Date:
January 22, 2013
To:
All Suppliers – Wal-Mart Stores, Inc. and subsidiaries – US, UK and Canada Markets
From: Duncan Mac Naughton, Chief Merchandising and Marketing Officer
Rajan Kamalanathan, Vice President – Ethical Sourcing
Re:
Zero Tolerance Policy and Ethical Sourcing Program Enhancements
Mandatory for All Suppliers of Wal-Mart Stores, Inc., its subsidiaries and affiliates,
Including Sam’s Club (“Walmart”) - US, UK and Canada Markets
Walmart’s business has always centered on helping people live better. As a leader in the retail industry,
Walmart collaborates with suppliers, other retailers, brands, NGOs and government leaders to build ethical,
global supply chains. Our commitment is not only to compliance, but a proactive approach that constantly
improves the dignity and respect afforded to workers and drives the transparency needed to promote best
practices and to enforce standards.
In 2009, as part of this commitment, we informed all suppliers of our expectations for transparency
and facility disclosure. We are now reemphasizing the requirement that all suppliers must disclose names and
locations of all facilities in advance where products within Walmart’s scope for the Walmart Ethical Sourcing
audit program (See, Appendix A) are manufactured, augmented or packaged (“sourced”). Sourcing for Walmart
may not occur in any undisclosed or unauthorized facility.
To continue improving transparency in our global supply chain, effective March 1, 2013, Walmart will
institute zero tolerance for unauthorized subcontracting and terminate its relationship with any supplier
engaging in unauthorized subcontracting when sourcing merchandise for Walmart. Walmart defines
unauthorized subcontracting as production, augmentation or packaging of merchandise in scope for the
Walmart Ethical Sourcing audit program in a facility that has not been fully and accurately disclosed in advance
to Walmart and audited per our Ethical Sourcing requirements as detailed in the Standards for Suppliers
Manual. This prohibition includes any undisclosed subcontracting conducted with or without the supplier’s
knowledge by agents, third-party facilities or any other entity within the supplier’s supply chain. Suppliers are
responsible to communicate all of our Ethical Sourcing requirements to all entities within the supplier’s supply
chain.
Walmart is also implementing important changes to how suppliers add new facilities. Newly disclosed
facilities will be required to prequalify with a green or yellow ethical sourcing audit rating prior to being made
Active. Orange rated facilities may no longer be added to the supplier’s matrices. It is imperative that all
suppliers regularly review Retail Link and the Standards for Suppliers Manual for new and updated information.
To reinforce Walmart’s expectations of transparency, no later than June 1, 2013 (and as allowed by
local law and procedures), all suppliers are required to have a representative employed by the supplier, and not
just an agent, responsible for ensuring compliance with our Ethical Sourcing requirements stationed in all
countries in which the supplier is actively sourcing Walmart product. The supplier representative’s frequent,
in-person monitoring of the supplier’s facilities will be considered an essential element for the supplier’s
continuation of business with Walmart. In addition to the ramifications for suppliers, any facilities
subcontracting sourcing of Walmart merchandise to an undisclosed or unauthorized facility are subject to a
1
Red-Failed assessment and may be permanently barred from sourcing merchandise to Walmart for all retail
markets. Walmart will make available on Retail Link a list of facilities not authorized to source merchandise to
Walmart.
To assist you in understanding the changes to Walmart’s Ethical Sourcing requirements, we have
attached a number of Appendices for your reference:
Appendix A:
Appendix B:
Appendix C:
Appendix D:
Appendix E:
Merchandise in Scope for Walmart’s Ethical Sourcing Audit Program
Critical New Program Information
Enhancements to Fire Safety Requirements – All Countries
Additional Safety Requirements for Bangladesh
Standards for Suppliers Poster
All information referenced in this letter can be found in Retail Link > Site Map > E > Ethical Sourcing
Documentation (also on our corporate website at: http://corporate.walmart.com/global-responsibility/ethicalsourcing). Please address your questions to ethicalstnds@wal-mart.com
Thank you for your commitment to transparency and to ensuring dignity and respect are extended to workers
in your supply chain while providing value to our customers.
2
Appendix A: Merchandise in Scope for Walmart Ethical Sourcing Audit Program
Any merchandise imported by a Walmart retail entity.
