Wal-Mart Ethical Standards

Ethical Standards and Working Conditions in Wal-Mart’s Supply Chain

A research report conducted by the International Labor Rights Forum (ILRF)

October 24, 2007

www.LaborRights.org

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The International Labor Rights Forum would like to recognize Joanna Barry and Michelle Jacome for all of their research, writing, and editing support for this report.

The International Labor Rights Forum was founded in 1986 and serves a unique role among human rights organizations as advocates for and with the working poor worldwide. ILRF works to support the right of all workers to a safe working environment where they are treated with dignity and respect, and where they can organize freely to defend and promote their rights and interests. ILRF
Table One summarizes key findings from reports Wal-Mart has published regarding its sourcing practices over the past four years. Some trends demonstrate positive changes, such as the increased number of unannounced audits, but most demonstrate continued areas for improvement, such as the decrease in “green” rated audits in the last four years. The purpose of this section is to examine what some of these data points are demonstrating. Key findings include: • Decreasing Percentage of Factories Rated Green: The number of factories rated green (as having no or low-risk violations) had been consistent at 21% for the first two years that data was available, decreased to 10% in 2005 and to only 6% in 2006. WalMart explains the dramatic shift as resulting from increasing standards for factories. However, the factories had fair warning and time to improve their practices, since the policy to increase standards was issued in 2004. Increasing Number of Unannounced Audits: The number of unannounced audits gradually increased from 1% in 2003 to 26% in 2006, which is a significant improvement. However, Wal-Mart’s goal for 2006 was to increase the percentage of unannounced audits to 30%, but the company reversed this commitment a year later to decrease the target rate again to 25%. Wal-Mart has committed itself to monitoring factory conditions through unannounced audits, admitting that they give a more realistic picture of factory conditions and are often
• Factory receives 30 days to address the violation by discontinuing the use of underage workers and properly compensating and repatriating the underage workers. • If a factory does not properly compensate and repatriate the underage workers, the factory is given a Red-Failed rating and banned permanently from producing merchandise for sale by Wal-Mart. • A factory is only permitted one Orange Age Assessment. Any subsequent violation results in a Red-Failed rating. Disapproved: • Wal-Mart considers factories that do not take sufficient corrective measures as disapproved. Factories that Wal-Mart rates as disapproved will not receive new orders from Wal-Mart. • According to the 2005 Report, a factory will be disapproved if it receives four Orange assessments within a two year period. • There was an increase in the penalty period for disapproved factories in 2005 from 90 days to one year. Red (Failed in 2003 & 2004): • Replaced the Failed Rating in 2005. • Red factories are permanently banned from producing merchandise for Wal-Mart. • According to the 2004 report (when Red factories were labeled “Failed”), factories rated as Failed had serious violations related to child labor, forced and prison labor, transshipment, discrimination, human rights abuses, attempted bribery, or unsafe or hazardous working conditions. While Wal-Mart’s rating system provides auditors a