July 17, 2009 - Wal-Mart, the world's largest retailer, announced today that it is developing a universal rating system to calculate the social and environmental impact of every product on its shelves.

The rating system will be developed over the next 5 years, and the company is hopeful that other retailers will adopt the system. If they do, it could result in a universal sustainability rating system for consumer products. Think of this as a nutrition-label for non-food items.

In prepared remarks, Michael T. Duke, Wal-Mart's President and CEO wrote: "We have to change how we make and sell products; we have to make consumption itself smarter and sustainable."

For many of Wal-Mart's 56,000 suppliers worldwide, this could add more costs to an already low-margin industry. While the program is voluntary, the company said this in regards to suppliers choosing not to participate: "Then they are probably not relevant to us."

The first steps in this program include Wal-Mart sending a list of 15 questions to all of its North American suppliers, for which the response deadline is October. The questions are fairly macro-level and do not drill down into specific product targets. The first sample question issued was "Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets?"

While still 5 years away from launch, the implications of this announcement are far-reaching and significant. It creates new table stakes for all suppliers, as consumers will be judging products not only on price, but on environmental and social performance. And as invitations to participate have been extended to other major retailers, the initiative has the potential to become standard practice for industries as wide ranging as home improvement and electronics in addition to food, textiles and other consumer packaged goods. Because of the sheer size of the retailing behemoth, this labeling system could easily grow faster than any other certification system to date.

"If we could take a snapshot of products today in the store and then fast forward 10 years from now," Matt Kistler, Wal-Mart's senior vice president for sustainability told the New York Times, we would see "dramatic changes."

This is not Wal-Mart's first venture into the sustainability area, the company has set far reaching goals around waste reduction, their supply chain management and sourcing as well as renewable energy usage.

What do you see as the potential implications of this announcement? Leave your comment below!