mart vendors are encouraged to buy.

"Our goal is to reduce solid waste in our stores by 25% a year from now," said one senior Sam's executive during a warehouse tour. "So, if we're going to capture it, let's get it back into our own supply chain, he said. "We actually have the ability to capture it and have it become a source of our own merchandise and packaging." He asserted, "It's been good for our business — but it's also been good for the environment."

"By treating this just as we treat anything else in business, these are opportunities for improving the value of items for our customers," Ruben observed. "We're not a government. We're a business, and in the end we're looking for those opportunities in whatever market we're in."

"As we reduce the packaging, the customer gets more value out of the item. [Excess packaging] is just another hidden cost."

Ruben said the company is not dictating to its vendors, but hoping they realize the value of the effort. It's a matter of choice and sound business planning, he indicated.

"One of the biggest opportunities we believe we have in front of us is the 187 million customers who walk through our doors every week," Ruben added. "We believe that affordability and sustainability should not be separate concepts. We're just scratching the surface and we have a long way to go."

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