Wal-Mart to Toughen Standards (New York Times)

Stephanie Rosenbloom, New York Times, Oct. 22, 2008

Wal-Mart
plans to announce Wednesday in Beijing that it will require
manufacturers supplying goods for its stores to adhere to stricter
ethical and environmental standards, the latest effort by the big
retailer to answer criticism of its business practices.

At a gathering of more than
1,000 suppliers, Chinese officials and advocacy groups, Wal-Mart
executives plan to reveal a new supplier agreement that will require
manufacturers to allow outside audits and to adhere to specific social
and environmental criteria. The agreement will be phased in beginning
in January.

The changes signal a move on the part of Wal-Mart,
the world's largest retailer, away from intermittent transactions with
many suppliers toward longer-term arrangements with a smaller group of
manufacturers. Wal-Mart is betting that using its buying power this way
can help keep prices low even as it keeps a closer eye on its suppliers.

Wal-Mart,
long criticized for its treatment of workers in the United States and
its ostensible willingness to overlook violations abroad, has in recent
years offered a series of environmental and labor initiatives. A
Beijing meeting now under way is the company's first "sustainability
summit."

By next year, Wal-Mart 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," Lee Scott,
Wal-Mart's chief executive, plans to say at the Beijing summit,
according to his prepared remarks. "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.

Environmental and labor groups that follow
Wal-Mart said the retailer had a mixed history when it came to the
environment and labor practices – and that sometimes the company's
goals were lofty, while the measurable outcomes were less so. Through
the years, Wal-Mart has been accused of various abuses.

In the 1990s it came to light that workers at factories producing Kathie Lee Gifford
clothing for Wal-Mart were subjected to inhumane conditions. Last year
two nongovernmental organizations said abuse and labor violations
(including child labor)
occurred at 15 factories that produce or supply goods for Wal-Mart and
other retailers. In June the United States government and the state of
Oklahoma filed a complaint in federal court claiming that Wal-Mart and
other companies dumped hazardous waste in Oklahoma City. In Bangladesh,
it was charged that factory workers were made to work 19-hour shifts,
with some bringing home just $20 a month.

Michael Green,
executive director of the Center for Environmental Health, a watchdog
group in Oakland, Calif., said he believed Wal-Mart's effort to improve
suppliers' practices began as a program to counter public-relations
damage. "I think what happened along the way is some people there
actually got convinced," he said. "It became more than a sophisticated
P.R. stunt, but something they believed in."

However, without
knowing the specifics of Wal-Mart's new plan, Mr. Green said it would
not be easy sledding. Suppliers under pressure to offer the company the
lowest prices are likely to have an incentive to cheat, he noted, and
outside auditors may not want to report violations for fear of losing a
lucrative Wal-Mart contract. Additionally, tracing the origins of all
the working parts that go into a single toy, for instance, is difficult
because it involves multiple factories.

Still, groups that have criticized Wal-Mart are attending the Beijing summit to hear the company's plans.

In
a telephone interview from Beijing Tuesday night, Mr. Scott said
Wal-Mart may offer longer-term agreements to suppliers willing to make
the big investments needed to live up to its environmental demands.

The
company said that within China, a nation with major environmental
problems, Wal-Mart 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. "People
will judge us," Mr. Scott said, "based on the results."

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