Wal-Mart beefs up audits of supplier factories
year, part of the giant retailer's ongoing push to portray itself
as an ethical and environmentally-conscious company.
Consumer and regulatory pressures are forcing companies to look at all aspects of their suppliers' operations, including employment conditions, and their impact on the environment. Mandates from powerful retailers such as Wal-Mart are pushing manufacturers to comply. Wal-Mart is already forcing its suppliers to cut down on packaging waste and to use more environmentally -friendly materials. Wal-Mart established its ethical standards programme in 1992 to verify factory compliance with its code of conduct for suppliers. The company's code requires suppliers worldwide to implement set labour and environmental practices in factories. In a new report released this week, the company said it conducted 16,000 audits of supplier factories. The retailer reported it has also beefed up its environmental criteria and increased the scope of the programme. The audits examined 8,873 factories producing goods for Wal-Mart, 15 per cent more than in 2005. Unannounced audits made up 26 per cent of the ones undertaken, a six percent increase over 2005. About 0.2 per cent of audits, or 32, resulted in factories being permanently barred from supplying Wal-Mart. Another 2.1 per cent resulted in factories being barred from producing merchandise for sale by Wal-Mart for one year. Another 64 audits found one or two underage workers at the factories. The discoveries resulted in a re-audit after 30 days and if underage labour is still present, the factory is barred as a supplier The retailer reported that high risk violations of its code decreased by 23.5 per cent in 2006. The company attributed the decline to the success of an educational outreach programme with its suppliers. "The Wal-Mart ethical standards programme is in place to do what is right for factory workers and the environment," said Rajan Kamalanathan, vice president in charge of the standards. "The only way to achieve our objective is by moving beyond monitoring factories to working in collaboration with stakeholders." For the year the company has expanded supplier factory audits to include waste identification, waste handling and disposal, wastewater treatment and discharge, and air emissions. "Auditors now discuss environmental findings with factory management as part of the audit closing meetings to educate them on the new criteria and on environmental sustainability," the company reported. Wal-Mart now includes environmental training in group training sessions for new and existing suppliers. "Factories that are disapproved may close, and the impact on the factory workers can be devastating," said Kamalanathan. To prevent this, the company identifies at-risk factories and invites management, along with the suppliers they do business with, to meet with members of the Wal-Mart ethical standards team. "We facilitate dialogue on issues of concern and serve as a resource to factory management in a collaborative way," said Kamalanathan. For example, in the Europe Middle East, and Africa region, meetings were held with eight targeted suppliers and factory management. At the end of 2006, all eight showed substantial improvement, with six achieving the retailer's highest audit rating, he said. Wal-Mart's standards for suppliers code details the company's expectations for labor practices in the production of merchandise for sale by Wal-Mart. Every supplier must sign an agreement that they, their contractors, and subcontractors will abide by the standards. As part of Wal-Mart's agreement with suppliers, a poster of the code, signed by factory management, must be displayed in a location visible to all employees at all facilities that manufacture merchandise for sale by Wal-Mart. A local helpline number and e-mail address is located on the poster for workers to contact Wal-Mart with any concerns they may have.