06/11/2008 11:16 AM

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The Greening of Wal-Mart Page 2

Another benefit of certification is that it establishes a clear view of each fish's chain of custody. "One of the problems we had was how much of our fish was coming to us third-, fourth-, or even fifth-hand," says Redmond. "Sometimes our supplier turned out to be nothing more than a packer who was going out to a market saying, ‘I need 50,000 lbs. of salmon no matter where it comes from.'"

Greater transparency in the seafood supply chain allows Wal-Mart to select better suppliers, simplify the chain of custody, minimize paperwork, reduce transaction and transportation costs, and improve the quality of the fish it receives - all while improving environmental outcomes.

The nonprofits in Wal-Mart's seafood network win, too: Both the MSC and WWF are attracting suppliers who might otherwise have eschewed certification to capture or keep Wal-Mart's business. And their programs have gained unprecedented levels of visibility through Wal-Mart's involvement. This visibility helps them build clout with consumers and get other retailers interested in carrying more sustainable seafood.

Trustworthy Textiles

Unlike seafood, cotton is not in short supply. Yet farming conventional cotton creates millions of tons of pollution every year. In contrast, organic cotton farming is gentler on the environment and on farmworkers' health.

With labels that appeal to parents by emphasizing the softness and chemical- free nature of organic cotton, Wal- Mart has generated strong sales of organic cotton baby clothes - among other products. Wal-Mart customers are typically unwilling to pay extra simply because a product is better for the environment. When customers think a product is better for their own or their family's health, however, they're more likely to dig deeper and pay for it.

Both Wal-Mart and its customers initially had to pay more for organic cotton. Beth Schommer, a former Wal- Mart divisional merchandise manager for infants and toddlers, describes the pricing strategy when the program first started: "A little organic shorts set was maybe $10.94, whereas a similar non-organic outfit would have been priced at $6.94. So, yes, there was a price premium compared to other Wal-Mart products. But when you compare it to a $10.94 organic shorts in the marketplace, it's not expensive."

Still, Wal-Mart is trying to sell organic at prices closer to conventional cotton by expanding its organic cotton business. Nonprofits and government agencies are playing a significant role in this effort. The Organic Trade Association and Organic Exchange helped convince the company to adopt the USDA organic cotton standards - regardless of where the cotton is grown. They also advocated use of the Global Organic Textiles Standard for processing. "This is probably the toughest standard in the industry for organic processing and handling; it's now the only certification process that can be followed for organic products coming to Wal-Mart," says Kim Brandner, senior brand manager of sustainable textiles.

By using external standards and accredited third-party organizations to certify practices at each link in the supply chain, Wal-Mart can guarantee that its products are, indeed, organic. The company also minimizes criticism that its involvement will dilute the stringent measures that organic products must meet (a concern raised by organic farmers, retailers, and NGOs alike). Relying on network partners allows the company to accomplish its objectives without major investments because suppliers absorb most of the costs of certification.

Like the seafood supply chain, the textile network has become more efficient with the advent of certification. "It used to be that if Wal-Mart was buying Champion T-shirts, [it] wouldn't look past Sara Lee [which held the license for Champion products]. [It] didn't think about the spinner, or the dyer, the ginner, or the farmer," says Diana Rothschild, a former Wal-Mart employee and Blu Skye consultant to the textiles network.

But now Wal-Mart is forging ties much further upstream in its supply chain to become more efficient and reduce costs. "We used to buy cotton from Turkey, ship it to China for spinning and knitting, and then ship it again to Guatemala to be cut and sewn," explains Brandner. "Now ... we're finding opportunities to do things like eliminate the shipment to China and have all processing done in Guatemala." Going directly to Guatemala not only saves time and money for Wal-Mart, but also further reduces the company's impact on the environment by lessening the amount of fuel and other resources used in shipping.

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