Wal-Mart's Supply Chain Greenhouse Gas Analysis

Abstract

As part of Wal-Mart’s Sustainability 360 initiative, the company seeks to find and eliminate greenhouse gases (GHGs) in its products. Wal-Mart plans to engage its supply chain in a product-level analysis of GHGs. Ultimately, Wal-Mart plans to use a carbon scorecard for two purposes: (1) as a merchandising department tool to reward suppliers that demonstrate superior environmental performance, and (2) as a business development tool in other departments at Wal-Mart. This master’s project examines the initial pilot phase of the supply chain initiative, designed with three questions in mind: Where is the carbon in the supply chain? Can a dual-purpose scorecard exist? Is this scorecard commercially viable? The pilot introduced 35 vendors from 7 product categories to carbon footprinting and gave them a Carbon Disclosure Project (CDP) questionnaire specifically designed for Wal-Mart suppliers. The questionnaire requires the vendors to reach one step back in their own supply chain to determine direct and indirect sources of GHGs allocated to the products they make. The questionnaire results indicate a wide range of embedded carbon values and provide insight into the energy intensity of packaging formats; however, pilot participant feedback indicates data inaccuracy due to low response rates from vendors’ suppliers. Because it is infeasible to engage closely with Wal-Mart’s approximately 66,000 suppliers, focus after the pilot needs to concentrate on the most energy intensive products. Life cycle analyses (LCAs) of Wal-Mart’s 3,000 retail product categories can identify 20 percent (approximately 600) of the categories that are (1) most energy intensive, (2) show the greatest sales volume, and (3) provide Wal-Mart with an opportunity to assist in energy efficiency. Wal-Mart will ask representatives of the identified categories to fill out the CDP questionnaire. The resulting data will yield one of the two initiative purposes—Wal-Mart’s energy department could assist some suppliers in energy efficiency mechanisms, creating commercial viability for the scorecard. Fulfilling the second initiative will require a second scorecard to rate a firm’s climate strategy and yield a simple score Wal-Mart’s merchandising department can use to rank suppliers and reward top performers.