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15 Sep 2009

Green Intelligence: Toward True Ecological Transparency

Wal-Mart’s push to develop a sustainability index for the products it carries could prove to be a pivotal moment in the effort to make consumers aware of the environmental impacts of what they buy.
By daniel goleman

Two months ago, Wal-Mart made an announcement that could set off an ecological earthquake: The giant retailer disclosed it was cooperating with an academic consortium to develop a sustainability index for rating its hundreds of thousands of products.

Just weeks after Wal-Mart’s announcement, the Harvard Business Review featured a cover story proclaiming that sustainability has become the key to successful corporate strategy. The article, co-authored by the University of Michigan-based strategy maven C.K. Prahalad, proclaimed that the next business model must be green and touted ecological innovation as the coming driver of economic growth.

Wal-Mart has handed the environmental movement a new tool for ameliorating the human footprint: using an emerging generation of information systems to create market pressures to upgrade the ecological performance of commerce and industry. This strategy entails making life-cycle-assessment data for products transparent — that is, labeling them with a sound, independent rating so shoppers can easily take the ecological impacts into account as they decide what to buy.

Indeed, the Wal-Mart announcement has thrust what once seemed merely an intriguing idea into a market reality companies will have to deal with — not just in tomorrow’s strategic plans, but in today’s logistics and operations. Wal-Mart’s 100,000-plus suppliers (and the likes of Procter & Gamble counts as just one) will be required to reveal their products’ ecological impacts or have them dropped from the retailer’s stores worldwide.

“A year ago I was just beginning to talk with folks at Wal-Mart about the concept of life-cycle assessment,” says Gregory Norris, an industrial ecologist who teaches at the University of Arkansas and the Harvard School of Public Health. “Now they are using the tools to do pilot life-cycle assessments on their own products. This has gone from talk to action.”

Norris heads the development of Earthster, an open-source information system designed to evaluate a product’s life-cycle assessment relative to
If this comes to the Wal-Mart supply chain, it’s on its way to the global economy.”
industry norms and help suppliers and bulk buyers to spot ecological upgrades that will improve the product’s rating. Norris, a member of the Sustainability Consortium that Wal-Mart has partnered with, envisions Earthster as capable of creating industry averages for a given product, enabling manufacturers spot where they need to improve and helping companies find suppliers who can offer upgrades on a given ecological impact.

A pilot project now underway with Earthster involves seven products from Wal-Mart. The intention is to make the system scalable, so that one day all items in Wal-Mart’s aisles will have a sustainability rating, starting with the retailer’s 3,500 house brands. “We expect usage to scale exponentially by next year,” says Norris. “Because Wal-Mart has so much influence, other big companies are looking into this, too.”

Roughly 20 percent of factories in China are said to be somewhere in the supply chain for Wal-Mart’s suppliers. “If this comes to the Wal-Mart supply chain,” Norris comments, “it’s on its way to the global economy.”

The index will produce a sustainability rating label that retailers will post as a single number or symbol next to an item’s price tag. The Sustainability Consortium, which is developing the index and is centered at Arizona State University and the University of Arkansas, envisions the system as a new industrial standard, one that many retailers beyond Wal-Mart will adopt, and that companies and other organizational purchasers will use in business-to-business buys.

A prototype for just such a sustainability index is already in operation: GoodGuide.com, launched earlier this year, aggregates more than 200 databases — from the global warming evaluations of companies compiled by ClimateCounts, to government listings of toxic chemicals — into a single rating on a 10-point scale.

The advantage of an all-in-one rating is this: say you’re buying a wood product that has won Forest Stewardship Council approval — but you also want to know how it rates on chemicals of concern, how workers are
Such eco-rating systems from big retailers exemplify a coming wave of radical transparency.
treated, and its carbon footprint. GoodGuide, developed by a team led by industrial ecologist Dara O’Rourke of the University of California at Berkeley, tells you all that, and much more — either in a single summative score (on a 1 to 10 scale), or broken down into sub-ratings in environmental, health, and social categories — and, if you’re determined to dig down to details, with transparency about how the ratings were arrived at. So far GoodGuide rates 70,000 or so individual products, with more in the pipeline.

According to O’Rourke, GoodGuide.com has had more than two million web users since its launch in October of 2008. A survey reported at a September meeting of the Grocery Manufacturers Association found even during the economic downturn two-thirds of shoppers say they now find it more important to purchase products with health and environmental benefits.

