Wal-Mart makes stinging appraisal of Chinese suppliers, increases expectations

Posted by Daniel Palmer on 23rd October 2008

Wal-Mart Stores, Inc. has taken the unprecedented next step of hosting a gathering of more than 1,000 leading suppliers, Chinese officials and NGOs in Beijing where they outlined a series of aggressive goals and expectations to build a more environmentally and socially responsible global supply chain.

“I firmly believe that a company that cheats on overtime and on the age of its labour, that dumps its scraps and chemicals in our rivers, that does not pay its taxes or honour its contracts — will ultimately cheat on the quality of its products,” Lee Scott, president and CEO of Wal-Mart Stores, Inc., proclaimed. “And cheating on the quality of products is the same as cheating on customers. We will not tolerate that at Wal-Mart.”

“Sustainability is about building a better business. We think it is essential to our future success as a retailer – and to meeting the expectations of customers,” said Lee Scott, president and CEO of Wal-Mart Stores, Inc. “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.”

The company claimed they will focus on areas aimed at meeting or exceeding social and environmental standards, driving innovation and efficiency and building stronger partnerships with suppliers, government and NGOs.

Addressing suppliers in attendance, Mike Duke, vice chairman for Wal-Mart’s international division, outlined a number of requirements and expectations for suppliers who want to do business with Wal-Mart. “Achieving the goals that we lay out today is going to require a common commitment. It’s going to take even stronger and deeper relationships. And it is going to take all of us working together.” he said. “We are expecting more of ourselves at Wal-Mart, and we will also expect more of our suppliers.”

At the Summit, Wal-Mart laid out a series of requirements for companies who want to do business with Wal-Mart, including:

* Required demonstration of compliance with environmental laws and regulations – China’s desire for a cleaner environment is clear, and the laws on the books reflect that. Wal-Mart reports they are taking a number of steps to further strengthen and enforce supplier compliance with environmental and social standards, including the creation of a new supplier agreement that will require factories to certify compliance with laws and regulations where they operate as well as rigorous social and environmental standards. The agreement will be phased in beginning with suppliers in China in January 2009 and expanding to suppliers around the world by 2011.

* Partner with suppliers to improve energy efficiency and use fewer natural resources–Wal-Mart will partner with suppliers to improve energy efficiency in the top 200 factories it sources from directly in China by 20 percent by 2012.

* Higher standards of product safety and quality.

* Greater transparency and ownership – By 2009, Wal-Mart will require all direct import suppliers plus all suppliers of private label and non-branded products to provide the name and location of every factory they use to make the products it sells. The company will also have all suppliers it buys from directly to source 95 per cent of their production from factories that receive the highest ratings on environmental and social practices by 2012.

Wal-Mart also reported that they will design and open a new store prototype that uses 40 per cent less energy and cuts water use, while also pledging to bring more environmentally sustainable products to its shelves.

Wal-Mart China President and CEO, Ed Chan, addressed the need for collaboration between Wal-Mart, the company’s suppliers and the Chinese government. “Few challenges in our world today are more pressing than protecting the environment and, in China, Wal-Mart has a unique opportunity to lead,” said Chan. “With the world’s largest population, and a robust manufacturing industry, no market presents a greater opportunity for environmental sustainability to take hold than China.”