As most people know, Wal-Mart is the world’s largest retailer. Its supply chain is made up of thousands of vendors and it stretches across a slew of borders and cultures. In recent years, the company has a high profile attempt at making this behemoth supply chain greener.

Matt Kistler, Wal-Mart’s senior vice president of sustainability, recently joined me on GreenBiz Radio to offer insight into working with suppliers to design products and packaging to be more environmentally friendly. Matt will be a featured speaker at GreenBiz.com’s upcoming GreenerByDesign conference.

Tilde Herrera: Thank you for joining us today on GreenBiz radio.

Matt Kistler: Thank you.

TH: Wal-Mart has generated a lot of headlines since first announcing its overarching sustainability initiatives. Now let’s talk specifically about how Wal-Mart is working with the supply chain to get its suppliers to green their products and packaging. Can you give us some success stories?

MK: Sure, I think early on we started off really focusing on packaging because it was something that, certainly, working with our suppliers was a large opportunity for us to make sustainable changes. Actually, in 2006, we began with just a simple goal to reduce packaging by 5 percent. That is something we can all focus on.

Certainly, one of the biggest opportunities also is not just to reduce the packaging, but to look at the material composition of the packaging (and) improve upon it so that the product that we used can be recycled. But, certainly, the reduction is probably the biggest opportunity for not only Wal-Mart, but certainly for our suppliers to reduce their costs.

TH: In terms of products, are there any success stories there?

MK: Yes, there are definitely products we’re bringing in as a company that are more sustainable. It’s simple things like the work we’ve done, let’s say, in liquid laundry detergent. Looking at our compacted laundry detergent, we worked with Unilever and then with P&G in making all the liquid laundry detergents that we sell compacted. That will come into play and completion later this summer. But Sam’s club has all ready converted all their liquid laundry to compacted and Wal-Mart’s doing the same as we speak.

TH: Matt, can you give us other examples of products?

MK: Yeah, we’ve worked with our suppliers in a number of different areas. I guess one that’s exciting and definitely ridding us of some waste is we recently launched a garden mulch that is made from recyclable tires.

Our tire centers at Wal-Mart stores and Sam’s Clubs would previously take our old tires -- the old tires that consumers would leave behind, I guess -- and have those hauled off. We paid to have them hauled off and, unfortunately, go into a landfill. But now we found a supplier we’re working with and they’re manufacturing with that raw material a garden mulch. That’s obviously made from the tire materials, so (it’s) a rubberized material. Not only does it last longer for the consumer but our customers with children, it provides a great playing surface for the kids because it has a little more cushioning to it. Also it doesn’t have the harmful affects from wood, like splinters.

It’s a great product. Once again, it’s kind of a closed loop system where a tire that we once sold to the consumer is coming back to us and then we’re having that material taken and turned into a whole new product. That’s a whole new revenue stream for that manufacturer, and it also reduces our costs and provides a fantastic product that the consumer is adopting. It’s nice to see sales continue to grow for that product.

TH: Can you talk a little bit about the process -- first the conception of this product to actually bringing it to market?

MK: Yes, there are several items we’ve looked at and what we could do with closed-loop efforts and this was one that came up.

We actually had several people approach us and we’re working with several different suppliers in this area. It’s simply just looking at what raw material waste streams exist today and looking at our business. What can we do with those waste streams -- whether it is the trash that we receive in from shipments or the packaging material that we have?

This one came up as, obviously, we have a large number of tires that we take back and this is just a use for them. Working with a supplier partner, we were able to develop a closed-loop system, which is obviously great for us and great for this new supplier to Wal-Mart, but I think, too, the consumer is adopting it nicely and it’s a new product to add to our value beyond what’s available before.

TH: Now have there been challenges along the way?

MK: I think definitely there’s been a lot of learning along the way, and certainly we’ve learned that some things you cannot change immediately. But in working on packaging, just for an example, we’ve gone through several iterations of packaging improvements.

And I think the one thing that the important things of working with our suppliers is that we’re kind of taking a tech neutral stance and we’re looking at all options, all alternatives, and not making mandates but rather looking at what are the innovations? What are the new technologies that are available? And so we’ll have a given supplier with a variety of different packaging materials coming to us, and we’re evaluating and we’re testing all of them and we’re open to that. I think more importantly, our supply chain continues and our suppliers are doing a fantastic job of really working with us and testing and trying different things.

I don’t think anybody has found a complete solution yet in any of these areas but there’s definitely room for improvement and innovation and certainly (for) collaboration in working together.

So that’s what I’m most pleased with but I think we’re all still trying to become more sustainable. There is not a green solution out there and we’re all still looking but I think by working together we’ll get there a lot faster.

TH: Let’s talk about advice for other companies -- the dos and don’ts in working with your supply chain to bring them onboard. What do you do? Can you offer some best practices for driving green design?

