DEFINITION of 'Social Audit'
A formal review of a company's endeavors in social responsibility. A social audit looks at factors such
as a company's record of charitable giving, volunteer activity, energy use, transparency, work
environment and worker pay and benefits to evaluate what kind of social and environmental impact a
company is having in the locations where it operates. Social audits are optional--companies can
choose whether to perform them and whether to release the results publicly or only use them
internally.
BREAKING DOWN 'Social Audit'
In the era of corporate social responsibility, where corporations are often expected not just to deliver
value to consumers and shareholders but also to meet environmental and social standards deemed
desirable by some vocal members of the general public, social audits can help companies create,
improve and maintain a positive public relations image. Good public relations is key because the way a
company is perceived will usually have an impact on its bottom line
Responsible Sourcing Audit Process
To help verify that the requirements in our Standards for Suppliers are met, we’ve invested in comprehensive social audits across our global
supply chain. Our audits review a factory’s practices to verify that:
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They meet or exceed our requirements
All labor is voluntary
Children aren’t used in the production of merchandise for Walmart
Workers are properly paid for all hours worked
Hours aren’t excessive and are consistent with local laws or regulations
Factories provide safe and healthy working conditions
Walmart’s responsible sourcing audits are conducted in facilities that produce direct import merchandise, Walmart-owned, proprietary or
exclusive brands, Walmart branded merchandise and merchandise that is nonbranded. Walmart also reserves the right to inspect the facilities of
any supplier outside this scope at any time.
All of our facility social audits are conducted by independent accredited and internationally recognized auditing firms. Facilities are then reaudited every six to 24 months, depending on the findings of the previous audits. To make our auditing program more effective, we focus our
efforts on unannounced audits.
The social audit results are assigned a color rating by the Responsible Sourcing team, based on type and severity of issues found. Walmart uses
these ratings to help make decisions about suppliers and factories – whether to develop them, make them a preferred supplier or to stop doing
business with them.
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Green: minor to no violations; the factory will be re-audited within two years.
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Red: most serious violations; may warrant no future business with Walmart.
Yellow: medium-risk violations; the factory will be re-audited within one year.
Orange: higher-risk violations; the factory will be re-audited within six months; if factories receive three orange ratings in a two-year period, the
factory may be disapproved and prohibited from doing business with Walmart for at least one year, after which they must pass a reactivation
audit and receive a green or yellow rating.
In 2013, 20,322 assessments were conducted across 15,027 active factories. Of these, 1,016 were conducted through the ILO/Better Works
Program or the International Council of Toy Industries CARE process. If a factory fails to meet our Standards for Suppliers, it must take
corrective action to improve its performance or the factory may not be permitted to produce Walmart merchandise.
A risk-based approach to audits
In 2014, we’ll begin the process of moving to a risk-based system, whereby our auditing scope and content will evolve each year to more
effectively address current industry challenges.
Our Commitment to the Workers of Bangladesh
At Walmart, we care deeply about the women and men in our supply chain, and we are passionate about their care and well-being.
We are committed to significant and sustainable reform of the ready-made garment industry in Bangladesh. And, we know that true
reform requires many stakeholders, including the government, working together for change.
Walmart is a founding member of the Alliance for Bangladesh Worker Safety (Alliance), comprised of 26 North American retailers
and suppliers who joined together to develop and launch the Bangladesh Worker Safety Initiative, a binding, five-year undertaking
with the intent of improving safety in ready-made garment (RMG) factories in Bangladesh. To date, the Alliance has completed fire
safety training for approximately one million Bangladesh factory workers and management. We believe the Alliance will help lead to
significant fire and building safety improvements for factory workers in Bangladesh.
In fall 2014, Senators Olympia Snowe and George Mitchell, co-chairs of the Bipartisan Policy Center (BPC), commended the
progress of The Alliance for Bangladesh Worker Safety since its inception in 2013. You can read a letter outlining their
comments, here.
Walmart also has contributed many efforts toward
improving worker safety in the ready-made garment
industry in Bangladesh. We worked with Bureau
Veritas (BV), a world leader in assessment and
certification services, to complete four phases of
inspections for factories in Bangladesh that produce
ready-made garments directly for Walmart. The
results of these inspections have been harmonized
with Alliance activity, and these factories are now
part of the Alliance process.
