BENTONVILLE, ARK.

The idea of one overarching eco-rating system for every retail product based on a stringent lifecycle analysis might be considered the holy grail of sustainability-focused businesses. Would it still be if such a system were developed by private industry? How about if it were developed by Wal-Mart (NYSE: WMT), the world’s largest retailer?

That’s exactly what Wal-Mart—which reported revenues of $93.4 billion in the first quarter of 2009—set out to do in July when it announced an effort to create a sustainability index. The Wal-Mart sustainability index is planned to identify—though not rate or certify—the environmental and social impact of every item the company sells.

Wal-Mart is starting by sending a list of 15 questions to its 100,000 global suppliers. The “simple but powerful questions” ask whether certain actions such as measuring carbon emissions or creating sustainable purchasing guidelines have been taken. The answers would become the basis of a report on each company’s sustainability-related actions that consumers would be able to evaluate in a glance, the company says.

Yet the 15 simple questions may not be enough to create a “worldwide sustainable product index [that] will establish a single source of data for evaluating the sustainability of products.”

“The index may help companies start to think generally about how to measure their environmental impacts,” says Martha Stevenson, senior project manager at GreenBlue, a nonprofit based in Charlottesville, Va., that worked on Wal-Mart’s “packaging scorecard,” which the mega-retailer sent to 2,000 of its private-label suppliers in an effort to reduce its overall waste by 5 percent. “Until Wal-Mart adopts a clearly defined, transparent methodology for company data reporting, the index is not going to be effective for comparisons of companies or product purchasing decisions.” This is something she says she is expecting in the second phase of Wal-Mart’s sustainable labeling effort.

Ian Spaulding, managing director of INFACT Global Partners, a corporate social responsibility (CSR) consultancy that works with Chinese factories, says he tends to agree. Just getting companies to think about such issues is not enough, Spaulding says. He notes that Wal-Mart’s largest suppliers such as Proctor & Gamble (NYSE: PG) are already working on these issues and are making great strides. Small- to medium-sized suppliers, however, will not necessarily implement any changes after returning the questionnaire, Spauling says.

“The vast majority of suppliers and factories around the world are not there yet,” he says. “They do not have an understanding of sustainability issues today. They probably don’t know what corporate greenhouse gas emissions are and how they can be reduced in the manufacturing process.”

Large retailers historically have not been highly successful at helping small and medium-size suppliers implement CSR strategies, he says.

Yet others in the sustainable supply chain management industry say Wal-Mart’s latest actions are a good sign. “I’m not seeing leadership on this topic coming from anywhere,” says Aaron Berg, principal and founder of Portland-based Blue Tree Strategies, a consulting and accounting firm that helps companies measure their sustainability efforts. “Until we can really account meaningfully for carbon dioxide equivalents, we’re really not empowered to talk about things like carbon taxes or sustainability intersecting with economic value. They just trumped every nation in the world.”

Reprinted with permission from Sustainable Industries