Research News

The new Wal-Mart effect

Most of America’s low-cost stores have much of their merchandise made in foreign countries, like China. What’s become better known, because of recent news reports, are the serious safety and environmental concerns that can arise from these foreign suppliers.

A new study by Vanderbilt professor of environmental law Michael Vandenbergh finds that U.S. companies are often insisting on environmental standards in contracts with foreign businesses rather than lobbying national or international governments.

Vandenbergh found that based on an empirical study of more than 70 companies in different areas of business, more than half imposed environmental requirements on their suppliers.

“The new Wal-Mart effect occurs when a mix of social, economic and legal factors induces a firm to impose private environmental or other requirements on its suppliers that are traditionally the subject of government regulation,” said Vandenbergh.

Vandenbergh studied companies including Wal-Mart, Costco, Target, Home Depot, Lowe’s, Staples, Office Depot, General Motors, DaimlerChrysler, Toyota, Ford, Nissan, Hewlett-Packard, Sony, Dell, Toshiba, Apple and more and found that many of the companies have pushed for some sort of environmental standards beyond the supplier’s country’s current laws or created an environmental management system to make sure certain policies are being followed.

Vandenbergh warns that there’s no way to guarantee how strong these private environmental standards or management systems are, but they often may be better than the standards imposed by governments on products made in their countries.

Vandenbergh found that although the extent, content and enforcement of the standards vary widely among the retail and industrial sectors studied, “early indications suggest that the agreements are having an important influence on the environmental behavior of exporting firms over and above the influence of existing public regulatory requirements,” said Vandenbergh.

Even though Vandenbergh concedes that private environmental contracting could have its fair share of problems, his research finds that private pressure may be an important way to stop potentially dangerous environmental violations.

What does this mean for the consumer? Ultimately, Vandenbergh found that U.S. consumers can use the “power of the purse” to convince retailers to push for higher environmental standards from their foreign suppliers.

Vandenbergh’s full study titled The New Wal-Mart Effect: The Role of Private Contracting in Global Governance can be found in the current issue of the UCLA Law Review.

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Media contact: Amy Wolf, (615) 322-NEWS