Wal-Mart to develop index of product environmental impacts; supply chain likely to bear the costs
On July 16, Wal-Mart announced that it will require suppliers to answer environmental impact surveys about their products, as part of a “sustainable product index” initiative. The eventual plan is to label products with more consumer-friendly environmental information. Wal-Mart will utilize the supplier disclosures through the Carbon Disclosure Project (CDP), the world’s largest database of corporate environmental data. The CDP expanded to include suppliers’ data in January 2008. The questionnaire for suppliers contains fifteen questions regarding issues such as greenhouse gas emissions and water usage.
Although a relatively simple survey, Wal-Mart’s new requirement raises many issues, namely the balance between cost to businesses and transparency to customers. According to the CDP, companies bear the cost of compliance. However, the suppliers must now be responsible for collecting accurate and current data and responding truthfully to the surveys. Wal-Mart’s plan will affect over 100,000 suppliers. By creating this chain of reporting obligations, Wal-Mart is essentially regulating and creating new costs for suppliers.
As for consumers, more and more companies are adopting the approach that, in the long run, providing information to consumers will improve their reputations and raise sales. That said, a recent study indicates that there is no correlation between a company’s corporate responsibility record and consumers’ perception of that company as socially responsible.
Is the cost of compliance too high? Will the eventual transparency have an actual impact on consumers? This is a large initiative and, like many other massive environmental efforts, its effects will likely take considerable time to surface.
