Wal-Mart to suppliers

by MEAT&POULTRY Staff
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Wal-Mart Stores Inc., the largest food retailer in the United States and, with sales topping $400 billion, as well as the world’s largest public company, announced July 16 a new sustainability program that will require all Wal-Mart suppliers, including meat and poultry companies, to meet a set of sustainability and transparency standards that Wal-Mart says will improve product quality, stimulate innovation, reduce the environmental impact of manufacturing, and institute greater transparency in the manufacturing, distribution and retailing chain. But that could also raise costs for Wal-Mart suppliers.

The new sustainability initiative "will put the customer in charge," said Wal-Mart CEO Mike Duke on July 16 at a "Sustainability Milestone" meeting in Bentonville, Ark., the company’s headquarters town, that was webcast around the world. "Customers want and expect retailers to have greater transparency. When companies don’t have transparency they don’t have the trust of their customers."

Duke said that Wal-Mart will shortly send out a 15-question questionnaire to all of its suppliers to assess their sustainability and transparency efforts. "We’re asking our suppliers to look hard at their own operations," he described. The company is also providing the initial impetus and funding for the development of a global database about the "life cycle" of every product Wal-Mart and even other retailers sell. It is organizing a consortium of universities and non-governmental organizations to help build the database, which will "tell customers about the sustainability of the products they want to purchase." In the case of meat and poultry products, that would include information on the farm or ranch of origin, the packing and processing plant, how the product is distributed and how the packaging can be disposed of or even recycled in an environmentally responsible way.

Duke didn’t say so directly, but his presentation seemed to imply that all the costs incurred from meeting Wal-Mart’s sustainability objectives will be borne by the huge retailer’s suppliers. When the Wall Street Journal asked John Fleming, vice president and chief merchandising officer at Wal-Mart, what kind of relationship a supplier who didn’t provide data for the sustainability index could expect with Wal-Mart, Fleming replied, "We probably don’t have one."

Several examples of the kinds of efforts and products Wal-Mart expects to result from its sustainability drive were given at its July 16th presentation, including the use of methane digesters at dairies supplying Dean Foods, a Wal-Mart supplier of sour cream, which convert the methane gas given off by cow manure into electricity. A British retailer, ASDA, which Wal-Mart owns, now buys one-third of the eggs it sells from free-range egg producers. It has also begun to feature, according to Paul Kelly, ASDA’s director of corporate affairs, who also spoke at the meeting, "low-carbon" beef.

Already, Wal-Mart has improved the fuel efficiency of its huge trucking fleet by 38 percent, said Leslie Dach, the company’s executive vice president for corporate affairs and government relations. It did this not only by improving gas mileage but also by using computerized routing to eliminate inefficient miles. In 2008, Dach said, Wal-Mart delivered three percent more cases of products to its stores but its trucks traveled 90 million fewer miles than the previous year. Overall, Wal-Mart stores have reduced in-store waste by 57 percent – "and it’s been completely cost-neutral" – and has become the largest donor of food in the U.S. Regarding sustainable food production, Dach said, "We want to bring more farmers into the supply chain and have more farmers farming sustainably." By 2011, he said, Wal-Mart will have 1 million farmers in China in its sustainable-farming program.

Fleming told the meeting that the company has been working on sustainability improvements for four years. He said that soon, store customers who buy the Wal-Mart brand "Faded Glory" cotton clothing apparel will be able to find out about the farmer who grew the cotton, see the cotton field, find out how much cotton was used in the garment as well as the environmental impact of the production of the garment from start to finish. He added that Wal-Mart is not only making this effort for its customers today but especially for the customers of tomorrow. When he talks to student groups and goes on recruiting trips to colleges, he said, sustainability and environmental impact are all he ever hears about. "In terms of these kids, we may never be cool, but we’re showing them we care," he said.

Dr. Jay Golden of Arizona State University, who will head the consortium of academics that will build the product life-cycle database, said that in the history of supply-chain development, today’s announcement could be as important as the moon landing on July 20, 1969. The Apollo space program, he said, completely changed the way contractors and suppliers interacted with and supplied the National Aeronautics and Space Administration, creating new efficiencies that were crucial in NASA’s effort to put a man on the moon by the end of the 1960s. The same thing could be the result of what was announced during the meeting, he said. "We’re talking about a completely new way to bring products to the customer and to keep the customer informed about those products."

"The economic crisis we’re in now has brought a new normal of expectations," said CEO Duke. "I don’t think this is a short-term thing – saving money. It’s not going to go away. And expectations have been raised for retailers. We always say the customer is in charge, but frankly sometimes we haven’t always walked the talk. But this puts the customer in charge. The customer wants to know."

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