Section: PACKAGING STRATEGIES SUMMIT/FORT LAUDERDALE, FLA.

Packaging pros rate Wal-Mart's scorecard

Dateline: FORT LAUDERDALE, FLA. —

Love it or hate it, Wal-Mart's sustainable packaging scorecard is changing the industry, as suppliers scramble to please the retail giant's buyers.

Two points of view about the scorecard measure were presented at the Packaging Strategies Summit Meeting 2008, held March 12-14 in Fort Lauderdale.

Charles Fishman, author of the 2006 bestseller The Wal-Mart Effect, about the impact of the company's practices on its suppliers, and Julian Carroll, managing director of the European Organization for Packaging and the Environment (Europen), gave starkly different opinions on the scorecard Wal-Mart Stores Inc. implemented in February.

Fishman, editor-at-large of Fast Company magazine, said after his book on the Bentonville, Ark., discount-store chain's global footprint was published, Wal-Mart officials invited him to spend a day at corporate headquarters. One of the topics covered that day was Wal-Mart's commitment to sustainability. Fishman said he came away convinced that the firm's sustainability practices are a stew of more or less equal parts public relations spin, genuine commitment to protecting the global environment and bottom-line Business 101.

"They will change the economy and the ecosystem as much in terms of sustainability as they did in pricing," he said.

Fishman said he crunched a variety of numbers to explain Wal-Mart's enormous leverage over packaging suppliers and found some interesting results:

• The firm has $43 million in hourly sales, 365 days a year. That translates to about $24,500 in profit each minute of every day.
• Sixty-two percent of Americans live within five miles of a Wal-Mart store and 99 percent live within 25 miles of a store.
• Wal-Mart sells 100 billion individual products annually, which translates into about 333 items per capita.

Fishman said given Wal-Mart's stated goal of a 5 percent reduction in all of its packaging by 2013: If just 1 gram were removed from every Wal-Mart product, that would take 110,000 tons of packaging out of circulation — the equivalent of a line of 10,000 trash trucks stretching 38 miles.

While packagers may grumble about having to dance to Wal-Mart's tune, Fishman noted a Jan. 23 speech by Wal-Mart President and Chief Executive Officer H. Lee Scott Jr., in which Scott talked about Wal-Mart's goal of having 25 percent more energy-efficient products on its shelves within three years. "That is bold. That is remarkable," Fishman said.

While tooling up to produce savings for Wal-Mart will be costly for packagers in the short run, he said, increased energy and raw materials savings from making less packaging will improve suppliers' bottom lines.

He said plastic pouch makers especially could benefit from the scorecard, because their product takes up less shipping and shelf space than traditional cardboard boxes. "Why can't my breakfast cereal be delivered the way [specialty] powdered sugar is?" he asked.

He said rather than resisting Wal-Mart, packagers should seek to innovate with the company to make products that are eco-friendly and cost-effective.

"Use packaging as a differentiation for your company from your competitors, using [Wal-Mart's] own scorecard as a way to start that conversation," he said.

Carroll, whose Brussels, Belgium-based trade organization represents nearly 50 companies and national packaging organizations, described the European Commission's 1994 packaging and packaging waste directive, which set national recovery and recycling targets among European Union members.

While most pre-2004 EU members are meeting their goals, Carroll said Europen fought hard to defeat a 2003 European Parliament bid to build on the directive by creating a packaging and environmental indicator — essentially, a government-mandated version of the Wal-Mart scorecard.

"We believe that industry should become very vigilant to prevent the Wal-Mart scorecard from becoming a kind of de facto recognized packaging environmental indicator," Carroll said.

To be fair, he said, company officials have said the scorecard is only one of 13 tools to evaluate the performance of its suppliers. "It's a business management tool, not an environmental management tool," he said.

Europen commissioned an unpublished analysis of Wal-Mart's scorecard and found several inconsistencies in its criteria, Carroll said, including:

• Differing greenhouse gas measurements for North American and European suppliers.
• Combinations of different U.S. government data into the material types category.
• Requested data on transportation distances that offers no credit for making packaging at the point it is filled.
• Product-to-packaging ratios that discourage production of smaller portions and disregard market trends to reduce portion sizes.
• The way Wal-Mart analyzes recycled content in packaging, especially as it relates to current industry best practices with respect to food-safety issues.
• Recovery values that focus only on packaging that remains in Wal-Mart's possession and differing standards for giving credit to North American and European suppliers.
• No credit to suppliers based on the amount of renewable energy (wind, water) used to produce packaging.

Carroll said Europen also has concerns over how massive the job will be for firms to gather the data necessary to complete the scorecard, as well as how some brand owners might suffer when their Wal-Mart scorecard rankings differ from those attained in indicators such as the Dow Jones Sustainability Index.

"My suggestion is we shouldn't be talking about sustainable packaging per se," he said. "What we should be talking about is how your packaging and the packaging you're selling to your customers helps them add value toward achieving their corporate sustainability goals."

Indeed, Wal-Mart's CEO on March 13 backed away from the scorecard's greener goals, according to a Wall Street Journal report. Scott told a questioner at the newspaper's ECO:nomics conference in Santa Barbara, Calif., that the firm isn't working with suppliers to please environmentalists. "It really is about how you take cost out which is waste," he said.

'[Wal-Mart] will change the economy and the ecosystem as much in terms of sustainability as they did in pricing.'

'Industry should become very vigilant to prevent the Wal-Mart scorecard from becoming a kind of be facto recognized packaging environmental indicator.'

PHOTO (COLOR): Fishman

PHOTO (COLOR): Carroll

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By Dan Hockensmith, PLASTICS NEWS STAFF