GreenSCM: Will Wal-Mart Green Product Labeling Create the New Scarlet Letter?
By
Dan Gilmore
Through a
special arrangement, presented here for discussion is an excerpt of a current
article from GreenSCM, a sister publication of Supply Chain Digest, focusing
on environmental issues impacting the supply chain.
I
am not completely sure yet what is going on with Wal-Mart’s “Sustainability
Index” for suppliers and products, but it makes for some interesting possibilities.
Two
decades ago, for those old enough to remember, Wal-Mart famously led a “Buy
American” charge, spending millions on television ads that often featured Sam
Walton himself.
It didn’t
work – Wal-Mart soon found that consumers, in general, wanted low prices more
than they wanted to buy American. The campaign soon ended, and now Wal-Mart
is the world’s largest importer of goods from China.
More
recently, Wal-Mart, Home Depot and other retailers have started to have some
of the products on their shelves marked as being “Green.” My sense is this
has not had much of an impact on consumer behavior. Why? In part, because so
few products yet have the label.
However, Wal-Mart has announced plans for a new Sustainability Index,
which will be created, in part, based on a consortium of various academics,
consultants, suppliers and others offering advice.
According
to the Wal-Mart web site: “The final step of the index is to provide customers
with product information in a simple, convenient, easy to understand manner
so they can make choices and consume in a more sustainable way. This will provide
customers with greater transparency into the quality and history of products
than they have today. How that information is delivered to consumers is still
undetermined.”
Read
between the lines – this means there is likely to be a green score for each
product (although there are huge challenges in doing this accurately and fairly)
sold at Wal-Mart.
Will
this be a small label that can only be read if a consumer gets very close to
the product? Or will it be a prominent score, easily seen on most products
from a distance? The new Scarlet Letter?
Just
imagine if it is the latter – you go to buy a toaster, and there, the cheap
one, has a giant “47” emblazoned in bright green on the side (out of 100).
The more expensive one has a sterling 84 rating.
What
do you do now? Will your fellow shoppers see that you have opted for the
pollution and C02 generating machine? Even worse, what if someone you know
sees your callous disregard for the environment? Can you cover it up with
bread and milk? Will the cashier scoff at you when you move through checkout?
There is always the self-scan area…
I
remember in the movie Serial Mom when Kathleen Turner destroys the
credibility of one witness when she accuses her of failing to recycle. The
jury and crowd in the court room gasp in amazement and disgust, and her testimony
against Ms. Turner’s character becomes worthless.
I
am doing this in a bit of a humorous way, but for consumer goods manufacturers,
this is deadly serious. I, for one, am not wild that Wal-Mart could throw
its market clout around this strongly and, in fairness, there are a lot of
unknowns in how this will play out. To maintain this accurately at a product
level would be a daunting task.
Still,
it seems clear that such labeling is coming. The only question is whether
only the consumer will know – or every other shopper in the store as well,
and maybe your neighbors.
Discussion Questions: What’s the likelihood that green rankings
will become akin to a Scarlet Letter for consumer products? What do
you think of Wal-Mart’s Sustainability Index? How might Wal-Mart’s green efforts
affect the availability and the guidelines for environmental-friendly
products?
Sustainability index? Green rating? Look, I’m all for doing business in an environmentally friendly way but this is way too much. Show me the regular product and the more expensive, environmentally friendly product and let me decide. Don’t make me feel bad as a consumer because I can’t afford the toaster with the 87 rating.
This initiative will probably end up like the Made in America campaign where customers choose price over ‘sustainability’. I don’t think people come to Walmart to save the world. They go there to save a few bucks on everyday needs. This labeling program will confuse the customer and make a whole bunch of vendors frustrated. Oh wait, this is Walmart we are talking about. No new news here….
It doesn’t have to be a (negative) scarlet letter. It can be a Green letter that illustrates an additional benefit the product offers.
In other words, move this concept into a positive positioning. We all agree that awareness regarding what is good and bad for the environment is increasing. And there is the possibility that consumers will want to be part of what is “good.” While a sustainability index is unlikely to be the only reason for buying a product…like chicken soup for a cold, “it can’t hurt.”
There are environmental indicators for air conditioners, light bulbs, dish washing detergents, etc. I don’t see Wal-Mart’s concept as far-fetched.
Will it be consistently accurate? Will consumers demand accuracy? We do know it will have to be transparent…and that’s a good beginning.
