Wal-Mart (NYSE:WMT) has quite a rep related to social issues like employee treatment. However, it's often proved to be a force to be reckoned with when it comes to environmental issus. Its latest promise: to add a system to disclose and eventually dispose of chemicals in the products it offers.
The initiative focuses on 10 chemicals and will affect an array of products, including household cleaners, personal-care products, and most strikingly, perhaps, baby-care products. Wal-Mart's talking "Sustainable Chemistry" -- a catchy phrase and discipline meant to "reduce or eliminate use or generation of hazardous substances, both to humans and to the environment," and the company describes it as "an evolving field as science and customer expectations evolve."
The first step will occur in January, when the behemoth discount retailer will track the reduction of the chemicals in the products; it will highlight its own environmentally safe products the EPA's Design for the Environment Label.
Some investors may not think customers care about such elements, but apparently, consumers do, or companies see the writing on the wall in terms of building trends. Last week, Procter & Gamble (NYSE:PG) vowed to begin a phase-out of phthalates and triclosan. The consumer-goods giant couched the decision in terms of what people increasingly want (or don't want) in their products.
One of the things we know about Wal-Mart is that it is so huge and touches so many consumers and suppliers alike, it can actually bring about substantial change in areas like this one. Many suppliers have no choice but to listen when Wal-Mart pushes for changes like these.
This undertaking will take some time. Even though its first stirrings will begin in 2014, it will not report on progress until 2016. In 2018, any items that still include the chemicals will be required to disclose them.
Wal-Mart has planned its Sustainability Index since 2009, in conjunction with The Sustainability Consortium. That has long been intended to work with suppliers on identifying eco-friendly attributes, so this is part of that push. However, Wal-Mart has already been working on some issues with suppliers since 2011. Its supplier scorecards on these matters help its buyers make decisions and allow Wal-Mart to give suppliers actionable recommendations on improvements they can make.
As interesting as Wal-Mart's move is, it's not alone. Whole Foods Market (NASDAQ:WFM) has also worked on some labeling initiatives; last year, 90% of its household cleaning offerings could boast the Eco-Scale rating for environmental friendliness.
On the other hand, though, California regulators just recently filed a lawsuit against the organic grocer regarding the sale of some pesticides in its stores, stating that the regulator hadn't yet deemed the products safe.
Wal-Mart has navigated chemical problems recently, too, so its latest news on a new view on toxins has good timing. In late May, it shelled out $81 million in settlements to regulators regarding old allegations that it had improperly disposed of hazardous waste.
Obviously, these are big undertakings for the biggest companies we know, and sometimes they will be downright difficult. However, the fact that they're trying to clean up their acts and disclose or even eliminate toxic product ingredients is a big step in the right direction.
Investors should definitely mull the fact that consumers demand these changes in their overall views; preferences are most definitely changing, and people are asking for a lot more transparency and a cleaner, less toxic world to live in.