O’Rourke has found himself invited to speak at a succession of business and industry meetings to explain the new ecological transparency systems. “My message to them is: ‘This is coming. Wal-Mart’s involvement is the biggest proof this is going mainstream,’” O’Rourke told me. “In the last two months we’ve been getting more and more calls from big retailers wanting us to let them put our ratings on their products — especially house brands,” which typically have double the profit margin of other products.

Such eco-rating systems exemplify a coming wave of radical transparency that could culminate in products’ competing not just on price and quality, but on their total ecological impact as assessed in life-cycle-assessment ratings. This could finally bring ecological impacts into the value equation for products.

Perhaps the most surprising development is the turnabout in businesses’
Historically consumers have known next to nothing about the true ecological impacts of what they buy.
embrace of transparency about ecological impacts (or at least some businesses — there also remains widespread skepticism, if not outright fear, of transparency). “Wal-Mart was considered the most secretive retailer,” O’Rourke says, “but now they’re saying the only way forward is the path of openness.”

Historically there has always been a vast information asymmetry, with consumers knowing next to nothing about the true ecological impacts of what they buy. Ecological transparency hands that once-hidden information to shoppers. The information systems fostering marketplace ecological transparency are disruptive technologies, promising to be a game-changer both for business and for environmental, public health, and social activists of many stripes.

One scenario: As the cost of compiling and indexing this previously hidden information drops to zero, the ratings will sway the shopping decisions of substantial numbers of consumers — as well as business-to-business and institutional buyers — shifting market share toward ecologically superior products, thus making winners of brands that compete best on the ecological merits, along with price and quality.

This, in turn, could trigger a virtuous cycle where this crucial information at the point-of-purchase impels companies to upgrade the impacts of their business practices in an ongoing process of improvement. And this game change for business could resolve the longstanding debate within companies about sustainability, where some voices argue for social responsibility and others counter that there is just no business case to justify changing. While there are exceptional, progressive companies, the best most businesses have done is to pursue sustainability only to the extent it immediately helps their bottom line — for example, by finding cost savings from energy efficiencies.

The big switch will come as executives see that the top line now benefits with more sales for ecologically superior products. Then the smart business strategy will include a perpetual upgrade, where companies actively search for points in the life-cycle assessment of a product and where an improvement in a supplier or source — or in a chemical or other ingredient, industrial platform, or process — could give their product a better ecological impact score.

All this promises to accelerate the demand for innovations across the entire range of ecological impacts from industry, transportation, and retailing. Andy Ruben, formerly the head of Wal-Mart’s sustainability initiative and

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For environmental groups, this sea change can make allies of businesses that were once seen as adversaries, creating a common agenda. Already the Nature Conservancy has consulted with a global oil company on how to manage a huge holding in Wyoming in ways that leave crucial ecosystems in optimal shape. Coca-Cola turned to expertise from the World Wildlife Fund to better understand its water footprint, and how to be lighter in the impact of its usage. Such working alliances, where academic and nonprofit expertise joins with business ventures to lessen ecological impacts, will make increasing sense in a radically transparent future.

Industrial ecologists — who focus on sustainable approaches that integrate environmental, technical and social factors — may find themselves suddenly in the spotlight, as ecological transparency highlights for business the importance of the discipline itself and primes demand for its services. As industrial ecology transitions from offering high-fee, proprietary life-cycle assessments to doing more open-source ones in the service of a virtuous cycle, the field may well take on new cachet and draw a flood of talented people who see it as a way to find work in keeping with their values.

Only time will tell if vehicles like the Sustainability Index or GoodGuide will one day be used by enough shoppers and big buyers to matter in these ways. Wal-Mart executives point to survey data suggesting that younger people — those born from the 1980s on — are far more motivated to shop for a better planet than any past generation. An increasing number of institutional buyers already have mandates for more ecologically sound purchases, so these rating systems could readily be used as lenses on suppliers.

But can information systems really create a new level of buyer awareness that will reach critical marketplace mass? I was at the New York Times as a science journalist when the Internet was launched, and if anyone had said then that one day this new kid on the block would threaten the paper’s very existence, they would have met only scorn. We’ll see.

ABOUT THE AUTHOR


Daniel Goleman is the author of Ecological Intelligence: How Knowing the Hidden Impacts of What We Buy Can Change Everything. His conversations on marketplace ecological transparency with Dara O’Rourke of GoodGuide and Gregory Norris of Earthster can be downloaded at: www.morethansound.net/ecological-awareness.php.
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COMMENTS


This article arrives right along with a piece in today's NY Times about taxing an additional penny per ounce for drinks with sugar to help defray the cost of health related costs caused by such drinks. We need to not only inform consumers about the ecological impact of our purchased, we need to include the true costs / honest costs of all products we buy. It's both the knowledge and pricing signals that will change our behavior for the better.

