Sustainability: business, life, environment

In my professional consulting career, I have found it remarkable when a company publicly announces that it will no longer do business with another company.  This is uniquely remarkable when in relation to a specific list of business sustainability criteria.  As a sustainability consultant, that action indicates that performance measures  are changing.

In this case, Wal-Mart recently revealed a new supplier agreement that will require manufacturers to adhere to specific social and environmental criteria, beginning in 2009.  The changes signal a move by the world's largest retailer towards greater business sustainability. Wal-Mart is shifting from intermittent transactions towards longer-term partnerships. 

"Meeting social and environmental standards is not optional," Lee Scott, Wal-Mart's CEO.  The new supplier agreement for ethical and eco awareness includes:

•    Supplier commitments:  All suppliers will sign new agreements indicating compliance with environmental laws.

•    Audits: Wal-Mart will "strengthen" its surprise and third-party audit program

•    Supplier Goals: The top 200 suppliers will achieve 20% energy efficiency improvement, and most importantly, "By 2012, all suppliers that we buy from directly should source 95% of product from companies that have the highest ratings in audits.

•    Product Quality: Zero defective merchandise returns by 2012. 

•    Transparency: Suppliers must reveal the name and location of every factory they use to make a product, as early as November for apparel, then home goods, toys, and others by the end of 2009. 

•    Supplier Compliance: Wal-Mart will work with suppliers that fail to comply, but "if after a period of time, the supplier does not improve, we will move our business."

For existing Wal-Mart suppliers, this may be a significant change.  For those looking for that prized shelf space, these new expectations create an opportunity to differentiate themselves from the competition.  Suppliers ready to implement sustainability concepts into their core business will now have a clear set of measures and a defined value opportunity.

This bold step by Wal-Mart may signal a change in traditional cost-focused supply chain management to a measure of business sustainability as standard supplier performance criteria. 

As a sustainability consultant, I interested to see how Wal-Mart’s stance shifts the playing field for suppliers with strong commitments.  Business leaders have already shifted from defensive sustainability strategies to sustainable growth, which is creating change in the marketplace.