Wal-Mart Stores, Inc. (NYSE:WMT) implemented more stringent policies for its suppliers, following a blaze in a Bangladesh apparel factory that killed 112 people and injured at least 200 people.
In a letter to suppliers, Wal-Mart said, on Monday, that it would implement a “zero tolerance” policy to those who would subcontract production without its approval starting on March 1. The world’s largest retailer said it would dissolve its agreement with any supplier who will not comply with its new policy.
Nomad Investment Partnership: Keep An Eye On The Unseen Risks
There are many ways to define risk. Warren Buffett has said that "risk comes from not knowing what you're doing." Q3 2020 hedge fund letters, conferences and more His mentor, Benjamin Graham, believed that risk should be measured as the chance of a permanent capital impairment of an investment. Seth Klarman also holds this view. Read More
Brooke Buchanan, spokesperson for Wal-Mart, said the new policy is different from its “three strikes” policy, which gives suppliers three opportunities to resolve problems.
The retailer giant also decided to publish the names of factories that did not pass the third party auditing system as well as the list of unauthorized factories. Wal-Mart Stores, Inc (NYSE:WMT) will also require suppliers to pre-qualify their new facilities with a green or yellow ethical-sourcing audit rating.
According to Buchanan, Wal-Mart will not provide work contracts to new factories with an orange rating or those with fire safety issues and requires improvements. In addition, the retail giant will require suppliers to have an agent based in the country instead of using a third party representative. Buchanan said, “Frequent in-person monitoring will be considered an essential element.”
Furthermore, Wal-Mart will reduce the allotted time for factories to fix their fire safety violations to 30 days. In the past, factories were allowed to fix any problem within six months to one year. Moreover, the retail giant requires factories in Bangladesh to conduct additional fire safety training and other standard procedures.
Wal-Mart audits all factories supplying private label and non-branded products for the company. The audits are conducted by independent firms, who are responsible fpr evaluating the safety and working conditions of the factories every six to 24 months.
Scott Nova, executive director of Worker Rights Consortium, commented that Wal-Mart Stores, Inc. (NYSE:WMT) is not transparent in terms of its auditing system. According to her, the retail giant does not publish the audit reports online or show it to factory workers. Nova said, “They’re essentially saying, Trust us that this time we really mean it, but neither you nor I are going to know what happened in the audits.”