Wal-Mart's new sourcing guidelines get tepid reception
By Petah Marian | 25 January 2013
Updated sourcing guidelines released this week by Wal-Mart have received a tepid reception at best, with industry watchers warning they are sceptical as to whether the new rules will be fully enforced.
The new guidelines follow a fire at the Tazreen Factory in Bangladesh in November last year which killed more than 112 workers and seriously injured many more. The factory had been producing apparel for Wal-Mart through an unauthorised subcontracting arrangement.
The changes, revealed in a 10-page letter sent to suppliers on Tuesday (22 January), emphasise that from 1 March 2013, the retailer will have a zero tolerance policy for any unauthorised subcontracting of its merchandise.
New accreditation standards
New facilities will also have to reach a higher standard before suppliers can add them. Wal-Mart's suppliers are graded on a traffic light basis - factories with a green rating have no violations, yellow rated factories have medium risk violations, orange rated factories have high risk violations and must be re-audited within 120 days.
Factories are disapproved if they receive four orange ratings over the course of two years. After a year, they can begin producing for the retailer again if they attain a green or yellow rating. Facilities receive a 'red-failed' rating when egregious violations are found. A red-failed-rated factory is immediately and permanently banned from producing merchandise for sale by Wal-Mart.
Newly disclosed facilities will be required to pre-qualify with a green or yellow ethical sourcing audit rating before they can be used. Orange rated facilities may no longer be added.
The retailer also reiterated its requirement that all suppliers must disclose names and locations of all facilities where Walmart's products are manufactured, augmented or packaged - and that sourcing must not take place in any undisclosed or unauthorised facility.
Concerns over enforcement
Scott Nova, executive director of the US-based labour rights monitoring group, Worker Rights Consortium, believes that Wal-Mart did not enforce its previous sourcing rules, and that there is no basis "for anyone to believe they will enforce their new sourcing rules."
However, he concedes there is "some value" in the announcement if the retailer follows through with its commitments.
"But given the track record of the company, given the lack of transparency in what they're proposing, it would be naive for anyone to assume that Wal-Mart will actually follow through with the contents of the announced policy," Nova told just-style.
Yet, Clothesource CEO Mike Flanagan believes that congratulating Wal-Mart's action works better than "endlessly beating them up" and in that spirit, described the moves as a "huge step forward from the world that existed before now".
Flanagan told just-style: "It's a pity that it has taken them so long to do it, but now that they've done it we should all cheer."
New fire safety guidelines
The new rules also spell out a series of new fire safety guidelines.
Again, Wal-Mart has come under scrutiny for not going far enough with some of these rules. Nova believes that saying all floors and buildings must have a secondary exit and "preferably an external fire escape route" is inadequate.
"For a multi-storey building to be safe, a building needs an indoor enclosed staircase, protected by fire retardant materials, so that if a building is on fire, workers on the seventh floor can get out safely.
"We believe most factories in Bangladesh, including most Wal-Mart supplier factories, do not have enclosed interior staircases, even though this is required by Bangladesh fire code.
"If they do not have an interior staircase that is fire and smoke protected then they need a properly constructed external fire escape accessible from each floor of the building," says Nova. "This is the single most important fire safety issue."
New Bangladesh rules
A number of the fire safety rules are specific to factories in Bangladesh. For example, residential buildings that have been converted into an industrial factory, facilities in a multi-storey building with a ground-floor marketplace, or facilities in multi-storey buildings shared with other factories under separate ownership, will all be blacklisted.
Indeed Bangladesh has very specific challenges, with more than 700 apparel workers estimated to have perished in fires since 2006.
Bangladesh has exceptional problems: "The risk of fatal fire is higher, and its track record is uniquely appalling," said Flanagan.
"Nowhere else in the world do people have to face that risk. Bangladesh has specific problems, one is the issue of building height, but another is the tolerance by flagrantly corrupt fire officials and a government that is on the take from everybody."
There are also concerns that without Wal-Mart's financial backing, the factories will say they can't afford to make the changes.
"Without an upfront commitment from buyers to support factories financially through this process, the renovations won't happen, so Wal-Mart can say that there are going to be inspections, that they are going to have to correct problems, but if they're not willing to cover the cost and support the factories financially then there's no reasonable likelihood that renovations will take place in these factories," argues Nova.
He added the upgrades could cost factory owners "hundreds of thousands of dollars".
Yet, Flanagan takes a hard line on this, arguing that it isn't Wal-Mart's job to give the factories money "because they're incapable of making it" themselves.
"These people pretend to be businessmen, they are in business to make money," he said, highlighting that after building the factory in 2009, the owner of Tazreen Fashion doubled its size in 2010.
"I'm not sure that the factory owners need the cash or that they should be given it, it just infantilises them. They need to be responsible," he said. "How much would it have cost to put in one external staircase?"
He suggests that Gap's approach to helping factories gain access to loans is a better way forward.
"Gap puts them in touch with the right people to help them get the money to develop the factory, not give them the money because they feel sorry for them. These factories live in the same world as everyone else and should have to pay for it."
A lack of transparency
Nova also takes issue with the lack of transparency that the new sourcing strategy provides.
"There's no accountability mechanism for Wal-Mart. They're announcing a policy, but there's no transparency such that any outside observer will ever know if they've done this stuff or not.
"There's going to be no disclosure of the factories they're using, there's going to be no disclosure of who carries out these fire safety inspections and when they take place, there's going to be no disclosure about the result of the inspections, so how will the worker representatives know, and Wal-Mart's customers know, if any of this ever happens?" Nova asks.
"We will have to rely exclusively on Wal-Mart's word, and frankly Wal-Mart's word is not worth a great deal when it comes to worker safety issues. They can announce any policy they want to announce, but in terms of any mechanism of holding Wal-Mart accountable to any of the promises it's making, it would be naive to assume that those promises will be kept."
Flanagan agrees that it's not the new policy, but how it is enforced, that will make a difference.
"With the best will in the world, it's not how strong the words are in the policy, but how strong Wal-Mart is going to be in practice to providing the resources and the monitoring to show that it is genuinely adhered to," he says.
"The question is not what's happening now, but what will happen in a year's time when I go and look at a Wal-Mart factory in Bangladesh. Will the factory reflect what's in the new policy? I hope it will. I also hope they tighten up on a couple of points."
There are also humanitarian concerns about job losses that may result from factories that go out of business if they no longer reach Wal-Mart's safety standards.
"There will be more criticisms in the real world from Bangladesh suppliers that will be delisted. Because, in effect, an awful lot of people are going to suddenly find that overnight they're not working for Wal-Mart any more. So I think we're going to hear more worrying protests from the runners of pretty shady businesses with consequential job losses," says Flanagan.
"There are a lot of people in Bangladesh beginning to complain already that they've lost Wal-Mart business and, quite rightly, the poor workers didn't do anything wrong."
A full list of Wal-Mart's new supplier safety guidelines can be accessed here.
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