As the world's largest retailer, Wal-Mart has successfully used its size to master technologies, processes and management techniques to outmaneuver its competitors for decades. The company's close connection with its suppliers, along with massive volume sales, has permitted Wal-Mart to transfer its efficiencies to its customers, resulting in lower prices and even higher sales volumes.
Wal-Mart hasn't always had the PR wind at its back, however. The 2005 film, Wal-Mart: The High Cost of the Low Price highlighted the large number of uninsured workers at the company along with numerous other less-than-flattering accounts of company behavior. So, was it inevitable that the strongest retailer would ultimately do what is in their best interest relative to its competitors? Perhaps. This might explain the firm's support of mandated employer health coverage after years of opposition.
While Wal-Mart's support of health care reform is surprising on the surface, its recent "Sustainability Initiative" is beyond ambitious. The company plans to create a highly complex "Sustainability Index" that would measure the environmental impact of every item on its shelves. The responsibility for documentation falls initially on each supplier, knowing that Wal-Mart will give preferential treatment to the most eco-friendly products. In fact, some products may never make it to market if Wal-Mart signals its opposition. Any wonder why laundry detergents are all "concentrated" now? WalMart directed the use of less water and packaging. That sounds like Wal-Mart directing Procter and Gamble on how to make its own products...
Do investors have reason to worry? Indeed, some big suppliers may have significant (unseen) liabilities in their current product lines. And where do the other retailers fit into the picture? Wal-Mart has taken the environmental high road that promises to change the face of retailing forever. I would hate to bet against them.
Still think that Sustainable Investing is a niche reserved for Treehuggers?
Better think again.
Boardwalk Capital Management
www.BoardwalkCM.com
