Wal-Mart establishes new rules for China

SHENZHEN, China Wal-Mart laid down the law for suppliers it does business with in China today at a first-of-its-kind meeting focused on sustainability that involved more than 1,000 suppliers.

The company announced it would implement a new supplier agreement that requires factories to certify compliance with laws and regulations that will be phased in beginning with suppliers in China in January 2009 and then expanded to suppliers globally by 2011. The company also said by 2009 it will require all direct import suppliers, suppliers of private label and non-branded product to provide the name and location of every factory they use. In addition, Wal-Mart will require the suppliers it buys from directly to source 95 percent of their production from factories that receive the highest ratings on environment and social practices by 2012.

From an energy reduction and resource utilization standpoint, Wal-Mart is applying some of the objectives already established in the United States. to its Chinese retail operations. For example, the company plans to design and open a new store prototype that uses 40 percent less energy and reduce energy use at existing stores by 30 percent by 2010. The company also plans to invest in hardware and systems and develop best practices that will enable it to reduce water used by half during the next two years.

The company’s goal is to become the most environmentally responsible retailer in China, a country where it has operated stores for nearly 15 years and now has more than 200 stores. Wal-Mart and its suppliers collectively are the largest exporters of goods manufactured in China which means the company is uniquely positioned to act as a change agent in a country where lax environmental controls, limited regulations and low wages have long been regarded as key reasons why China rose to become a global manufacturing powerhouse.

“I firmly believe that a company that cheats on overtime and on the age of its labor, that dumps its scraps and chemical in our rivers, that does not pay its taxes or honor its contracts, will ultimately cheat on the quality of its products,” Wal-Mart president and chief executive officer Lee Scott said. “And cheating on the quality of products is the same as cheating on customers. We will not tolerate that at Wal-Mart.”

In prepared remarks, Scott went on to add that Wal-Mart expects suppliers to meet strict social and environmental stand, be open to rigorous audits and to publicly disclosed all appropriate information.

“If a factory does not meet these requirements, they will be expected to put forth a plan to fix any problems. If they still do not improve, they will be banned from making products for Wal-Mart,” Scott said.

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