Building Capacity in
Bangladesh
We believe that sustainable, long-lasting
improvements in the global supply chain can be
achieved in part through proactive programs that
empower workers and build the capacity of factories
and suppliers. Among the programs we have
helped implement in Bangladesh:
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The Women in Factories Training Program is a five-year
initiative by Walmart and the Walmart Foundation to
work with NGOs in India, Bangladesh, China and Central America to provide critical life and work skills training to at least 60,000 women in
the supply chain. The curriculum, developed in partnership with CARE, provides women and men with the fundamental life and work skills
necessary to be successful in the workplace, at home and in their communities.
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Walmart made a donation to the Institute of Sustainable Communities (ISC) to support the newly created Environmental, Health and Safety
(EHS) Academy in Bangladesh. Through the EHS Academy, more apparel manufacturers in Bangladesh will have access to high-quality,
affordable and comprehensive training on fire safety and environment, health and workplace safety.
Our team at George, Asda’s and Walmart’s private-label clothing line, has worked with 17,000 workers in 34 factories in Bangladesh to
implement the LEAN Manufacturing program. The LEAN program is designed to streamline production processes and invest in worker skills
training.
Increasing Transparency in the Supply Chain
We recognize that no single organization or company can bring lasting change to the ready-made garment industry in
Bangladesh. True reform requires multiple stakeholders, including governments, to work together for change. We believe that
transparency helps all stakeholders understand and address factory conditions.
As part of this commitment, Bureau Veritas, a third-party firm, conducted in-depth electrical and structural safety assessments at
Bangladesh factories that produce ready-made garments directly for Walmart. The results show factories have made substantial
improvement over the past year, with electrical ratings climbing by more than 80 percent and building safety improvements by more
than 60 percent. Walmart was the first company to publically share our initial factory safety assessments results; We have now
completed all phases of assessments and have posted the results of our enhanced safety assessments in order to provide information to
partners committed to real change.
Factories are in the midst of the critically-important stage of remediation for building, electrical and fire safety. When factories are
closed for remediation, the Alliance and factory owners are together providing full pay for up to four (4) months.
Factory Remediation
There are several areas of major remediation that have taken place at many factories in Bangladesh, including upgrading of
electrical systems, installation or upgrading fire hydrant system, installation of fire doors, construction of additional staircases and
installing alarm systems.
Walmart has also announced that we will provide support for up to $50 million in access to capital to factories in Bangladesh,
including a loan facility that we developed in partnership with Standard Chartered Bank. We are excited to have this mechanism in
place, and we look forward to receiving the loan requests to help improve factory conditions.
In addition to the loan capital, we also have launched a number of programs to support local suppliers and workers, including
supporting fire safety training for factories through a $1.6 million contribution to the newly created Environmental, Health & Safety
(EHS) Academy.
We continue to work with stakeholders and factories to raise standards in the supply chain in Bangladesh. We continue to positively
influence the global supply chain, by collaborating with other brands, retailers and stakeholders to improve the working conditions
in the countries from which we source.
Assessment Disclosures
One important component of The Alliance is the public release of building, fire and electrical inspection reports as well as periodic
updates to corrective action plans for factories in the ready-made garment sector in Bangladesh. This level of transparency also
supports the Bangladesh Government Commitment - in the National Action Plan - to release the inspection data of factories
throughout Bangladesh.
The Alliance is committed to having all inspection reports posted on the Alliance website and the Government of Bangladesh
website, and helping ensure they undergo a rigorous quality control process before they are released. The Alliance is working
actively with each factory as well as the Government of Bangladesh to release reports as quickly as possible. Released inspection
reports and corrective action plans can be viewed on the Alliance website
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Alliance for Bangldesh Worker Safety
Walmart is a founding member of the Alliance for Bangladesh Worker Safety (Alliance), currently comprised of 26 retailers and suppliers,
which works to help improve building, fire and electrical safety throughout Bangladesh. Over the past year, the Alliance has:
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Trained more than 1 million factory employees on basic fire safety
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Piloted a helpline where workers can anonymously report safety or other job-related concerns
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Provided, together with factory owners, wages for approximately 1,000 displaced workers
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Created a Board labor Committee to focus exclusively on labor issues impacting workers’ lives.
