Walmart announces new environmental initiatives in China

This post is also available in: Chinese (Simplified)

Wal-Mart announced on Wednesday in Beijing a series of environmental initiatives that, if fully implemented, could dramatically reduce the pollution coming from thousands of Wal-Mart suppliers (and the suppliers of these suppliers) in China.  Here are a few of the new requirements announced (as noted in the Wall Street Journal):

• “Wal-Mart said it will require third-party certification that suppliers are meeting all the safety, labor and environmental standards required by local laws.”
• “Manufacturers that sell directly to Wal-Mart also must provide the retailer with lists of their suppliers.”
• “Wal-Mart said it will phase in energy-efficiency requirements with its Chinese suppliers next year, and expand the program world-wide by 2010.”

The implication of these commitments are potentially staggering. The seemingly insatiable appetite in the West for cheap Chinese goods matched with poor implementation of environmental controls in China has lead to what China’s own Ministry of Environmental Protection calls an “environmental crisis.”  Wal-Mart, which purchases over US $9 billion directly from China, has been at the vanguard of this shift in production to China.  If suppliers respond to Wal-Mart’s requirements and actually comply, the impact will be broad and wide-ranging.  How well Wal-Mart can overcome the difficulties of enforcing these sorts of requirements on suppliers will, of course, make all the difference.  The China Price by Alexandra Harney does an excellent job of making clear just why this can be so difficult.

One development that has gone unspoken in media coverage about this announcement is the important role that China’s move toward greater openness and transparency has played in the lead-up to this.  The information released by Chinese environmental authorities has allowed companies and members of the public alike to identify the factories in their communities or their supply chains that are illegal polluters.  The most well-known is Ma Jun’s excellent water pollution and air pollution maps.  But lesser known grass roots environmental groups and unknown regular folk around China have been making use of these new information tools to learn about problem polluters.  My colleague, Linda Greer, has carried out an innovative project in the textile industry which developed out of Jiangsu Province’s important Greenwatch program – a system to disclose through a five-level scale the environmental performance of tens of thousands of factories in the province.  One of the textile factories that had appeared as a bad polluter on the Jiangsu list has worked with NRDC to bring itself into compliance with environmental laws.  This is how greater transparency is supposed to work, and remarkably it is already beginning to pay dividends.

And Wal-Mart is making the case that this is all good for business as well.

“Some people’s primary concern will be what will this do to cost?” Mr. Scott said. “But when we rolled out our sustainability initiative at Wal-Mart we found that eliminating waste, downsizing packaging and improving transportation fuel efficiency led to a whole lot of savings.”

He added, “I don’t expect people to immediately jump off their chairs and say this is wonderful. There will be a healthy dose of skepticism on some people’s part.”

A healthy dose of skepticism is indeed in order, as a tremendous distance still exists between this commitment and successful execution.  After the press conferences are done and gone, corporate pledges of this sort have had a spotty history of actually going into effect.  But credit is due for a bold pledge, and there will be many people in and out of China watching over this process as it rolls out across China to see if it really happens.

See additional New York Times coverage here.