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The Weekly Walk of Shame series usually examines things that just aren't right in the world of finance and investing. Today, though, we're replacing the "Shame" with "Fame." Feel free to spread the love in the comments section below.
Today's subject: Over the years, Wal-Mart (NYSE: WMT ) has often drawn well-reasoned criticism about many of its business practices. Recently, however, its environmental initiatives have won the megaretailer some much-needed goodwill. Now Wal-Mart has taken another commendable step that could spur a whole host of other companies to become greener and less wasteful.
Why you should cheer: According to a recent article in Fast Company, Wal-Mart has begun setting up the framework for a Sustainability Index, surveying several major vendors and suppliers to determine how eco-friendly their practices are. The company may eventually publicize its results, which would allow consumers to make more informed choices about which products truly follow green practices.
The concepts of "sustainability" and "environmental friendliness" have long been difficult to quantify. Ever since environmentalism started to appeal to consumers on a wider scale, many companies have pursued half-hearted measures often derided as "greenwashing." Wal-Mart's initiative may help make a difference in how such claims are measured -- in a way that could earn the retailer consumers' love and real long-term cost-savings.
More importantly for Wal-Mart's suppliers, the retailer may also give high-scoring companies preferential treatment (and a bigger slice of its coveted shelf space.) That could push suppliers to compete on a whole new playing field: less harmful waste, more sustainable practices.
In addition, the company is involved with, and helped to launch, the independent Sustainability Consortium, which aims to develop tools to help companies innovate products with less harmful impact on the environment. The consortium includes not only retailers like Wal-Mart, but also non-government organizations (NGOs), government agencies, suppliers, and researchers.
Thus far, such divergent entities as Monsanto (NYSE: MON ) , Disney (NYSE: DIS ) , Seventh Generation, and the EPA have been involved. Others big names, such as Procter & Gamble (NYSE: PG ) , Dell (Nasdaq: DELL ) , and Unilever (NYSE: UL ) , are founding members, while organizations like the Environmental Defense Fund and the World Wildlife Fund have been attending meetings.
Even more intriguingly, the consortium is creating Earthster, an open-platform tool that will allow participants to share data and research, and theoretically help companies innovate more cheaply and swiftly when it comes to sustainable practices.
What now? We wait and watch for possible pitfalls to the Sustainability Index. Wal-Mart has a historical reputation for being ruthless to suppliers. Because of its huge role in retailing, suppliers have little choice but to play ball on Wal-Mart's terms. If they can't make changes quickly enough, some businesses could suffer mightily from this initiative, despite its ultimate advantages.
The idea that divergent stakeholders can cooperate with one another for a common, positive goal that aligns all their interests seems reminiscent of the proponents of conscious capitalism (like that preached by Whole Foods Market's (Nasdaq: WFMI ) CEO and founder John Mackey). However, we shall see whether such thinking can translate to Wal-Mart and its suppliers, not to mention its bedfellows in the Sustainability Consortium.
For some of these huge corporations, accustomed more to old ways than new thinking, such changes are difficult. They could find it difficult to trust one another and share information. Meanwhile, regulatory bodies and NGOs certainly have a different mind-set than profit-driven corporations. The path could be anything but smooth.
In addition, it's still very early in the initiative. Wal-Mart's Sustainability Index won't even be ready for prime time until 2013, and there's clearly still a lot of work to do. It's unclear how the program will be executed, although Wal-Mart may provide a "nutrition label" type of environmental disclosure on products. Many major questions remain, including how to prioritize the components of sustainability. Is clean water more important than clear air?
My cheering may be a bit premature. Regardless, I think the spirit of innovation here deserves high praise. Such innovative impulses can surely lead corporations to better, more efficient, less wasteful business practices. We investors should celebrate such long-term thinking. And there's no time like the present to start trying.
Given Wal-Mart's massive size and influence, its efforts could create real, quantifiable positive change. The quest to discover better, more sustainable ways of business, ways that are easier on resources and the environment, is certainly one to celebrate.