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Extra7/16/2009 12:01 AM ET

Wal-Mart to require 'green' labeling

The retailer is asking suppliers to assess the environmental costs of making their products. The data will be used to devise 'green' ratings that will guide shoppers.

By The Big Money

PepsiCo (PEP, news, msgs) buys lots of renewable energy, while a Coca-Cola (KO, news, msgs) plant recycles plastic bottles. Should environmentalists drink Pepsi or Coke?

Dell (DELL, news, msgs) is "carbon neutral." Hewlett-Packard (HPQ, news, msgs) says it designs for the environment. Whose laptops are more "green"?

So many choices, so little reliable guidance: Clorox's (CLX, news, msgs) Green Works or Seventh Generation? Local or organic strawberries? Paper or plastic? Who's to say?

Wal-Mart, that's who.

The giant retailer ($406 billion in revenues in 2008) is developing an ambitious, comprehensive and fiendishly complex plan to measure the sustainability of every product it sells.

Wal-Mart has been working quietly on what it calls a "sustainability index" for more than a year, and it will take another year or two for labels to appear on products. But the company's grand plan -- "audacious beyond words" is how one insider describes it -- has the potential to transform retailing by requiring manufacturers of consumer products to dig deep into their supply chains, measure their environmental impact and compete on those terms for favorable treatment from the world's most powerful retailer.

Wal-Mart intends to announce the sustainability index at a meeting today at its corporate headquarters in Bentonville, Ark., to which hundreds of suppliers, academics, environmentalists and government officials have been invited. There, the company will unveil a sustainability consortium led by the University of Arkansas and Arizona State University that will provide scientific research to support the effort.

Faculty at Duke, Harvard, Stanford, the University of California at Berkeley and the University of Michigan have been involved in planning the index, but they haven't yet agreed to join the consortium, in part because some college administrators are skittish about working with Wal-Mart.

Consumer-goods companies Procter & Gamble (PG, news, msgs), General Mills (GIS, news, msgs), Tyson Foods (TSN, news, msgs) and Unilever (UN, news, msgs), among others, are partners in the consortium. And competing retailers including Costco Wholesale (COST, news, msgs), Target (TGT, news, msgs) and Kroger (KR, news, msgs) have been invited to join. This is, in other words, a very big deal.

Wal-Mart declined to discuss the index in advance of its meeting. So did other retailers. But details are trickling out.

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Medical worker  © Corbis
Nation's retailers split over health reform
The National Retail Federation is rallying its 2,500 members in opposition to Wal-Mart's support of a federal mandate for employer-funded health insurance. (July 13)
"Bringing clarity to this question of what is more sustainable is a key role for Wal-Mart," said Rand Waddoups, senior director of business strategy and sustainability at Wal-Mart, in an interview at a GreenBiz.com conference in May.

"Imagine one day when every product on the shelf has behind it enough information from a life-cycle-thinking perspective that allows us to be much, much more intelligent about how we're buying," he said. "And really, in the end, eventually, what consumers should be."

Continued: Get the ball rolling

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