Walmart is making a splash in corporate supply chains this month with its new Sustainability Index, a system that aims to develop a sustainable standard for over 100 product categories. The Index seeks to assign a score to each of Walmart’s products thereby providing customers with greater transparency surrounding their favorite products and driving efficiency and risk mitigation through its value chain. The Index begins by organizing products into 100 different categories, each with its own specific Sustainability Scorecard. The scorecard then assesses each product’s supply-chain on the sustainability issues that are most pertinent to that product, whether they be climate emissions or workers’ rights.
Arguably, the biggest change from Walmart’s previous sustainability initiative (the Supplier Sustainability Assessment) is Walmart’s buyers and suppliers are now incentivized to stock Walmart’s shelves with the most sustainable products. Walmart states that it has, “put in place a set of incentives that will recognize leading suppliers and buyers” who are improving the sustainability of their products. Walmart even goes as far to say that “As part of these incentives, every one of our buyers, and their leadership, will have responsibility objectives on their performance evaluations, and the Index will be the primary tool they use to prioritize opportunities and set their annual objectives.”
Suppliers should pay particular attention to that last statement, as those who do poorly on the scorecard could potentially see their sales to Walmart dwindle as the program expands while leaders are likely to see their sales increase. While only 18 categories have been asked to respond to the index by September 14th subsequent phases that will expand the index to all 100+ categories are scheduled to take place this fall and next spring.
How Suppliers are Scored
Each product’s assessment consists of Key Performance Indicators (KPI), which focus on issues most relevant to that product’s lifecycle impacts on the environment and/or society. Each KPI is designated one or more Impact Groups, defined as where and how the product impacts society and/or the environment. The number of Impact Groups assigned to each KPI represents the total possible points that a supplier may potentially score on that KPI.
Scoring depends on the type of the KPI as well. If the KPI asks for a percentage answer, then scoring is simply: the number of Impact Groups multiplied by the percentage. Multiple choice KPIs are a little trickier however. Depending on the number of answer options each multiple choice KPI has, each answer option is assigned a different percentage. Once a supplier selects an answer option, that percentage is multiplied by the number of Impact Groups.
An example from Household Paper’s category assessment:
“KPI 5: Have you established GHG reduction goals?
- Yes, we have internal GHG reduction goals;
- Yes, we have publically reported, company-wide GHG reduction goals;
- Yes, we have publically reported GHG reduction goals for pulp production, or we have GHG reduction goals and at least 50% of purchased pulp comes from suppliers that have public GHG reduction goals.
- Yes, we have publically reported, company-wide GHG reduction goals.
This question has one null response (‘No’) and three positive responses, each positive response is assigned a percentage. In this example, there are three answer options so each increases its percentage by 33.3%, so the second answer option is 66.6% of the total possible points.
Score: 66.6% * 4 Impact Groups = 2.664 points
Renewable Choice has collected information Walmart has publically released regarding its Sustainability Index that affects suppliers in 100 of its largest product categories. From this, we developed a simplified FAQ to help suppliers quickly understand the scope, process, target categories and business impacts of the new index. We've also developed Scoring Guides for the Paper Products, Electronics, and Household Cleanser categories to help suppliers quickly understand the way these product categories will be evaluated and scored on the new index. Renewable Choice is not affiliated with Walmart.
Since 2009, we’ve been helping suppliers with sustainability. Please contact us for more information on how we can help you succeed with the new Sustainability Index.