The one penny per ounce charge for sugar drinks would yield $15 billion per year in the US - that's 47 Gallons of sugar drink per year for every man, woman and child (over the age of 8) - my wife and I drink perhaps one can per month each, so others are taking up our slack. No wonder obesity and other health issues are "killing" us and our health care budget.
Posted by Elliot Hoffman on 17 Sep 2009


This is a very interesting development and there is much to be hopeful about. I feel compelled, however, to offer a note of caution.

The fundamental flaw in our global economic system is the assumption that limitless growth is desirable and possible. So now we are recognizing the need to incorporate "sustainability" into our model.

I worry that a sustainability index could turn into a marketing device -- a driver of more growth -- to lure us into continued, unbridled consumption, even as it returns some real environmental benefits.

A product index turns sustainability into a relative term -- a product is more or less sustainable in comparison with another product. That construct works and is useful when the universe is a superstore, and WalMart deserves that much credit.

But thinking larger, let's recall the definition of sustainability that has animated international discourse since it was formulated most famously by Gro Brundtland in the report called Our Common Future (1987): it is development that "meets the needs of the present without compromising the ability of future generations to meet their own needs."

That's the real yardstick, and we still have yet to confront the unpopular notion that there are limits to growth.
Posted by David Sassoon, SolveClimate on 17 Sep 2009


Wow. Great article, great caution, David. Aren't we hoping, at the end of the day, for systems intelligence — how one product can be compared against others on the basis of its whole lifecycle economic, social and environmental impacts. I am working on low carbon fuel projects right now aiming in exactly this direction and would love any references or resources anyone can provide.

To quote a friend, Wal-Mart can the "third rail" for driving not only "awareness" but increased demand and higher expectations. I am very hopeful.

My caution: awareness hasn't necessarily led to behavior change.

My source of hope: many millennials get it that their security, prosperity, and meaning are directly tied to the wellbeing of the whole planet and make their decisions accordingly and are asking fundamental questions about our GDP-based consumer culture.
Posted by Will Duggan on 17 Sep 2009


Interesting article. CNBC is doing a whole documentary on Walmart and is looking closely at the mega-store's new green policy. If you're interested the show, "The NEW Age of Walmart," premieres Wednesday, September 23 at 9P ET on CNBC.

For more info: http://bit.ly/l8okr

And for a sneak peak: http://bit.ly/12Tnlw
Posted by CNBC on 18 Sep 2009


Praiseworthy step towards the present challenge! Now it will give vent to the public voices that according to the index the item should carry a tax tag to compensate the loss. When it's directly cost effective, then only the clean products consumption will be encouraged. And isn't it even justifiable as well?
Posted by Padam Pande on 19 Sep 2009


Although a good start, Walmart’s initiative doesn’t address that people apt to truly care about sustainability ratings would never set foot in Walmart for other reasons, namely exploitation of cheap labor in China, mass-produced goods. The issue at hand here is more than just the number 5 next to the $3.88 price tag; there are social justice implications that come along with goods production that Walmart will not be able to address simply by following what happens to the product after it leaves the sales floor.

David, you mention that this sustainability index may yet just turn into a market device and driver of more “linear” moving growth. I too fear that Walmart’s initiative is clearly a business venture to create new markets and in the end, drive up profits (which are already grossly astronomical). I am more than eager to see them follow through with their plan to evaluate product life-cycle though, and I see it as their acknowledgement of accountability for the vast scale of environmental implications as a result of their operations. If Walmart is really to make a stab at sustainability, they would need to bring labor back to the US, and focus on the natural resource being used/affected for each product and what that will mean for the resource in the future.
Posted by Julia on 22 Oct 2009


Whether Wal-Mart has undertaken this “sustainability index” project as a marketing tool, a way to generate greater respect and corporate goodwill from the huge ‘anti-Wal-Mart’ population or as a way to silence many of its critics; this is without a doubt, a massive step forward for the retail sector and Wal-Mart should be applauded for this initiative. The consumer should also be applauded. Wal-Mart’s decision to incorporate the index, reflects shifting consumer values that Wal-Mart seeks to capitalize on, it seems that consumers not only seek frugality at the check-out, but seek to lessen their formally externalized costs unto the ecosphere as its becoming increasingly apparent that the perils of climate change, biodiversity loss and deforestation are knocking on our doors and action is imperative. So weather this initiative is profit driven or implemented from a newly transformed and inspired Wal-Mart, the outcomes are undeniably good! And in response to David Sasson's blog, the ‘limits to growth argument’ does not really apply here.

