Wal-Mart Flexes its Muscles

Sometimes great power is to be lamented; other times, it is to be applauded. Generally, Wal-Mart has been the subject of criticism regarding its immense power and influence in the world of retail. But this story shows the upside:

Wal-Mart announces new ethical and environmental principles

Wal-Mart announced Wednesday in Beijing that it would require manufacturers supplying goods for its stores to adhere to stricter ethical and environmental standards, the latest effort by the world’s biggest retailer to answer criticism of its business practices.

At a gathering of more than 1,000 suppliers, Chinese officials and advocacy groups, Wal-Mart executives revealed a new supplier agreement that would require manufacturers to allow outside audits and to adhere to specific social and environmental criteria. The agreement will be phased in beginning in January, Wal-Mart said.

Is Wal-Mart the new Nike? Recall that, a couple of decades ago, Nike was widely criticized for giving contracts to factories using sweatshop labour in developing nations. Today — due in large part to publicity, boycotts, and other forms of public pressure — Nike is widely regarded as an ethical leader within the apparel industry. But Nike’s changes only affected a few factories (maybe a few dozen? a hundred or two?) making shoes and athletic apparel. Wal-Mart is going to affect the behaviour of over 1,000 companies, each owning who knows how many factories, making a huge range of consumer goods. That’s a lot of impact. It’s too soon to see how effective Wal-Mart’s move will be at actually changing behaviour along its supply chain, but when it comes to pressure on manufacturers, nobody throws their weight around like Wal-Mart.

(p.s. I predicted here two and a half years ago that “within 5 years, Wal-Mart will be at the TOP of at least some business ethics / corporate social responsibility / corporate citizenship rankings.” I’m not saying that’s come true just yet, but let’s just say I’m feeling pretty good about my prediction at this point.)

2 comments so far

  1. Andrew on

    Chris,With respect to where to allude to Nike in your above discussion, I did a fair amount of research into Nike’s labor practices a few months ago for a discussion on my blog.In my view, there are two sides to the Nike story.Firstly, the company has made commendable improvements in terms of the public transparency and accountability with respect to labor conditions at supplier contract factories. In 2004, Nike took the unprecedented step of providing full public disclosure in relation to the location of supplier contract factories. In addition, the company now provides public disclosure of the results of audits into these contract factories.Both of these steps helped in making the company more publicly accountable, and the company received well justified praise for these steps.But the results of the audits were very concerning. According to the companies own figures in 2006:(1) Approximately ninety per cent of its factories were non- compliant with the the company’s code of conduct in relation to overtime;(2) Performance was deemed to be unsatisfactory in relation to eleven categories of occupational health and safety in relation to approximately eighty per cent of factories; and(3) Approximately thirty per cent of contract factories were non compliant with the companies code of conduct in relation to the payment of wages (which basically stipulates that workers must at least recieve the legal minimum wage).So yes, the company has improved in terms of accountability, but it has a long way to go before it deserves any credit in relation to its performance in this area.

  2. […] previous postings on Wal-Mart and the environment, see here and […]

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