Wal-Mart's Packaging Scorecard: How Will You Rate?

On Feb. 1, Wal-Mart Stores Inc., Bentonville, AR, officially unveiled its much-talked-about Packaging Scorecard, setting in motion a program that will continue through 2013. The announcement publicized the scorecard's series of criteria for evaluating the sustainability of product packaging from Wal-Mart and Sam's Club suppliers.Starting in 2008, Wal-Mart will use the scorecard to evaluate and rate its 60,000 Wal-Mart and Sam's Club worldwide suppliers in the hope to reduce greenhouse gas emissions, landfill waste and a lot of supply chain costs. Wal-Mart alone expects to save $3.4 billion, if it reaches its goal of a 5% reduction in packaging by 2013, and could drive nearly $11 billion in savings in the global packaging industry over the five-year period, according to Matt Kistler, vice president of products and packaging innovation at Wal-Mart, in a transcript from a media call following the September 2006 announcement of this commitment at the Clinton Global Initiative in New York. Wal-Mart declined a formal interview. Wal-Mart began to form this packaging vision last year, when the company worked with suppliers to cut back on packaging for its private-label Kid Connection toy line. Streamlining packaging on fewer than 300 toys over a period of one year, according to Wal-Mart, saved 3,425 tons of corrugated materials, 1,358 barrels of oil, 5,190 trees, 727 shipping containers and $3.5 million in transportation costs. Essentially, the scorecard will build on those lessons, extending the waste-cutting strategy to Wal-Mart's more than 160,000 products worldwide. The ScorecardWal-Mart worked with a team of packaging materials suppliers, called the Packaging Sustainable Value Network, to identify the scorecard's criteria and metrics.Andy Johnson, director of business development and marketing at Graphic Packaging International, Marietta, GA, who has been participating on the value network for a year, says, "They've been trying to get a consensus around how the scorecard weighting should be applied and the different underlying calculations for the scorecard."The decided calculations, according to a Wal-Mart statement are as follows: 15% will be based on "GHG/CO2 per ton of production;" 15% will be based on "material value;" 15% will be based on "product/package ratio;" 15% will be based on "cube utilization;" 10% will be based on "transportation;" 10% will be based on "recycled content;" 10% will be based on "recovery value;" 5% will be based on "renewable energy;" 5% will be based on "innovation."To elaborate on those numbers, first look at the 15% delegations (greenhouse gas emissions per ton of production, material value, product to packaging ratio and cube utilization). Companies can take steps to address several of the scorecard criteria by right-sizing packaging so that it better fits the product, says Johnson. "There are many packages in the marketplace that have a lot of headspace, so there are opportunities to downsize the package itself." He lists Velveeta cheese as an example of the ideal 1:1 product to package ratio, with the foil wrap resting right next to the product.Next, three criteria score a 10% count of the supplier's rating (transportation, recycled content and recovery value). To slash transportation, which will be based on the number of miles traveled, companies should look to alternative routes. "The scorecard provides insight to your distribution model. I think companies will identify ways to reduce the distance of shipments or increase the amount of materials shipped after they have entered data in the scorecard," says Johnson.And other solutions will contribute as well, he points out -- smaller and more effectively shaped packages will fit better in trucks, shrinking fuel costs. Incorporating recyclable materials into packaging is another great step, but recovery value -- the actual rate of recovery, due to in-place networks for repurposing and recycling, for each material that can be reused -- is a crucial second part of the materials equation. Graphic Packaging understands the rate of recovery for different versions of its favored material, paperboard, and Johnson notes that vendors specializing in plastics, metals and other materials will have similar insights for clients in their areas.The final two criteria are weighted at 5% each (renewable energy and innovation). No doubt, replacing fossil fuels with renewable energy sources and incorporating renewable resources into production when possible will boost a company's score. Innovation is trickier: What has your company done to help improve sustainability through innovative initiatives? Johnson points to concentrated versions of liquid detergents, which entered the marketplace in the past few years, as examples of supplier innovation that saved big on packaging.How are Marketers Taking it? In corporate announcements, Wal-Mart has indicated that it will not impose incentives or penalties outside of comparative ranking to spur suppliers to improve their methods. Critics ask: Will that be enough? Wal-Mart reported that in the scorecard's first month, 2,268 suppliers had logged onto the scorecard site and that 117 products had been entered into the rating system. The company also