There is a continuing danger that green will be associated with more green (higher prices). There are people who care about sustainability. It might be hard for some to say these days but when people are hungry, they want food; when they are thirsty they want drinks; and when facing a financial abyss–real or imagined–they want low prices and don’t really care about where the products came from, how much the farmers got paid, or whether they’re saving whales, pandas or the planet.
Sorry. Someone has to act the part of the 800-pound gorilla.
If you want sustainability to work, you can’t hammer away at that great unknown entity–the supply chain. You have to show people how it impacts their lives on a daily basis. In other words, what it does for them. This is where a few good Mad Men come in. You want to talk about sustainability and greening up, then you gotta sell it–the same way as you would sex or soft drinks.
Dan raises some interesting scenarios. One he doesn’t mention however is this; What happens–hypothetically–when Wal-Mart realizes that the majority of its highest gross products rate poorly according to its own sustainability index? And that by corollary the products with the highest ratings are their least profitable.
In my opinion, this is a scenario that could indeed play out. The question is, what does Wal-Mart do then?
Sustainability index? Will it clarify which elements of sustainability are rated well? For instance, one product may have a low carbon footprint in terms of moving the product from the manufacturer to the retailer. What is the carbon footprint if the manufacturing process is included, or the carbon footprint of getting the raw materials from the supplier, or the carbon footprint involving the growing or production of the raw materials? Is the product organic but has a high carbon footprint in terms of transportation?
Will all the elements of a product’s sustainability be evaluated? Communicated clearly to consumers? Will consumers want to sift through the information? Will they be embarrassed when making choices as reported in the article? Will consumers trust that these scores really were determined in a manner that was completely independent from Walmart?
The headline sounds good. The devil is in the details, as always.
The article focuses on one third of the Sustainability Index with great humor. Labeling is phase three (of three) in Walmart’s Sustainability Index rollout. Phase one has suppliers answering a simple survey regarding sustainable practices; the second phase will be about creating a global data base of product lifecycle information that can be leveraged by other retailers. I see this step as being the most significant for several years and Walmart has plainly stated that the labeling phase will be on down the road and that the details of what it might look like are “undetermined.”
It’s an enduring myth that Walmart is always working an evil and predetermined master plan that will suddenly get sprung on an unaware supplier and customer base. The truth is that Walmart has gotten really good at getting started and course correcting along the way. The labeling phase will not be arbitrary or haphazard; by the time it rolls out, Walmart will have a clear idea of what its customers want in terms of choice and everyone else will benefit from the trail that Walmart is blazing.
It’s a well-intentioned step in the right direction, which will be helpful to consumers so inclined. Of course there will be people who disagree loudly, especially because the Great Satan Wal-Mart is involved. I’d hope that Wal-Mart will put detailed info on its ratings, and how they work, on its website. Unfortunately, the population is increasingly comprised of people who believe that light bulb ratings are in some way tied to the Kennedy assassination, and that “sustainability” is directly tied to the secret financial interests of Nancy Pelosi. Can’t help that, can we?
Certification can become an end in itself and often ends up negating the very principles it is designed to support. The whole idea of one company defining standards for an industry makes me more than a little nervous.
The idea of an index or some kind of rating is excellent, but it should be done by an independent organization–not Wal-Mart–for it to be fair and one that the consumer will trust in the long run.
Studies have been done on what logos and green certification consumers actually pay attention to and this is what Wal-Mart needs to pay attention to. Their saber-rattling on the subject only lends to the confusion but it does at least move the conversation forward.
In truth, we are at a crossroads with manufacturing green products. It’s time to get serious with it and to come up with things that in deed are good for the environment and don’t cost that much more.
Like the person who used chicken soup example, there’s Healthy Choice on the shelf next to Campbell’s…what sells more? The fact that they are carrying both suggests both are selling, but right now a private branded chicken soup is probably selling the most.
In the end, the consumer will purchase what works best for her. The majority of Wal-Mart’s customer base is going to buy with her pocketbook. If being truly sustainable is on Wal-Mart’s mind then China should be out of the picture forever. That is not going to happen.
