Walmart’s Green Strategy Raises Serious Issues

Wal-Mart's move to eliminate 20 million metric tons of greenhouse gases from its supply chain in the next five years is impressive. It's also an example of the world's largest retailer exerting a blunt form of regulatory vigilantism.

Please don't get me wrong. Wal-Mart's program clearly makes a positive difference for a company which would emit a whole lot more carbon without this program. The company reports this effort will have dramatic impact: the equivalent of removing 3.8 million cars from the world's roads for one year. The company notes that its efforts will cut costs for consumers who buy its products, while making its suppliers more energy efficient in their use of raw materials, manufacturing processes, transportation, and waste disposal. And Wal-Mart's collaboration with the Environmental Defense Fund on the program stands as a model for corporations engaging with influential nongovernmental organizations to make progress for the planet. It is difficult to argue with such benefits.

That said, let's take a moment to consider how Wal-Mart's move affects businesses that now have no choice but to react to this mandate. Here are some of the implications:

1.No one outside of Wal-Mart gets a vote. Wal-Mart is setting standards in advance of any government action or regulation. Yes, the House has approved the Waxman-Markey bill for carbon caps, but President Obama hasn't signed a bill yet. If a supplier wants to play in Wal-Mart's world, it has to play by Wal-Mart's rules. Not the U.S. government's rules, set through a tortuous but generally open process. Wal-Mart's rules.

To read the rest of the story, please go to: Harvard Business Review.