Any merchandise sourced through Walmart Global Sourcing (WGS)
Any private label, licensed or non-branded merchandise as defined in Walmart’s Standards for
Suppliers Manual whether produced in-country (domestically produced) or imported by a party other
than Walmart (non-WGS)
Any merchandise subject to licensing arrangements
Any merchandise with brands exclusive to Walmart (whether by exclusive license or exclusive supply
arrangement with a trademark owner)
Non-branded merchandise defined as merchandise where no brand identification is referenced
Merchandise associated with Walmart through labeling such as “distributed by/manufactured for
Walmart” or “walmart.com”
Any packing materials with printed logos or brands that are exclusive to or reference Walmart
Merchandise components bearing any mark associated with Walmart
Augmentation of any merchandise in scope for Walmart Ethical Sourcing through production or
processes including, but not limited to washing, embroidering, assembling, printing etc.
3
Appendix B: Critical New Program Information
Prequalification for New Production Facilities
Effective March 1, 2013, Ethical Sourcing prequalification will be required for all newly disclosed
facilities and facilities requested for reactivation for all retail markets.
For a facility to be placed in Active status, the facility must complete an Ethical Sourcing audit and be
rated Green or Yellow, and suppliers may not request the addition of an existing Orange rated facility
to their matrices.
Production in a facility that has not been prequalified will be deemed unauthorized subcontracting.
Newly disclosed facilities will also be required to participate in mandatory training sessions provided by
Walmart in order to remain active.
All newly disclosed or reactivated production facilities must undergo a mandatory electric and building
safety assessment (Bangladesh facilities-only).
Pre-Production Requirements
In advance of sourcing merchandise for Walmart, suppliers must ensure the following - Failure to do so will be
deemed an act of Unauthorized Subcontracting:
All facilities are fully and accurately disclosed in Retail Link and the buyer is notified; (Retail Link > Site
Map > S > Supplier Profile > Supplier Dashboard). In retail markets where Retail Link is not utilized,
suppliers should contact their buyer for details on the disclosure process for the specific retail market;
Buyers must be made aware, by item number, the facility where an item will be manufactured;
All facilities must be Active in Retail Link;
All facilities must be associated with the supplier’s Retail Link ID;
All facilities must be assessed with a Green or Yellow Ethical Sourcing audit rating
4
Appendix C: Enhancements to Fire Safety Requirements – All Countries
Fire Safety
As part of our effort to work with suppliers globally to improve facility conditions related to risk of fire, we have
made several modifications to our protocol for auditing and assessing facilities.
Facilities found to have fire safety related violations must initiate corrective actions immediately. All repairs or
changes that are not able to be completed immediately must be completed no later than thirty (30) days from
identification. During this thirty-day period, the factory must implement plans to mitigate the identified risks or
further production will be barred.
In addition, there is a certain set of requirements which may be above and beyond legal requirement(s) that
must be implemented and adhered to. These include:
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
No locked doors. Doors should have push bar operation for easy exit in case of emergency
Barred windows must have an internal mechanism for emergency release or removal to allow
for worker escape and must remain unlocked
All floors and buildings, including dormitories, must have a secondary exit, and preferably an
external fire escape route
Fire escape routes must lead to safe assembly points without any obstructions. Assembly
points must be designated and marked as such and must be kept clear at all times.
Proper access for fire department vehicles and other fire-fighting equipment in the factory
premises.
Adequate water supply for sprinkler and fire hydrant systems.
Audible, visible and operable smoke alarms placed appropriately throughout the building with
at least the minimum number required by law
Audible and operable fire alarms that can be heard in all parts of the building, that operate as
one system amongst all floors and areas of the building
Marked and lighted exit routes for all floors and areas of the building, including stairwells.
Emergency lights to be fire grade ‘industrial emergency lights’ for use in smoke and fire
environments.
Quarterly joint fire drills including all floors of the building to be overseen by an external party,
such as the fire authority, for timely and effective personnel evacuation. Documentation of
these drills must be retained by the facility for review during any visit to the facility.