held its second annual Sustainable Packaging Exposition on March 12 in Bentonville, where 130 packaging vendors displayed alternative packaging solutions to an audience of nearly 3,000 product suppliers, hosted by Wal-Mart buyers. "The turnout from the package development side of the biggest CPGs in the world was there; you had packaging development people at the VP level who were there with their local Wal-Mart sales team, walking the floor to see what the opportunities were in the area of sustainability," says Charles Brignac, marketing manager, winning at retail, at Graphic Packaging International. He adds that while he has noticed an interest in sustainability from Graphic's supplier partners in recent years, "I think that Wal-Mart has taken this to a new level in terms of creating a scorecard. Now everybody's brand is going to be onstage come 2008; they can't present an item without presenting their score. They're under the microscope to meet their objectives." Susan Graff, principal at ERS, an Atlanta-based firm that advises corporate clients on holistic sustainability initiatives, notes that the competition to be a leader in the sustainability movement is a real pressure. "[Our clients] tell us consistently that first and foremost they are trying to make more sustainable products because they realize they're going to be at risk in the long term if they aren't able to innovate first," says Graff. One success story she points to is that of Interface Inc., Atlanta, a manufacturer of commercial carpet and the popular waste- and cost-saving modular carpet tiles and carpet squares. "They were in a situation where their total industry was crashing ... and 10 years later, they are leading the industry," says Graff. "They basically financed their whole sustainability evolution off of the savings from better natural resource efficiency, better use of energy and materials, that went along with innovation." Interface caught the attention of Wal-Mart's CEO Lee Scott, and in 2004, Wal-Mart associates began meeting with Interface executives to learn more about sustainable practices."Everyone who's in this professionally wants to see Wal-Mart win on this because they have such a huge influence," says Graff. And truly, as the corporate focus on sustainability grows, the impact will be far-reaching. Even packaging suppliers will do well to make sustainability a part of their innovative process, notes Graphic Packaging's Johnson. "A lot of our customers have added new functions that are working on sustainability ... I think that packaging suppliers that are not providing more sustainable solutions may find that they are out of sync with the marketplace and that their customers will lean toward suppliers that have more sustainable options."The Greater OpinionOf course there are plenty of moral reasons to lean toward sustainable corporate practices, but in the end, will consumers notice the change? Graff thinks so, and she believes strongly that suppliers and retailers should work to emphasize sustainability gains at the point of purchase to reach the growing number of consumers with environmentally and socially conscious values."I think that companies have got to be able to tangibly point to what they've done," says Graff. "The fact that Wal-Mart's going to have some measurable data on packaging is a good start."Graphic's Brignac is not so sure it's that simple. "Studies would indicate that only about 15% of consumers would even consider paying more for a package just because it was a sustainable package. Over 85% say they'd rather have a better price," he says. "I would say that the largest impact is clearly going to be those areas where cost of goods is taken out of the process at the same time that sustainability goals are being met by removing materials." As Wal-Mart's guidelines indicate, cutting costs and materials are exactly the ways the retailer is encouraging suppliers to think when they consider sustainability, at least for now."Our size and span is exactly why sustainability has to exist in the business, and why it has to be our way of doing business," said Andy Ruben, Wal-Mart's vice president for corporate strategy and sustainability, in a paper by Interface Inc. "Sustainability will keep us competitive, and will keep us communicating with our customers, suppliers and associates to collaborate and innovate." Graff voices her hope that packaging is only the start of things to come and notes that real change could be spurred if Wal-Mart would exhibit a buying preference for products produced through sustainable innovation processes. Her hope may not be too far from being realized: In March, Wal-Mart released criteria for a new scorecard, this one geared to evaluate consumer electronics suppliers on the environmental sustainability of their products. According to a company release, Wal-Mart will begin asking suppliers to fill out the scorecard in 2008 and notes that buyers will, in fact, have the option to use the results to influence purchasing decisions."I think the [sustainability] problem is going to be solved in the engineering and R&D centers of some of these big consumer brand companies, and that's going to be to Wal-Mart's benefit," Graff says.

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