Don't look now but big business is internalizing another important externality
February 28, 2011
From "Why Wal-Mart Is Making Our Health Its Problem" by Julia Kirby, editor at large for the Harvard Business Review:
[Wal-Mart] has a plan to reduce the salt, sugar, and saturated fats in its private-label products, and to encourage its suppliers of branded goods to do the same. The goals it has established it expects to take five years to reach. Is the retailer legally obliged to take on this challenge? Not at all. Are its customers demanding it? Sadly, no. With no impact expected on profitability, it's hard to imagine shareholders are exerting pressure for the change either. So what's behind the initiative?
In a word: scale. In a recent article in HBR, Chris Meyer and I argued that we'll see companies taking more and more ownership of externalities they could ignore because of changing sensibilities and better sensors (meaning detection and reporting of impacts by third parties). But we also identified a third driver: the scale of modern business. Whereas in the past, a single grocer could not have much impact on society, in today's highly consolidated market, Wal-Mart touches a significant percentage of the nation's food intake. Once you reach a scale where your decisions have ramifications for millions, it is hard to pretend that the impacts, even as distant ripples, are not your problem.