The Consultants Relief and Retirement Act

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No, this is not a new government program to get us out of the recession. It’s the Walmart plan to create a Sustainability Index. Greenbiz ran an article discussing the need that this program will create for most of the Walmart suppliers that have yet to carefully assess their footprint and social beneficence. That amounts to some 90,000 firms world-wide. The article estimates that only about 10% of the impacted firms have already done some of the work or have the resources to comply.

Consultants are already jumping to get business from these firms.

Walmart's sustainability assessment offers both a huge business opportunity and a potentially huge environmental business. Walmart suppliers will likely find opportunities to wring inefficiencies from their operations through the process of assessing their environmental footprints, while a bumper crop of consulting and accounting firms is springing up to help suppliers navigate the journey.

This may be putting the cart a little before the horse. Nine of the fifteen questions on the survey form require only yes or no, for example, “Have you measured your corporate greenhouse gas emissions?” It may take a consultant to explain the question and assist the firm in searching its records or examining its policies, but no measurements or quantitation is required. Presumably any questions that have no for an answer will require that the firm correct the situation at some point. Given the nature of the survey, all of these dichotomous questions are eventually going to require a yes answer. Otherwise, it will be virtually impossible to do any ranking. It’s probably one strike and you’re out.

This is unquestionably a positive move as it will force the firms to examine each of the topics being questioned and respond by filling in the gap. I am a bit skeptical about asking whether the firm has obtained 3rd party certification for any of its products. This is an onerous and expensive process, and still a controversial one in terms of the significance of the rating process. Will this substitute for the life-cycle process Walmart expects to instigate based on the inputs from the suppliers? If so then the intended ranking or rating system will have multiple algorithms and different weighting schemes.

Three more of the questions ask for whether target have been set and if so what are they? I am puzzled as to how these data are to be assessed. Reduction potential is very industry and firm specific. A numerical target, by itself, says little and may send erroneous signals about a firms intentions.

The remaining three ask for real data, if available: greenhouse emissions, water use, solid waste, Again it is not clear what meaningful information this piece of data provide. Here too, the numbers require a great deal of contextual data to provide significance to sustainability. What data is Walmart going to use to compare firms of different size, located in diverse places. Consultants enter because greenhouse gases are very difficult to measure and are largely computed from some sort of estimating program. Consultants “own” these programs and are unsurprisingly reticent to reveal their details.

Missing from the questionnaire is anything related to toxic materials. For many of the products in Walmart’s shelves, this is likely to be the most important factor in determining the “sustainability” of the product. I use scare quotes here because I do not believe that any index, based on these questions and their answers can be direct related to sustainability no matter how you define it. It is not even clear how this program will lead to reduced levels of unsustainability as long as unlimited growth drives the firm's strategy.

There is great danger that, given Walmart’s dominating position, their system will become some de facto standard. The news that followed the public airing of the project noted that other companies may join them. Greenbiz writes:

The sheer size of Walmart's reach makes the initiative a big deal, said Nancy Hirshberg, vice president of natural resources at Stonyfield Farm, a New Hampshire producer of organic yogurt and other dairy products that are sold at Walmart. "It's the biggest customer in the world asking you questions about things you should be thinking about," Hirshberg said. "Not anyone else has that power."

Hirschberg makes a key point. The Walmart process will get firms thinking about unquestionably important issues related to sustainability, but not all of what is necessary. Will the omission of these send the wrong message that what Walmart asks for is all that counts? Our knowledge about how economic activities interact quantitatively with the outside world is imperfect. Should any company be setting the rules for how to judge what is acceptable or not?