Wal-Mart, Tesco and Sustainability… Questions for Suppliers to Retailers…

“They can change the industry in the same way that we used to expect the government to change industry.”

- Jeffrey Hollender, President Seventh Generation, talking about Wal-Mart

This is a remarkable statement, and it is true. Wal-Mart and Tesco have been walking into their respective suppliers in the last year making some extraordinary demands on environmental issues. Not extraordinary in content, but extraordinary for who is asking.

If you are at a company that has experienced this, consider the following questions:

  • Are these not usually the discussions that the company would have with government officials or environmental campaigners?
  • What would be the typical negotiation position with government or an environment group? Which people in the company would be dealing with this? Who is dealing with it now? Is this team more likely to say yes to the same demands?
  • Is it true that because it is a customer asking, the company is trying to accede to demands it would negotiate on more fiercely if it were a government proposal?
  • If this were a negotiation with government, would your trade association be playing a role? How much of a role is the trade association playing now? Has the game not switched to “how can we do this at least cost to ourselves”? (and usually at greater cost for our competitors)?
  • Is your sector becoming split on issues on which it used to be aligned?
  • How much extra information have you given to retailers in the past year? Could they put this to some productive use?
  • If you meet the demands of retailers, how much does this cost you, and how much does it cost them? Who receives the plaudits? If there were an environmental blame game in the next few years, who would be most insulated from criticism?
  • Do you see the current set of demands as a one-off, or the beginning of a continuing stream of demands? How far could this go?
  • If the retailers are receiving acclaim for their environmental work, is it possible that their brands will be more vulnerable to pressure group or media attack if they do not address a certain issue? Could this force the retailers to make demands on a wider and wider set of issues? Is there an issue on which you would have to say no? Would all your competitors say no?
  • Are the demands of one or two customers making you question your product for other customers? Will you change for all? Are your products being balkanized?
  • Is it possible that because of cultural differences in their home markets, the demands of major retailers will begin to diverge? If this happened, would you meet all sets of demands? If not, which would you choose?
  • Have you noticed that governments in the US and Europe seem happy for the retailers to take the lead in these areas? Is this different to the attitude of the European Commission even a year ago?
  • Will there be a time you would prefer it to be governments sorting out the new rules, not your customers?

The retailers have an excellent strategy. They help the environment, they help their business. What is your strategy?

December 2009