SCDigest editorial staff

The News: Wal-Mart is putting lots of effort into environmental and “sustainability” programs, with CEO Lee Scott apparently truly having found religion.

The Impact: When Wal-Mart gets a cold, thousand of suppliers sneeze. The effort will potentially impact the processes and products of its supplier base domestically and across the globe. As a supply chain trend setter, Wal-Mart’s efforts may also help show the industry how environmental friendliness and smart business can co-exist.

The Story: Wal-Mart has been aggressively pursing a variety of environmentally-friendly strategies over the past few years. The impact on the retailer and its suppliers could be significant.

While a few observers have suggested the move is mostly a PR ploy by Wal-Mart to show up its public image in the face of several negative public stories in recent years and continued assaults by its many critics, a cover story in last week’s Fortune magazine is convincing that the effort by the company and CEO Lee Scott is very real.

In many cases, Wal-Mart is finding opportunities to be more environmentally friendly and improve the bottom line at the same time. In others, the effort may lead to higher costs and therefore higher prices – the question will then become whether Wal-Mart will maintain the strategy in those cases, or revert back to the low cost model, similar to the relative short-lived “Made in the USA” campaign that faded as Wal-Mart’s global sourcing expanded rapidly chasing lower prices.

Wal-Mart has already spent big money on outside consultants and internal effort getting the green movement underway. It even hired Al Gore to speak to hundreds of managers and show his global warming movie “An Inconvenient Truth,” and has trotted in a wide variety of other environmental movement leaders – in most cases, much to their surprise. It has dialoged with more environmentally-friendly industry peers like Whole Foods and Patagonia.

The result has already been a series of strategy changes and goals, and the establishment of 14 different “sustainable value networks” based on products or area (e.g. China), that would set strategies and goals and monitor execution.

In some cases, the goals and bottom line are well in sync, especially as gasoline and energy prices continue to rise. For example, Wal-Mart has set goals for its huge private fleet of increasing overall fuel efficiency by 25% over three years, and to double it in ten. It has similarly ambitious goals for energy use in its stores.

The company is looking hard at various packaging issues, both in terms of the cost impact on shipping and material costs, as well as environmental issues around its disposal. This is an area where suppliers can expect scrutiny by Wal-Mart in the hopes of both reducing costs and being more environmentally friendly.

But will Wal-Mart pursue enviro-friendly sourcing strategies that don’t also lower costs? Earlier this year, Wal-Mart announced that over the next few years it would transition its suppliers of salmon for its grocery stores from traditional, lower cost sources to higher cost suppliers that have been certified as “sustainable” from the Marine Stewardship Council. It hopes in part such certification will be embraced by Wal-Mart shoppers.

The company is also pursuing “organic” in a variety of product categories, from food to apparel, with positive consumer response thus far.

Fortune even reports the CEO Scott has had discussions with his peer at Kimberly-Clark about the potential for compressed toilet paper, which would somehow manage to squeeze three rolls worth into one.

As long as gas and transportation costs remain high, such moves probably have a great ROI in addition to achieving environmental goals. Whether they can withstand a potential return to lower logistics costs, or if such moves will enable competitors that maintain a more focused cost structure to gain share from Wal-Mart will be the really interesting questions.

More on this soon from Supply Chain Digest.

What do you think of Wal-Mart environmental and sustainability efforts? What are the benefits – and risks? Do you expect it to last? Let us know your thoughts.