Walmart outlines zero-tolerance supplier policy

24 January 2013
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24 January 2013 | Anna Reynolds

Walmart has warned its global suppliers that they could be “permanently barred” if they subcontract their work to unauthorised factories.

The world’s biggest retailer, which owns UK supermarket chain Asda, has sent a letter to all of its suppliers informing them of the new zero-tolerance policy on subcontracting without the company’s knowledge, as well as strengthening its standards on health and safety.

The company has made the change following a tragic fire at the Tazreen factory in Bangladesh that killed 112 workers in November 2012. The factory was not an authorised supplier to Walmart, but had been subcontracted by another vendor without the retailer’s knowledge.

New facilities will be required to prequalify with a ‘green’ or ‘yellow’ ethical sourcing audit rating (the two best ratings) prior to being approved. Facilities that rate either ‘orange’ or ‘red’, indicating poor ethical standards, will not be added into a supplier’s network. These factories will be listed on Walmart’s corporate website.

Further, by June 2013, all suppliers will be required to have a company representative responsible for ensuring compliance with Walmart’s ethical sourcing requirements. Frequent monitoring of the supplier’s facilities will also be essential to continuing to do business with the firm.

Enhanced fire safety standards in all countries have also been implemented, particularly in Bangladesh. Walmart will also carry out a review of active facilities and any fire safety issues will require corrective action within 30 days. The retailer has also identified a need for attention to risks related to building structure in Bangladesh and has published a set of criteria to assess facilities on. Those that are deemed high risk of fire will no longer pass as eligible for production.

Rajan Kamalanathan, vice president of ethical sourcing at Walmart, wrote on the compay's blog: “The fire and tragic loss of life at the Tazreen factory in Bangladesh has brought to the forefront a number of opportunities for improving the safety standards of our global supply chains. These new policies are designed to strengthen compliance of important safety standards around the world.

“But we know that we cannot do this alone. Our objective is to work with like-minded companies to raise the bar for the entire industry. We recently shared the new policy with NGOs, companies, and government officials to get their feedback and direction.”

Walmart set out a series of actions to boost the sustainability of its supply chain in October last year.

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