Impact of Wal-Mart scorecard creates concerns

There is always risk when you're an innovator. That's why many persons experienced both excitement and trepidation when Wal-Mart officially implemented its packaging scorecard on Feb. 1. The company is using the scorecard to help achieve its sustainability goals of reducing waste, using renewable energy and selling sustainable products.

The scorecard requires suppliers to enter data into a program that allows Wal-Mart buyers to compare each supplier's sustainability credentials. It has become a key tool for the retailer's buyers to use when they make purchasing decisions.

As of the start date, Wal-Mart estimates that so far, nearly 6,400 of its vendors have submitted data on more than 97,000 products. In becoming the first major U.S. retailer to initiate such a sweeping sustainability program, Wal-Mart deserves praise. However, in the early weeks of its implementation, a lot of concern is being expressed.

Some say Wal-Mart's primary goal is to reduce its own supply-chain costs. Others claim the scorecard will drive up suppliers' costs as they redesign packaging and logistics. One estimate put Procter & Gamble's cost of complying at $200 million. By Wal-Mart's own estimates, about 20 percent of its suppliers have not yet submitted scorecard data. Most who haven't complied are smaller vendors.

The scorecard includes several key metrics: greenhouse gas emissions; product-to-package ratio; space utilization; the amount of renewable energy used in package production; and emissions related to the distance the packaging materials are transported.

One industry consultant expressed concern that some of the metrics on which the scorecard is based are not finalized, yet buyers are making decisions based on the scorecard results. He pointed out that some materials definitions are still listed as “draft” on a website for suppliers. He also said use of renewable energy was supposed to be extra credit, yet it's being given a 10-percent weight in each supplier's score, which could exclude them from purchases.

Despite a yearlong testing stage before the Feb. 1 launch, Wal-Mart admits that it will need to continue refining the metrics.

Perhaps the biggest concern about the whole process is the fact that no matter what Wal-Mart does, this sustainability program will become a de facto standard for the industry—the global muscle of this retail giant commands that much attention.

So, it is important that Wal-Mart gets it right. That's the responsibility of being a leader.