Wal-Mart Announces Higher Standards for Suppliers

Wal-Mart Stores Inc. (Bentonville, Ark.) announced in China that it will begin requiring any manufacturers that supply goods for its stores to adhere to stricter ethical and environmental standards. While the retailer wasn’t specific, it is assumed that includes suppliers of store-building equipment and materials, too.

The announcement came at a gathering of more than 1000 suppliers and Chinese officials hosted by Wal-Mart in Beijing.

The agreement will be phased in beginning in January 2008. Wal-Mart said it will start keeping close track of the factories from which its products originate, even if they pass through many hands. By 2012, Wal-Mart will require suppliers to source 95 percent of their production from factories that receive the highest ratings in audits of environmental and social practices.

The agreement includes a ban on child and forced labor and pay below the local minimum wage.

“Meeting social and environmental standards is not optional,” said ceo Lee Scott. “I firmly believe that a company that cheats on overtime and on the age of its labor, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honor its contracts, will ultimately cheat on the quality of its products. And cheating on the quality of products is the same as cheating on customers.”

To ensure suppliers are making changes, Wal-Mart said it would require three levels of audits: from the vendors themselves, from an outside party and from Wal-Mart, which will initiate more of its own random, unannounced audits.

Wal-Mart said the audits would assess factory working conditions as well as compliance by manufacturers with standards regarding air pollution, wastewater discharge, management of toxic substances and disposal of hazardous waste.

The company said that within China, it would aim by 2010 to cut water use in half in all stores, design and open a prototype store that used 40 percent less energy and reduce energy use in existing stores by 30 percent.