Can Wal-Mart Save The Planet?

First, Wal-mart got on board with healthcare reform. Now the New York Times reports that it seeks to push environmentally sustainable products. At this rate, Wal-Mart might be in danger of becoming the sweetheart of progressives, instead of being a constant target of their criticism.

According to the Times, tomorrow Wal-Mart will announce a new indexing system to help consumers understand the environmental impact of everything they buy. I believe providing consumers additional information to evaluate which products to purchase is a laudable goal. I just have a few questions/concerns about how it will turn out.

Will Anyone Care?

According to the Times:

In the short term, the sustainability index would be meant to give store buyers a system of measurements to help them decide which products to put on their shelves, so that determining which products are "greener" is no longer solely the consumer's burden.

Right -- if consumers really care. If two products have the same price and quality, but one is more sustainable, I imagine most consumers would be swayed by environmental impact. But what happens if better sustainability proves more expensive? For example, would you be willing to pay 50 cents more for a cup of yogurt that got a higher sustainability score? Maybe you would, but maybe someone else would not. I find it a little difficult to believe that a higher sustainability score will drive many people to purchase products of otherwise equal quality at a higher price -- especially at Wal-Mart, a place people shop to find the lowest prices.

The Times also asserts:

In the long term, the index will drive competition to create more sustainable products. Right now, there is no universal metric to help manufacturers make decisions based on what is best for the planet.

Right -- if producers see that consumers really care. For example, if the products with the highest sustainability scores suddenly start jumping off the shelves, then companies will definitely take note. If the change in sales is negligible for those with higher scores, then I'm not so sure. We would all like to believe that companies really care about sustainability, and some do. But more care about profit.

Producers Have Reason Not To Participate

What happens if producers don't participate? Some will, no doubt. Others will probably choose not to play along. Wal-Mart cannot really force companies to participate. Presumably, their score will just be listed as "unknown." Unless firms are certain that their practices stress sustainability better than their competitors (and few can be), their response might be not to risk getting a bad score. As a result, those firms might logically choose not to participate.

Auditing Producers' Claims

Here's how Wal-Mart will gather the information to form their program's scores, according to the Times:

To make it happen, Wal-Mart is expected to ask its more than 100,000 suppliers to provide details about their supply chains. It will also team up with scholars, environmental and social groups, and other retailers.

It sounds to me like Wal-Mart is going to rely on the companies to provide the information. Auditing that information would be very costly, so I assume that Wal-Mart will take those companies at their word. This clearly creates a situation where companies may lie about their sustainability and not really improve their practices. I'm not sure how to fix this other than if Wal-Mart audited all of its vendors' claims, which seems unlikely.

Will Its Competitors Follow?

The article seems to believe that other retailers will also show the Wal-Mart's sustainability index on the products it sells. Target comes to mind. But Target and others could have an incentive to ignore Wal-Mart's index. For example, what if Target said to lower scoring producers: "Listen. We aren't going to worry about any sustainability score mumbo jumbo. But we want better pricing than you give Wal-Mart, since they do."

I know we all want to believe we live in a world where that could never happen. But I don't know of any legal consequences facing Wal-Mart's competitors if they took that approach. Such a strategy could cause most consumers to flock to their stores instead for lower prices. That could lead to Wal-Mart abandoning this initiative. If consumers truly demand sustainability scoring, regardless of price, then this won't happen. I'll be curious to see how it all turns out.