Wal-Mart is cracking down on its suppliers. They’ve declared a “zero-tolerance policy” for wholesalers and sourcing agents who violate its global sourcing standards. The policy calls for severing ties with agents who subcontract work without the knowledge of Wal-Mart’s.
The change is a direct response to the Tazreen Factory fire in Bangladesh, which killed 112 workers. Wal-Mart was surprised to find that it had clothing being manufactured in the factory via an unauthorized subcontracting agreement.
Previously, Wal-Mart had emphasized a “three strikes” approach that moved suppliers through color coded stages depending on the severity of the violation and gave three chances before ending the relationship.
“Obviously our three-strike policy wasn’t working as well as it could have,” Rajan Kamalanathan, Wal-Mart’s vice president of ethical sourcing, was quoted as saying. “Our message of zero tolerance is meant to get people’s attention.”
Wal-Mart issued a ten-page letter to inform suppliers of the change. They will also begin publishing the names of unauthorized factories on its corporate website so suppliers can more readily access the information.
The company is also enhancing its pre approval audits and is rolling out additional safety measures specifically in Bangladesh. Those measures are primarily related to fire safety, but labor activists have disputed their impact because Wal-Mart is still refusing to pay prices that account for the cost of additional equipment.
Wal-Mart is also taking criticism for failing to disclose the names of all of its suppliers for the sake of independent monitoring. The monitoring would bring greater transparency to the monitoring process and eliminate conflicts of interest.
After the Tazreen fire, Wal-Mart terminated its relationships with the two suppliers who had subcontracted work to the factory, but it failed to name the suppliers.
The company also intends to strengthen its monitoring program, but is continuing to insist that suppliers, local governments, and other parties need to bear more of the burden of insuring compliance.
In response to the criticisms regarding price, Wal-Mart said that it is considering creating a fund or revolving line of credit to finance improvements.