Fire safety training conducted for all personnel every 6 months
Personnel on-boarding process should include fire safety training upon hiring
Trained firefighters for each floor of the facility
Valid fire license where required by law
Valid construction approval where required by law
Hazardous/flammable chemicals must be kept away from ignition sources
Crèche/childcare facilities must be on the ground floor of the building, preferably located in a
separate non-industrial facility
Suppliers must work with their facilities to ensure the above requirements are being met.
Additional information related to fire safety can be found in the Ethical Sourcing Standards for Suppliers
Manual in the section on Health & Safety. [Retail Link > Site Map > E > Ethical Sourcing Documentation
>Standards for Suppliers Manual (also on walmartstores.com: http://corporate.walmart.com/globalresponsibility/ethical-sourcing]
5
Appendix D: Additional Safety Requirements for Bangladesh
Walmart will initiate a review of active facilities in Bangladesh and will require corrective action, as noted in
Appendix C, for any fire safety issues identified.
In addition, all facilities must go through a mandatory electrical and building safety assessment provided by a
credible independent external certification agency. Production may not begin until after the facility has passed
the full Ethical Sourcing prequalification process, which includes the electrical and building safety assessment.
Production in a facility that has not been prequalified will be deemed unauthorized subcontracting.
While an overall global approach is necessary, there is a need for heightened attention to the risks specifically
related to building structure in Bangladesh. A facility that meets one or more of the below Structural Fire
Safety Criteria is deemed to be at high risk for fire related incidents and will be assessed as Red-Unauthorized
and inactivated according to protocol. A facility assessed as Red-Unauthorized is no longer eligible for Walmart
production for any retail market.
Structural Fire Safety Criteria
Residential building converted into an industrial facility
Facilities in multi-story building with a ground-floor marketplace or commercial shops on any floor
Facilities in multi-story building shared with other factories/enterprises under separate ownership
Facilities with a rooftop that does not meet legal requirements and is not 100% clear
Facilities where there is a residence located within the building
Rooftop Requirements
Rooftops must conform to all legal requirements and must be 100% clear. Evacuation must lead to a designated
assembly point clear of the main roads and other obstructions during an emergency.
Combining Factory IDs in Retail Link
A unique aspect of production in Bangladesh is the co-location of various facilities on different floors of multistory buildings. Oftentimes, these facilities are owned by the same organization. In order to address this issue,
effective immediately, multiple facilities in the same building under one owner will be combined into one
Factory ID in Retail Link regardless of the suppliers attached.
–
All facilities in a building or compound that are producing the same product type (i.e. garments) are to
be combined to one Factory ID.
–
When direct import and non-direct import facilities located in the same building are required to be
combined, the non-direct import facility will be required to successfully complete the direct import PreQualification process (including Factory Capability & Capacity and Supply Chain Security audits).
–
The facilities will be combined under one facility name but the other facility names will be referenced
in the Comments section of the facility history screen in Retail Link for reference.
–
All audit histories will be transferred to the primary facility history.
–
The primary facility assessment will reflect the least favorable grading of the combined facilities.
To complete this process, we will be asking all suppliers sourcing from Bangladesh to provide specific facility
details.
6
Audit Protocol for Multiple-Facility Compounds
The protocol for including multiple facilities in a compound into one audit is outlined below. For facilities in a
compound that have not been sourcing for Walmart, suppliers have until April 1, 2013 to work with these in
preparation for inclusion in the audit process. If a combined facility refuses to participate in the audit or denies
the audit firm access to facilities or documentation upon request, the entire facility will be assessed as Access
Denied as per our standard Ethical Sourcing audit protocol. The facility will be inactivated precluding shipment
and new order placement.
Please be aware that audit firms are instructed to use the following guidelines related to Bangladesh facilities.
All facilities in the building and compound involved in sourcing the same product type (i.e. garments) are to be
included in the audit.
Facilities from which non-similar products are sourced will require a walk-through for validation of
environmental, health and safety conditions, age violation related spot interviews, and observation for
other high-risk issues.
Fire License will be reviewed for all facilities in the building/compound.
Building Approvals / Layout Plan will be reviewed for all facilities in the building/compound.
Rooftop will be reviewed for compliance with all legal requirements and included in the audit findings.
Joint Fire Drills will be confirmed among the facilities.
7
Appendix E: Standards for Suppliers Poster
Please click here
for a PDF version of the Standards for Suppliers Poster
Poster text appears on the following page.
