Wal-Mart throws its weight behind a greener supply chain

Short-sighted as it may be, some companies may be undaunted by the fact that more U.S. politicians are taking carbon emissions seriously. After all, there's no significant federal legislation looming that would ding an organization that produces an excessive amount of that infamous substance so often linked with global warming. But even if Uncle Sam isn't monitoring the size of companies' carbon footprint, anot

But even if Uncle Sam isn't monitoring the size of companies' carbon footprint, another powerful entity is: Wal-Mart. Earlier this week, the retail empire announced that it will team with the Carbon Disclosure Project (CDP) to start tracking and reducing the energy consumed and carbon emissions produced by its suppliers. The project will begin with seven product categories: DVDs, toothpaste, soap, milk, beer, soda, and vacuum cleaners.

This announcement is a huge one, and it should drive home the fact that it's not just tree-hugger pols and nonprofits that care about energy waste, associated carbon emissions, and other greenhouse gases. When a mainstream global company with the size and influence of Wal-Mart asserts it's keeping a tab on not only its own carbon footprint but those of its suppliers, having a large footprint suddenly has very clear, very real economic ramifications.

Twentieth Century Fox Home Entertainment -- one of Wal-Mart's suppliers -- has already initiated a supply-chain analysis of the carbon impact of the production, manufacture, and distribution of its DVDs. More than 20 of Fox's key suppliers embraced the study by supplying detailed information on their energy use and greenhouse gas emissions.

Notably, Wal-Mart certainly isn't the only influential corporation out there keeping a tab on the greenness of its supply chain. HP, IBM, Dell, and Xerox, for example, assess their suppliers' environmental responsibility practices and, in some cases, work actively with those companies to help them become more efficient, as well as better environmental stewards.

Moreover, investor groups such as CDP, a coalition of more than 315 investors representing $41 trillion in assets, have been encouraging companies to disclose their carbon footprints for the past five years. This year, 77 percent of the FT500 -- representing 500 companies globally -- responded to CDP's survey. U.S. companies lagged, though, with only 56 percent of the SP500 responding.

While the aforementioned organizations are pushing for change, Wal-Mart is certainly the largest, most influential, and farthest-reaching organization out there throwing around its formidable economic weight in asking its customers for specifics on energy use and GHG emissions.

At first blush, companies may not revel in the thought of its big customers seemingly playing eco-police and essentially telling them how to run their operations. But there's perhaps an overlooked silver lining to investing the resources in measuring, reporting, and reducing your organization's carbon emissions. Yes, it's the socially responsible thing to do. Yes, it gives consumers a warm, fuzzy feeling when they buy your products. But from an economic standpoint, measuring your company's carbon footprint can be an important tool for gauging energy consumption. When you start looking for ways to cut your CO2 emissions, you're effectively seeking ways to reduce the amount of electricity and fuel your company wastes.

"This is an opportunity to spur innovation and efficiency throughout our supply chain that will not only help protect the environment but save people money at the same time," said John Fleming, executive vice president and chief merchandising officer for the Wal-Mart Stores Division, in a written statement.

Not only is that good for your company's bottom line, but it's ultimately good for the bottom line of companies further up the supply chain. After all, lower operating costs puts you in a position to sell your products at a more competitive prices, which means the Wal-Marts, HPs, IBMs, and further up the chain save money, too. And who knows? Perhaps those savings will reach consumers' pocketbooks.

I anticipate that Wal-Mart's announcement will prove a particularly pivotal moment in the rapidly evolving green movement, with some serious potential for a cumulative ripple effect. First, it will induce companies down the supply chain -- those flying under the public's eco-radar -- to become better environmental stewards. Second, economically influential companies in industries other than retail may follow Wal-Mart's lead, which will result in their suppliers taking steps to be greener. Time, of course, will ultimately tell.


Copyright © 2007 IDG Communications, Inc.

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