Firstly, I doubt that an index will increase consumption. If the Wal-Mart consumer sees that their preferred brand of toilet paper is derived from old growth Boreal forests the home to endangered species of wolves, moose, bear and a provider of essential ecosystem services (sequestration, climate regulator etc), they are most likely to choose a more sustainable option (post consumer, recycled, biodegradable).

I feel that people are more conscience that we hippies believe, when given the correct information, knowing that a product is directly perpetuating deforestation or another widely acknowledged ecological disaster pulls at the heartstrings. So in this example, the concept of ecological extraction and its consequent transformation into a marketable good, is significantly curbed, the beneficiaries are Wal-Mart and the ecosphere. Growth will be significantly curbed.

My primary concern is that this Wal-Mart initiated index – being directed by Wal-Mart – could favor the products and suppliers that Wal-Mart has existing and friendly relationships with. I wonder how loyal suppliers, that will score poorly on the test will react to this? Your thoughts? Should there be a subjective entity that objectively scores products?

Ultimately, this is a step forward for the retail sector. Weather virtuous or not, Wal-Mart’s initiative will get the consumers thinking about sustainability and new and improved indices will arise from shifts in consumer thinking. This is how society progresses, this is an example of consumers forcing Wal-Mart to transform.
Posted by Harrison Koch on 26 Oct 2009


We need to reduce your use of plastic water bottles The bottled water business is booming. In the U.S. alone, we use 1.5 million barrels of oil each year just to create plastic water bottles. We collectively use billions of plastic water bottles each day in our country and only about 12% are recycled. The rest end up in our landfills, or worse, littering our roads, rivers and waterways.

In fact, every plastic water bottle ever produced is still in our environment today. Reducing our use of bottled water and bring our own water from home in a reusable bottle. Consider that municipal water supplies are checked diligently for safety while water bottlers operate with little to no oversight. There are also many great water filtration systems available today, priced to accommodate any budget, and a variety of quality, stylish water bottles. With additional concerns about the safety of plastics and potential leaching of toxic chemicals like bisphenol-A (BPA) into our beverages, we say “just say no” to plastic bottles.

Posted by Dentista on 15 Dec 2009


Dara O'Rourke recently spoke at the 2010 State of Green Business conference about the difficulty of getting quality, systematic data, and the challenge this presents to all of us who are engaged in improving the knowledge of our picture of sustainability impacts.

Two of the central issues to our understanding of sustainability continue to be challenged by what the field terms as “scope” and “enfranchisement” which affect Earthster, GoodGuide and others in the field of metrics and standards.

“Scope” refers to all the things that defined for a sustainability measurement.

“Enfranchisement” relates to the question of who has been involved in the decision-making process of defining what is important to measure.

Are we factoring in every environmental, economic, social, technological, political and legal consideration and perspective -to get a true comprehensive picture?

As a social entrepreneur, I work on the URSULA Project, seeking to answer these questions. URSULA stands for Unified Rating System, Universal Lifecycle Assessment, and is a way of scoring and rating everything against a standard that serves all life on earth. URSULA is an open and transparent system that seeks to leverage crowd-sourced lifecycle data, and pair it with a fair voting mechanism, to create a universal standard through collaborative definition.

Today URSULA enables a level of detail and peer reviewed data from an enfranchised majority of scientists and the public, to ensure that we are measuring the right things in the right way.

Keep up the good work, Mr. Goleman.

Posted by Erik Rothenberg on 07 Feb 2010


David, you mention that this sustainability index may yet just turn into a market device and driver of more “linear” moving growth. I too fear that Walmart’s initiative is clearly a business venture to create new markets and in the end, drive up profits (which are already grossly astronomical). I am more than eager to see them follow through with their plan to evaluate product life-cycle though, and I see it as their acknowledgement of accountability for the vast scale of environmental implications as a result of their operations. If Walmart is really to make a stab at sustainability, they would need to bring labor back to the US, and focus on the natural resource being used/affected for each product and what that will mean for the resource in the future.

Posted by cna training on 08 Mar 2010


I don't know how after watching the movie: "Wal-mart; the high cost of low price", you can believe anything that Wal-mart says. They just seem to be more interested in propaganda. Look at their actions; not their words to see their nature. They don't act in a humane or environmentally friendly manner with their practices. Have people seen this movie? I mean, we should be ousting Wal-mart if we cared about the land and our people. Aren't mom and pop shops more sustainable; you know, "Think Globally, but ACT locally?"

Posted by Corrie Rainyn on 18 Apr 2010



 

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