August 6, 2007

Wal-Mart to score suppliers, packagers on sustainability

As part of its company-wide sustainability program, Wal-Mart Canada will be introducing its first-ever Supply Chain Sustainability Scorecard this fall to assess its network of service providers on the basis of environmental impact, efforts and improvement.

The company recently brought together dozens of companies, including some of Canada's largest trucking, rail, storage and distribution suppliers, to begin the process of quantifying various sustainability measures relevant to its product shipping processes and practices. The meeting allowed Wal-Mart to outline its new expectations of supply-chain service providers, and to establish relevant and agreed categories for its upcoming scorecard.

"Our new rules for supply chain sustainability will cover everything from fuel use, to facilities and equipment standards, to the overall environmental commitment demonstrated by the companies we hire to ship and store our products," said Lesley Smith, Wal-Mart Canada's vice president of supply chain. "As always, the business case and payback is twofold: a better operation with better environmental effect."

With the introduction of the Supply Chain Sustainability Scorecard this October, Wal-Mart Canada will be assessing the businesses it hires to ship and store its products based on four categories: Equipment, e.g. use of sustainable alternatives, efficient engines and tires, etc; Operations, e.g. enforcement of programs for recycling, vehicle idling, oil collection, etc; Facilities, e.g. responsible energy use (including green power), efficient buildings, etc; and Corporate commitment, i.e. a vision or culture of sustainability throughout the business.

By moving goods more efficiently, Wal-Mart Canada and its supply-chain service providers will help the retailer continue keeping its merchandise prices low. At the same time, by reducing materials, increasing efficiency, and eliminating unnecessary shipping, the company and its suppliers will meet rising environmental standards.

Steps in this direction have already been taken. In July 2006, for example, Wal-Mart Canada and shipping supplier SCM switched from road to rail mode to transport goods to ten stores in Nova Scotia and PEI. This change alone has reduced carbon emissions by 2,600 tonnes. For necessary road delivery, the companies converted 20 truck generators to electric power, saving 40,000 litres of fuel. Combined, these two measures are expected to deliver annual cost savings of more than $2 million.

In the coming months, Wal-Mart will "footprint" its supply chain operation, and has asked service providers to audit their respective environmental impact related to operations on behalf of Wal-Mart Canada. This will provide a quantifiable benchmark for future improvements.

The Supply Chain Sustainability Scorecard initiative follows on the heels of Wal-Mart Canada's introduction of its Packaging Scorecard program at a first-ever sustainable packaging exposition, held in Toronto this spring in partnership with the Packaging Association of Canada. This event brought together more than 100 Wal-Mart suppliers, including buyers from Wal-Mart Canada's home office.

The Packaging Scorecard program, to be in place by year-end, will assess suppliers' products on the basis of the sustainability of their packaging. It is intended to support the goal of reducing the packaging on products sold in Wal-Mart stores by 5% by 2013.

Examples of considerations for the Packaging Scorecard include whether companies are generating greenhouse gas emissions or using renewable energy to create packaging; whether materials used for packaging can be reduced, or eliminated; and, when materials are necessary, whether those materials have residual value and programs available to encourage recycling.

Wal-Mart has a growing number of sustainable packaging success stories. For example, reducing the size of a cardboard box for a product line of toys sold in Wal-Mart stores across North America by just one square inch created an immense "ripple effect" throughout the supply chain. In one year, cardboard use was reduced by 3,450 tons, PVC plastic was reduced by 600 tons, and fuel consumption declined by 300,000 litres. Related cost savings for Wal-Mart amounted to $3 million.

Also, by changing some shipping crates from cardboard to plastic, allowing boxes to be used approximately 60 times instead of once, Wal-Mart Canada has already saved $4.5 million in costs, with expected waste reduction of more than 1,400 tonnes and carbon emissions reductions of 10,000 tonnes, due to the elimination of cardboard production. This Canadian initiative has become a best practice for other global Wal-Mart operations.

This month, on August 29, Wal-Mart Canada will be holding a Green Fair in Montreal as part of its Achat-Québec program. This event will give Wal-Mart the opportunity to meet with Quebec suppliers of organic, environmentally friendly and fair-trade products. The goal of the Green Fair is to bring together the 70 to 80 Quebec companies that produce or distribute organic, environmentally friendly and fair-trade products in order to single out potential Wal-Mart suppliers in Quebec.

Launched in 2005, the Achat-Québec program includes nearly 1,350 Quebec suppliers whose products are specially identified in the store. Since the program's inception, Wal-Mart has met with 800 potential suppliers at trade fairs around the province. Wal-Mart has 51 outlets in Quebec and purchases more than $1.5 billion of goods from Quebec suppliers annually.

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