No cheating in Wal-Mart supply chain is emphasized at the company’s China summit this week in Beijing, attended by the retail giant’s more than 1,000 leading suppliers as well as Chinese government officials and non-government organizations.
Wal-Mart president and CEO Lee Scott said:
“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. We will not tolerate that at Wal-Mart.”
I guess all those global product recalls especially that of Made in China finally pushed Wal-Mart’s red alert supplier button. At the summit, Wal-Mart plans to enforce to its suppliers, starting in China, the following sustainability initiatives:
- Factories will be required 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 expand to suppliers around the world by 2011.
- The top 200 factories it sources from must achieve a 20 percent improvement in energy efficiency by 2012. Wal-Mart will share information and best practices with all of the factories it sources from as well as its competitors.
- 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 Wal-Mart sells by 2009, beginning with apparel to home, toys and other product categories.
- All suppliers requires to source 95 percent of their production from factories that receive the highest ratings in audits for environmental and social practices by 2012.
Wal-Mart said if a factory does not meet these requirements and did not improve on meeting these requirements, they will be banned as Wal-Mart’s suppliers. The company aims to drive returns on defective merchandise virtually out of existence by 2012.
This is a very admirable cause for Wal-Mart given the risk that they may lose some of their cheap product supply source. I do wonder if some of Wal-Mart’s products will become more expensive in the process if their Chinese suppliers decide to pass on some of the added green costs to them?
Is Wal-Mart really that powerful as a retailer to be able to enforce these sustainability rules in China?