GRI Book Club: The Wal-Mart Effect

The Financial Times ran a news story yesterday with the headline "Wal-Mart postpones its green report." Seems that a draft circulated to its main stakeholders "was rejected as inadequate" according to the journalist. The world's largest company had originally promised a sustainability report by mid-2007 - a promise made back in 2005 when shareholders and advocacy groups put Wal-Mart under fire on their sustainability practices.

I see a real opportunity for Wal-Mart here - they have the chance to revolutionize the practice of reporting and make real strides towards understanding their sustainability footprint and reinforcing the global movement toward a common language for reporting. Fingers crossed they also see it that way.

No one really knows how Wal-Mart sees such things claims Charles Fishman - author of "The Wal-Mart Effect". Its an easy-to-read book which I am about 3/4ths of the way through. Mainly it's about the economic impact that Wal-Mart has on communities and its suppliers, but just last evening I came across a case study on the Chilean Salmon industry which highlights the power Wal-Mart could weild on workplace and environmental conditions if it so desired.

Fishman outlines the boggling growth in aquaculture in Chile, and the fact that about 1/3rd of that country's total output is bought by Wal-Mart. The problem is that this intensive fish farming is causing coastline damage and is polluting the sea beds underlying hundreds of pens jammed with millions of Atlantic Salmon (incidentially - the species is not native to Chile). Processing factories have sprung up and replaced subsistence agriculture as the main form of employement for people in the region. For the price to remain as low as $4.85 per pound of Salmon at Wal-Mart you can imagine that rehabilitating the environment or providing up-to-code working conditions for factory laborers are not on the priority list for these suppliers.

All I know is less than $5 a pound for Salmon sounds a bit fishy :-)

But imagine if Wal-Mart demanded low priced fish but produced via adherence to basic environmenal and labor rights codes? Fishman points out that "the result could be a completely new kind of Wal-Mart effect - Wal-Mart using its enormous purchasing power not just to raise the standard of living for its customers, but also for its suppliers."