And manufacturers are in business to sell products and make money. That does put the onus on them. So we have plastic clothes pins and wood clothes pins side by side on the shelf at Wal-Mart. Both made in China. The wooden ones cost more, but break down in the environment better. The plastic ones are cheaper and last longer, but plastic. Product that isn’t disposable has to be part of the equation, so even though plastic is bad for the environment (uses oil), it’s probably cheaper and lasts longer. Which one will the consumer purchase more of? Wal-Mart’s data could probably tell you automatically. A few more of the plastic buyers will move to the more expensive wooden ones, but not in droves. It’s better if you come up with a plastic clothespin whose properties break down in the environment in landfills…and costs about the same or a little more. That’s the clear winner.
Actually, this is more of a means of educating the consumer–which is good–than scaring the manufacturer. It’s still up to the manufacturer to come up with products that are both green and serve a function and are priced well.
That sounds like a win, win, win to me. So manufacturers (and it’s high time this starts happening anyway) need to get their A game on.
The wide perspectives of the commenters here demonstrate this is not an easy question to answer–the key variables to consider might be in how consumer behavior is changing with regard to (and understanding of) “sustainability.” I just came across a very helpful academic overview of sustainable consumption in the International Journal of Consumer Studies – 33 (2009) 107-112 that may shed some light for others.
In my opinion, Walmart is only heading in this direction because they’ve seen a consumer demand for making “green-minded” purchasing easier for the average Joe. Whether it succeeds or not is in the subtleties and psychology of the transitioning minds of the emerging, more sustainability-minded consumer. Walmart is doing a lot of the research for the mass CPG brands and suppliers.
Cynical me suspects that green labels will be for sale to the highest bidders in each category.
Which dimensions will matter? “Green” means so many different (and sometimes mutually conflicting) things that I have serious doubts that it can be encapsulated into an index, or “footprint” or batting average.
What if we argue that conventional incandescent light bulbs are in one sense “greener” than the newer CFLs because their lighter weight means they use less energy to transport? Is this a spurious argument? Maybe, but it casts some light on how tricky it may become to decide what products are greenest.
I just don’t see how this is all that different from the many supermarkets now with their own shelf labeling systems, identifying “healthy” foods. The industry couldn’t agree on what’s “healthy,” so they’re doing it on their own, and they are, for the most part well received by shoppers.
Right now, few consumers care about sustainability any more than energy efficient labels. The majority of consumers with these concerns shop at Whole Foods. Until this recession is over, i.e. people go back to work, it will be about price.
Sustainability is nice, but price is far more important today, for all but a small group of consumers. When getting food on the table is less of an issue–as with organics–more consumers will add it to the purchase decision.
Wal-Mart is ahead of the curve here in the United States and right in the pack in Europe. After all the negative publicity Wal-Mart has received, starting to look like a good citizen doesn’t hurt.
Sustainability index? That’s just lip service for the press releases. The typical downtrodden customer at Wal-Mart has no idea what that is all about.
Hey, Whole Foods shoppers buy toasters, too.
Walmart is taking away reasons for people not to shop with them. Unfair labor practices? Oh, wait, they now require their law firms to offer flex time. Environmental degradation? Well, at least they are making it easy for me to choose a toaster with a smaller ecological footprint.
Walmart may never be the darling of the eco-set, but at least they won’t be the whipping boy, either.
” …this means there is likely to be a green score for each product (although there are huge challenges in doing this accurately and fairly)”
Ya think ?
Whatever the merits of the concept may be in theory, in practice I think it has a 99+% chance of producing heat and a <1% chance of producing light (qualities which are, respectively, inexahuastible and rare.)
Yes, Warren I do believe in the Great Satan…:-) Look, it’s simple, if there wasn’t a profit motive behind it–Wal-Mart wouldn’t be doing it. There is no greater champion at self-interest than Wal-Mart. This has nothing to do with ‘Sustainability’. It has everything to do with directing a consumer to the more highly-profitable purchase for Wal-Mart. Even if it’s only marginally successful in doing so, it will mean huge differences in profitability for Wal-Mart.
While it may be true that the majority of Wal-Mart shoppers are purely motivated by price and price alone, steering only a few to a more profitable purchase is significant. Yes, even the ‘down trodden’ want to ‘feel good’. It’s the same case with nutritional labeling. There is absolutely no difference between the two. Both are used by retailers attempting to look politically correct to the consumer while driving small movements in margin. Buying ‘healthy’ just as buying ‘green’ costs more. But there is also more margin. Move a little bit in either direction through soft coercion, and it’s a win for profitability. That is the motivation–nothing else. And, is making a profit a bad thing? No. But today, you have to disguise that because profitability is not politically correct either.