8
Standards for Suppliers
The Standards for Suppliers (“Standards”) are Wal-Mart Stores, Inc.’s (“Walmart”) fundamental expectations from its suppliers
related to social and environmental conditions. These Standards are utilized to evaluate employment practices and
environmental compliance in those facilities producing merchandise for sale by Walmart. Suppliers must also comply with
Walmart’s Gift and Gratuity and Conflicts of Interest Policies and conduct their business in an ethical manner and consistent with
accepted accounting principles.
The Standards must be visibly posted in English and in the shared language(s) of its employees in a common area at all facilities
that manufacture products for Walmart and its affiliates.
All Suppliers and their manufacturing facilities, including all subcontracting and packaging facilities, will be held to these
standards. As a guide to help Suppliers understand the expectations and obligations of the Standards for Suppliers, Walmart has
prepared the ethical and environmental Standards for Suppliers Manual (“Manual”). A copy of the current edition of the Manual
may be obtained at http://walmarturl.com/ethicalsourcing.
Standards
1. Compliance with Laws
Suppliers and their designated manufacturing facilities
(“Suppliers”) must fully comply with all applicable national
and/or local laws and regulations, including but not limited to
those related to labor, immigration, health and safety, and
the environment.
2. Voluntary Labor
All labor must be voluntary. Slave, child, underage, forced,
bonded, or indentured labor will not be tolerated. Suppliers
shall not engage in or support trafficking in human beings.
Suppliers shall certify that they have implemented
procedures to manage the materials, including all labor
related processes, incorporated into their products to ensure
they comply with laws on slavery and human trafficking.
Workers must be allowed to maintain control over their
identity documents.
3. Labor Hours
Suppliers must provide workers with rest days and must
ensure that working hours are consistent with the law and
not excessive.
4. Hiring and Employment Practices
Suppliers must implement hiring practices that accurately
verify workers’ age and legal right to work in the country
prior to employment.
All terms and conditions of
employment including, but not limited to, hiring, pay,
training, promotion, termination, and retirement must be
based on an individual’s ability and willingness to do the job.
5. Compensation
Suppliers must compensate all workers with wages,
overtime premiums, and benefits that meet or exceed legal
standards or collective agreements, whichever are higher.
Suppliers are encouraged to provide wages that meet local
industry standards. Suppliers are encouraged to provide
wages and benefits that are sufficient to meet workers’
basic needs and provide some discretionary income for
workers and their families.
6. Freedom of Association and Collective Bargaining
Suppliers must respect the right of workers to choose
whether to lawfully and peacefully form or join trade unions
of their choosing and to bargain collectively.
7. Health and Safety
Suppliers must provide workers with a safe and healthy
work environment. Suppliers must take proactive
measures to prevent workplace hazards.
8. Dormitories and Canteen
Suppliers who provide residential and dining facilities for
their workers must provide safe, healthy and sanitary
facilities.
9. Environment
Suppliers should ensure that every manufacturing facility
complies with environmental laws, including all laws related
to waste disposal, air emissions, discharges, toxic
substances and hazardous waste disposal. Suppliers must
validate that all input materials and components were
obtained from permissible harvests consistent with
international treaties and protocols in addition to local laws
and regulations.
10. Gifts and Entertainment
Suppliers must not offer gifts or entertainment to Walmart
associates.
11. Conflicts of Interest
Suppliers must not enter into transactions with Walmart
associates that create a conflict of interest.
12. Anti-Corruption
Suppliers must not tolerate, permit, or engage in bribery,
corruption, or unethical practices whether in dealings with
public officials or individuals in the private sector.
13. Financial Integrity
Suppliers must keep accurate records of all matters related
to their business with Walmart in accordance with standard
accounting practices such as Generally Accepted
Accounting Principles (GAAP) or International Financial
Reporting Standards (IFRS).
Reporting Violations
Violations of Walmart Standards can be reported confidentially in
a local language. If you have knowledge that any of these
standards are being violated, you are encouraged to report the
issue. Contact methods are listed below.
Email: ethics@wal-mart.com
World Wide Web: www.walmartethics.com
Phone: +1 (800) WM-ETHIC
1-800-963-8442
January 2012
9