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Walmart tightens global supplier rules

Jan 23 2013 08:49 AP

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Bentonville - Walmart Stores has alerted its global suppliers that it will immediately drop them if they subcontract their work to factories that haven't been authorised by the discounter.

Walmart's stricter contracting rule, along with other changes to its policy, comes amid increasing calls for better safety oversight after a deadly fire at a Bangladesh factory that supplied clothing to Wamart and other retailers. The fire in late November killed 112 workers at a factory owned by Tazreen Fashions. Walmart has said the factory wasn't authorised to make its clothes.

In a letter sent Tuesday to suppliers of its Walmart stores as well as Sam's Clubs in the US, Canada and the United Kingdom, the company says it will adopt a "zero tolerance" policy on subcontracting without the company's knowledge, effective March. 1. Previously, suppliers had three chances to rectify mistakes.

Wal-Mart also said it plans to publish on its corporate website a list of factories that haven't been authorised to manufacture goods for Walmart.

Also, starting June 1, suppliers must have an employee stationed in countries where they subcontract to ensure compliance, rather than relying on third-party agents.

"We want the right accountability and ownership to be in the hands of the suppliers," said Rajan Kamalanathan, Walmart's vice president of ethical sourcing said. "We are placing our orders in good faith."

Walmart will hold a meeting for clothing suppliers from the US and Canada on Thursday to explain the new policy changes.

Kamalanathan said Walmart is looking to create a fund that factories can tao to improve safety, but that is still in discussion. But he also said local governments and other suppliers and retailers have to do their part in boosting factory safety.

Critics quickly dismissed Walmart's moves as inadequate and said that the retailer needs to do more.

"It shows that Walmart is feeling a great deal of pressure in the wake of public scrutiny," said Scott Nova, executive director at Workers' Rights Consortium, a labour-backed advocacy group. But he noted the company's response isn't adequate unless Walmart and others pay their suppliers more so they can cover the costs of repairs.

"The upfront commitment from brands and retailers is essential if we are going to see real change," Nova added.

Nova's group is one of several organisations trying to get retailers and brands to sign a first-of-its-kind contract that would govern fire-safety inspections at thousands of Bangladeshi factories making T-shirts, blazers, and other clothes Americans covet.

The contract would call for companies to publicly report fire hazards at factories, pay factory owners more to make repairs and provide at least $500 000 over two years for the effort. They would also sign a legally binding agreement that would make them liable when there's a factory fire.

PVH Corp, a New York City-based company that sells the Calvin Klein and Tommy Hilfiger brands, last March signed the agreement after a national TV news report that chronicled the dangerous conditions in one of its Bangladesh factories. But PVH pledged to start the program only if at least three other major retailers sign on. So far, only one has: A German coffee chain named Tchibo that also sells clothes. Nova said that his organisation is in discussion with other retailers.

Walmart says it has no plans to sign on to the contract. Brooke Buchanan, a Walmart spokesperson, says that the company can make a "positive impact on our global supply chain by both by raising our own standards and by partnering with other stakeholders to improve the standards for workers across the industry."

Nova also noted that Walmart needs to disclose a list of all the suppliers it currently works with so they can be monitored by independent groups. It also needs to disclose the results of all its factory inspections.

Richard Locke, head of political science at MIT and an expert in global supply chains, said that Walmart also needs to re-evaluate its purchasing practices so its demands are not putting excessive pressure on factories to cut corners on safety. It also needs to provide better technical assistant training for factories so they can run their businesses better.

Walmart ranks second behind Swedish fast fashion retailer H&M in the number of clothing orders it places in Bangladesh. Before the fatal fire there, Walmart had taken steps to address safety, such as mandating fire safety training for all levels of factory management.

Building fires have led to more than 600 garment work deaths in Bangladesh since 2005, according to research by the advocacy group International Labour Rights Forum.

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