MK: I think, first of all, you said it: It kind of starts with the design. If the design is wrong to begin with, it’s hard to make a product more sustainable if you start with a bad design. But then I think, too, it’s not looking at mandates. It’s looking at continuous improvement and innovation. I think, too, one thing that has been very successful for us in working with our suppliers is something we just call “bringing the system into the room.”

And it’s very literal as well as conceptual in that we literally bring the supply chain into the room. So we’ll have the manufacturer of the actual product. We may have the raw material supplier. We’ll have the packaging people, whether it is the people who actually make the packaging material or the designers of it. And then we'll have people on the supply chain who touch the products, so transportation, logistics, and then how the product is actually merchandized.

By bringing the whole system into the room, you start seeing where the opportunities truly lie versus just making small changes that maybe are incremental only. You bring the whole system into the room and you can make some real revolutionary change in seeing what a total benefit can be. And you may also see where one cost for one product of that supply chain or one piece of that supply chain may be higher initially, but in totality because of what you do in that one area, it allows you to be more sustainable in another which, in total, lowers your cost. So the consumer wins in the end because we have a lower costing product on the shelf.

TH: That sounds interesting. Can you give us an example of this happening with one of your products?

MK: Well, I think one I mentioned already was the compacted liquid laundry detergent as one where we looked across the system to see how we could make everything work better and also, too, how we could market the product more effectively to the consumer. So working with Unilever and PNG, we saved money in transportation. We’ve saved money certainly in logistics overall, not to mention just the raw cost of packaging material.

But then there was always concern that because it was a smaller size footprint on the shelf that it would be more difficult for the consumer to see the product, and also to have that impact you get with a larger packaging presence on the shelf. But in working with our marketing team, our merchandising team and certainly the product suppliers’ marketing teams, I think we redesigned the product. We marketed it better and we communicated the enhancement of the changes to the consumer.

I guess what we found is that there’s some downstream real benefits that we’ve seen with this product that initially we missed. So we’re seeing, first of all, that we’re able to keep more product on the shelf by reducing other stocks. We’re spending less labor time in putting the product on the shelf because the shelf can actually hold more product for the consumer.

But most importantly, all of us are seeing improved consumer benefits, or what the consumer is saying about the product because now it’s easier for them to handle. It’s easier for them to carry. They’re not using as much of their shelf space at home for this product, and when they need to get rid of the package, it’s easier for them to take care of.

TH: What other best practices can you offer to other companies?

MK: I think the one is that something we’ve effectively done at Wal-Mart was really to work on our own direct footprint first, so whether it be our stores or whether it be our direct or private fleets, we worked with them first and I think we got initiatives started there before we started kind of impacting the supply chain. So I think it’s pretty important for anybody who gets involved in sustainability to simply get there own house in order first.

Then when we started working with the suppliers, I think we cast a very wide net. We worked with all our suppliers, both, big and small and we took kind of the collaborative learning and the innovations from one area and we added them to others. So whether it be across packaging, whether it be across how we market the product, whether it be about closed-loop systems, we took the best learnings from some and we applied in the others which I think is really important in this space.

And I think lastly, something I think has been widely successful within our own company that we never thought would rise to this level has been just the engagement and the passion of our own employees -- or as we call them, “associates” -- working in sustainability.

TH: You said that there has been sort of a learning curve here in engaging your suppliers to make products and packaging greener. What don’t you do?

MK: Well, I don’t think we’ve made mandates. I think that’s been smart. Like I said, I don’t think anybody has the perfect solution yet, and we’re certainly learning a lot. I think also, too, being tech neutral in where we stand right now, we have not dismissed some products or some materials, and rather, we’ve looked to improve them across the board.

So instead of just kind of eliminating a product, we say, “This is good. Now how do you make it even better?” So that continuous improvement, not making mandates and trying to make things better overall, I think has been very successful for us.

TH: Matt, can you talk a little bit about what is on the horizon for Wal-Mart in terms of new products that we might expect to see?

MK: Sure, I think new products, obviously, will continue to come out of sustainability with the innovation that kind of lens that sustainability provides not only Wal-Mart, but definitely our supplier partners to look through. I think we’ll see more innovation.

I think we’ll see a lot more closed-loop type programs and I think, you know, whether it be more sustainably-grown products or more sustainably-produced products, I think we really just started to scratch the service.

I’m excited to see what we’re doing in organic cotton. I’m excited what we can hope to see soon with the locally produced fruits and vegetables. I think we’re just really starting to begin here but I think the best part about it, I think we’re seeing business start to understand the opportunity and see the value in it and I think the consumer is rewarding us all because they’re purchasing these products.

Tilde Herrera is associate editor at GreenBiz.com.