Supplier Standards Report

The most recent Wal-Mart supplier standards report, posted on its web site in June 2005 says it performed more than 12,000 audits at 7,600 supplier factories in 2004. More than 100 factories were banned from doing business with Wal-Mart because of child labor violations. Another 1200 facilities were disapproved due to repeated violations. The high number of facilities disapproved raises questions about the quality of initial factory certification efforts and corrective action training provided to suppliers.

We are encouraged that the company is publicly releasing auditing and monitoring data. However, there are substantive questions about the quality of the company's audits and the implications of some of its findings. The company has a long way to go before we can have as much confidence in the data presented as disclosure leaders such as Nike or Gap. Because of the company's business model and size, it faces a much steeper path to reliable compliance. Other companies we are in dialogue are more willing to engage in proactive analysis of monitoring results and a commitment to figure out why certain problems persist and how to resolve them through training or outside audit verification.

Further, the company does not address the fundamental inconsistency between its business philosophy of squeezing suppliers each year to deliver similar products for less money and the real costs associated with developing a culture of compliance at supplier facilities.

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