The Verdant 360 Blog

There’s no alternative to sustainable development.

How’s that for an opening line. But that’s exactly how this September 2009 article published in The Harvard Business Review, Why Sustainability Is Now the Key Driver of Innovation, opens. The article’s authors Ram Nidumolu, C.K. Prahald and M.R. Rangaswami, make a compelling case that the companies that are early adopters of sustainable business practices are developing competencies that distance them from their competitors. They studied 30 major U.S. corporations including P&G, Cisco, Walmart and Hewlet-Packard. Among their conclusions:

• Sustainability isn’t the burden on bottom lines that many executives believe it to be. In fact, becoming environment-friendly can lower your costs and increase your revenues. That’s why sustainability should be a touchstone for all innovation.
• In the future, only companies that make sustainability a goal will achieve competitive advantage, That means rethinking business models as well as products, technologies and processes.
• Becoming sustainable is a five-stage process and each stage has it’s own challenges.

Here are the five stages they refer to:

Stage 1: Viewing Compliance As Opportunity

Stage 2: Making Value Chains Sustainable

Stage 3: Designing Sustainable Products and Services

Stage 4: Developing New Business Models

Stage 5: Creating Next-Practice Platforms

The study outlines each stage and discusses the challenges and how innovative corporations have overcome those challenges to be become segment leaders.

Their conclusion- the number of new consumers is projected to double over the next twenty years.  This will place an unprecedented demand on limited resources. Traditional approaches to business will collapse and companies will be forced to develop innovative solutions.

To the authors, “Sustainability=Innovation.”

You can get a copy of the article at: www.hbr.org

Sustainability, Uncategorized C.K Prahalad, Cisco, Harvard Business Review, HP, M.R. Rangaswami, Ram Nidumolu, Sustainability, Sustainable Innovation, Walmart

It’s hard not dwell on the importance of Walmart’s announcement this week. I have not previously devoted three straight posts to the same topic, but I do feel that it is potentially the most significant approach to sustainable business practices we have seen to date. Walmart’s global reach and purchasing clout are unparallelled in the retail space. It has over 100,000 suppliers. For this reason alone any announcement around sustainability is important, but when you combine it with an actionable request (albeit voluntary) to complete a survey by a target date (in this case, October for U.S. based suppliers) and all of a sudden it forces a whole bunch of people to evaluate their sustainability positions.

Broken into four sections, the survey appears simple at first glance and some of the questions are fairly opened ended, but the sum of the survey, is that it requires an examination of sustainability practices and will allow for comparisons that were not previously possible. In this blog post  I will list the questions by section. In subsequent posts I will examine the survey on a section by section basis.

Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions
1. Have you measured your corporate greenhouse gas emissions?
2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)?
3. What is your total annual greenhouse gas emissions reported in the most recent year measured?
4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets?

Material Efficiency: Reducing Waste and Enhancing Quality
1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured.
2. Have you set publicly available solid waste reduction targets? If yes, what are those targets?
3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured.
4. Have you set publicly available water use reduction targets? If yes, what are those targets?

Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials

1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety?

2. Have you obtained 3rd party certifications for any of the products that you sell to Walmart?
People and Community: Ensuring Responsible and Ethical Production
1. Do you know the location of 100 percent of the facilities that produce your product(s)?
2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
3. Do you have a process for managing social compliance at the manufacturing level?
4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
5. Do you invest in community development activities in the markets you source from and/or operate within?

15 questions, simple enough, but when we dive into them by section in subsequent posts, you will see the answers may not be that simple.

-FR

Corporate Social Responsibility, Supply Chain, Sustainability, Uncategorized GHG's, Sustainability, Sustainable business practices, Wal-mart, Walmart, Walmart's Sustainability Index

Professor Rosabeth Moss Kanter thinks so. Professor Kanter, who The Times of London describes as one of the “50 most powerful women in the world” holds the Ernest L. Arbuckle Professorship at Harvard Business School. In a blog post on The Harvard Business Review site, Walmart’s Environmental Game Changer, she expresses the view that by nature of it’s market clout, Walmart has “transformed green standards from nice-to-have, to must-have.”  Walmart’s announcement puts pressure on their suppliers and their competitors. In the process it moves the consumer products marketplace towards a future in which consumers can make comparative buying decisions based on the knowledge of the product’s environmental and social impact. Here is how Professor Kanter describes Walmart’s decision,

Wal-Mart’s unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labeling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

It marks a change in how products will be labeled, how supply chains communicate their activities and in the information that will inform consumers make purchasing decisions. This is how Green To Gold author Andrew Winston describes it in a post How The Wal-mart Eco-Ratings will Save Money, also on the Harvard Business Review.

And this is the larger trend that’s coming. The combination of technology and rising consumer demands is creating a powerful movement toward greater transparency  about how a product is made, where it comes from, how much energy is used, and so on. Consumers are already starting to get a taste of this data — you can already download a number of iPhone apps and/or check websites like GoodGuide.com  to find product sustainability scores. Consumers will certainly want more, and they’ll want more coordination between all the groups starting to collect it. The world’s biggest retailer kicking off this initiative is a good start at harmonizing all these sources.

Sounds like a game changer to me.

-FR

Supply Chain, Sustainability Andrew Winston, Harvard Business Review, Professor Rosabeth Kanter, supply chain sustainability, Sustainability, Wal-mart, Walmart, Walmart's Sustainability Index

Leave it to Walmart to up the ante. Today the world’s largest retailer released a statement that should catch everyone’s attention. They have announced plans to create a product sustainability index that will eventually (they believe) be included on all products that are sold in Walmart stores. According to Walmart the index will give consumers a single source of data for the evaluation and comparison of a product’s sustainability. It reinforces Walmart’s commitment to leadership in the area’s of both sustainability and corporate social responsibility.

According to Mike Duke, Walmart’s President and CEO:

Customers want products that are more efficient, that last longer and perform better. And increasingly they want information about the entire lifecycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way.

We do not see this as a trend that will fade. Higher customer expectations are a permanent part of the future.

At Walmart, we’re working to make sustainability sustainable, so that it’s a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption.

The Walmart plan calls for a 3 phase approach to the development and implementation of the index. The first step is creation of a survey (sounds a little like the Verdant 360) that will ask questions around 4 areas.

1. Energy and Climate
2. Material Efficiency
3. Natural Resources
4. People and Community

Walmart will be asking it’s over 100,000 suppliers to respond to the survey. It is asking it’s U.S. base suppliers to respond by October of this year.

The second phase will be to create a consortium of universities to collaborate with suppliers, retailers, NGO’s and governments to create a global database of information of the cradle to grave impact of the products that are sold in Walmart stores. They intend to engage a software company create an open platform to power the index.

The Third and final phase will be to translate the data captured in phase two into a standard that informs consumers about the sustainability of products.

This is how the statement was reported in bloomberg.com today,

Wal-Mart’s unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labeling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

We will be discussing this for some time to come.

-Fred

Corporate Social Responsibility, Supply Chain, Sustainability Add new tag, Corporate Social Responsibility, supply chain sustainability, Walmart