Wal-Mart Sets Sustainability Standards for Suppliers

Wal-Mart Stores disclosed a new series of environmental and social responsibility standards here last week that it will impose on all of its suppliers around the world over the next three years. Maintaining the trust of our customers today and in the future is tied hand-in-hand with improving the quality of our supplier factories and their products, Lee Scott, president and chief executive

BEIJING — Wal-Mart Stores disclosed a new series of environmental and social responsibility standards here last week that it will impose on all of its suppliers around the world over the next three years.

“Maintaining the trust of our customers today and in the future is tied hand-in-hand with improving the quality of our supplier factories and their products,” Lee Scott, president and chief executive officer of the Bentonville, Ark.-based company, said at the China Sustainability Summit — a meeting of more than 1,000 of its global suppliers, Chinese officials and non-governmental organizations.

Though the meeting was held in China, the goals Wal-Mart set out are part of “a global commitment for the future,” Scott explained. “The global economy will turn around, but the social and environmental challenges will be with us for decades.”

The move comes after a series of recalls and incidents of contamination involving Chinese-made goods.

Mike Duke, vice chairman, said Wal-Mart is working through CIES with major retailers and brands around the world “to define a set of global standards and audit protocols by which we will hold our suppliers accountable — and, most importantly, by which we expect suppliers to hold themselves accountable.”

If companies want to do business with Wal-Mart, he said, they will have to meet the following requirements:

* Demonstrate compliance with environmental laws and regulations by signing newly created supplier agreements, in which factories certify compliance with local laws and regulations and with rigorous social and environmental standards — agreements that will be phased in beginning in January with suppliers in China who export to the U.S., the United Kingdom and Canada.

Three months after that, the company will expand the requirement to suppliers all over the world who ship to those three countries, Duke explained. During the next three years, suppliers to all of Wal-Mart's markets will be required to sign the new agreement.

Suppliers will also need to demonstrate compliance by auditing their own factories.

“Wal-Mart will also step up and strengthen our own random audits, and we will require suppliers to allow third-party audits as well,” he added.

Duke said audits will focus on specific environmental criteria, including a factory's air emissions, wastewater discharges and management of toxic substances and hazardous waste disposal.

* “If a factory fails to meet our standards, we will work with that factory on a remediation plan,” he explained. “But if, after a period of time, a factory fails to improve, Wal-Mart will move our business to suppliers who do comply and who do improve.”

* Improve energy efficiency and use fewer natural resources, with the goal that the top 200 Chinese factories from which Wal-Mart buys will improve their energy efficiency by 20% by 2012.

“Partnerships with the government and NGOs will be critical,” Duke pointed out, noting that Wal-Mart intends to share information and best practices not only with all factories from which it buys, but also with all competitors.

* Set higher standards of product safety and quality, with the goal of driving returns of defective goods “virtually out of existence” by 2012.

* Impose greater transparency and ownership by demanding that all direct-import suppliers and all suppliers of private-label and non-branded products provide the name and location of every factory they use to manufacture the products they sell, beginning next month with apparel and encompassing home, toys and other product categories by the end of 2009.

“What that will mean,” Duke explained, “is that we expect you to tell us not just where the item was assembled, but which subcontractors played a role. And if there is an issue with the product, we expect you to have the answers and to take ownership over getting to the root of the problem.

“But our vision for our relationship with suppliers is really to move beyond compliance, and by 2012 our objective will be for all suppliers we buy from directly to source 95% of their production from factories that receive the highest ratings in our audits,” Duke said — “factories that provide safe and healthy working conditions; that offer fair compensation; and that meet their environmental obligations.”