Wal-Mart’s (Un)sustainability Index

July 24th, 2009 by Phil Mattera

Del95400Wal-Mart has taken the latest in a long series of steps to make itself look good by imposing burdens on its suppliers. The mammoth retailer, which is thriving amid the recession, recently announced plans to require its more than 100,000 suppliers to provide information about their operations that would form the basis of a product sustainability index.

Rating products is a good idea. It’s already being done by various non-profit organizations that bring independence and legitimacy to the process. Wal-Mart, by contrast, brings a lot of negative baggage. In recent years, Wal-Mart has used a purported commitment to environmental responsibility to draw attention away from its abysmal record with regard to labor relations, wage and hour regulations, and employment discrimination laws. It also wants us to forget its scandalous tax avoidance policies and its disastrous impact on small competitors. The idea that a company with a business model based on automobile-dependent customers and exploitative supplier factories on the other side of the globe can be considered sustainable should be dismissed out of hand. Yet Wal-Mart is skilled at greenwashing and is, alas, being taken seriously by many observers who should know better.

On close examination, Wal-Mart’s latest plan is, like many of its previous social responsibility initiatives, rather thin. All the company is doing at first is to ask suppliers to answer 15 questions. Ten of these involve environmental issues such as greenhouse gas emissions, water use, waste generation and raw materials sourcing. The final five questions are listed under the heading of “People and Community: Ensuring Responsible and Ethical Production.”

Two of them involve “social compliance.” It is an amazing act of chutzpah for Wal-Mart, which probably keeps more sweatshops in business than any other company, to claim moral authority to ask suppliers about the treatment of workers in their supply chain.

The questions in this category seem to assume that suppliers don’t do their own manufacturing. This is a tacit acknowledgement of how Wal-Mart has forced U.S. manufacturers to shift production offshore, and often to outside contractors. Now Wal-Mart has to ask those companies to be sure they know the location of all the plants making their products and the quality of their output.

The point about quality was one that CEO Mike Duke (photo) emphasized when announcing the rating system. This is also highly disingenuous. For years, Wal-Mart was notorious for pressing suppliers to reduce the quality of their goods to keep down prices. Now the behemoth of Bentonville is suddenly a proponent of products that “are more efficient, that last longer and perform better.” Will Wal-Mart pay its suppliers higher prices to cover the costs of improving quality?

goodguideI can’t bring myself to jump on Wal-Mart’s bandwagon. If I want product ratings I will turn not to Mike Duke but rather to someone like Dara O’Rourke, who founded a website called Good Guide that rates consumer products and their producers using independently collected data from social investing firms such as KLD Research and non-profits such as the Environmental Working Group. It uses criteria such as labor rights, cancer risks and reproductive health hazards that are unlikely to ever find their way into the Wal-Mart index.

Good Guide also rates companies, including Wal-Mart, which receives a mediocre score of 5.3 (out of 10), and it reaches that level thanks to its marks on p.r.-related measures such as charitable contributions and some but not all environmental measures. In the category of Consumers it gets a 4.1, Corporate Ethics 3.9, and for Labor and Human Rights 4.1 (which is generous).

Maybe Wal-Mart should focus on improving its own scores before presuming to rate everyone else.

2 Responses to “Wal-Mart’s (Un)sustainability Index”

  1. Thanks for this good analysis. It seems to me that part of Wal-Mart’s plan here is to appear to exercise its market power for good, thereby deflecting focus from the key question, which is should any one company have such sweeping market power in the first place? A troubling number of environmentalists seem quite enamored with the idea of such a powerful company dictating terms to suppliers and others. But doesn’t this sort of power and oversight belong in the hands of the public — isn’t it us, through our democratically elected governments, that should be setting and enforcing standards?

  2. david says:

    hi, i enjoyed your article, thought you might find dara o’rourke’s conversation with daniel goleman interesting, there are samples on the publisher’s website at http://www.morethansound.net, thanks.

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