Seeking lasting solutions
At Walmart, our goal is to provide lasting solutions to the complex issues that are part of the global supply chain. That’s why we’re
investing significant resources in proactive programs that empower workers and build the capacity of factories and suppliers.
Supply Chain Capacity Building
We're committed to working with our supplier partners and their factories to help them develop the capability to improve working conditions by
investing in education, training and operational efficiencies. In 2012, we created our Supply Chain Capacity Building (SCCB) program, which
brought together established training modules (Orange School Program, Supplier Development Program and Supplier Round Table) and newly
developed modules (Factory Audit Orientation and Violation Correction Training) into a well-rounded collection of instructional curriculum.
The SCCB program components vary from half-day group training sessions to several months of one-on-one engagement with suppliers and
factories. Topics range from Responsible Sourcing orientation to managing issues that are regionally specific to developing systems that
encompass many facilities within a supplier's manufacturing base.
SCCB is an integral part of our overall strategy to effect continuous and sustainable improvement within the facilities that produce our
merchandise.
Women in Factories Training
In 2011, Walmart and the Walmart Foundation launched the Women in Factories Training Program. Through this five-year initiative,
Walmart and the Walmart Foundation work with NGOs in India, Bangladesh, China and Central America to provide critical life and
work skills training to at least 60,000 women in the supply chain. The curriculum, developed in partnership with CARE, an
international NGO, provides women and men with the fundamental life and work skills necessary to be successful in the workplace,
at home and in their communities. Of the 60,000 women receiving training, 8,000 high-potential women are offered advanced
training, with a focus on management and leadership skills, as well as in-depth instruction on work and life skills. While our focus is
on women, we extend training to both men and women working in the factories.
Factory Audit Orientation
Factory Audit Orientation is a training program that prepares new factories and associated suppliers for participation in the Responsible Sourcing
program through training in the following areas:
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Walmart's Standards for Suppliers
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Social and environmental compliance
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Enhanced fire safety requirement
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Chemical and machine safety
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Dormitory and canteen standards
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Audit scope and factory disclosure
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Factory audit process, results and consequences
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Country- and region-specific trends, laws and best practices
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Effective corrective action plan development
In 2013, 4,598 factories participated in Factory Audit Orientation
Violation Correction Training
Factories with higher risks observed during audits are requested to attend Violation Correction Training so we can provide them with a better
understanding of our Responsible Sourcing program and requirements under Walmart’s Standards for Suppliers. Violation Correction Training
addresses common trends related to social and environmental compliance, with special focus on locally relevant topics. Through training in root
cause analysis, factories are able to develop corrective action plans to remedy potential violations. As part of our audit program, factories are
assigned colors based on the severity of issues found.
Orange School Program
The Orange School Program provides one-on-one, hands-on training to select factories and suppliers. By focusing on the fundamentals of root
cause analysis methodology and procedures, we teach factory management to proactively identify noncompliance issues and develop a
systematic approach to continuous improvement. In 2013, 89 factories completed the Orange School Program, and 30 additional factories are
currently undergoing training.
Supplier Development Program
The Orange School Program provides one-on-one, hands-on training to select factories and suppliers. By focusing on the fundamentals of root
cause analysis methodology and procedures, we teach factory management to proactively identify noncompliance issues and develop a
systematic approach to continuous improvement. In 2013, 89 factories completed the Orange School Program, and 30 additional factories are
currently undergoing training.
Supplier Round Table
The Supplier Round Table is a forum for our suppliers, factories and stakeholders from similar sourcing regions to come together and discuss
concerns and share best practices. The sessions are focused on responsible sourcing goals, as well as objectives and current challenges across
their region. In 2013, there were 41 global Supplier Round Table sessions, with 633 participating factories and 436 participating suppliers.
Empowering workers in Bangladesh
We know the most effective way to increase workplace safety is by empowering the workers. That’s why, in addition to our Women in Factories
and Supply Chain Capacity programs, we’re investing in additional safety training in Bangladesh.
Through our work with Bureau Veritas, our goal is that each and every worker in factories producing merchandise directly for our suppliers in
Bangladesh be trained on fire safety procedures.
We’ve also contributed $1.6 million to the Institute of Sustainable Communities (ISC) to support the newly created Environmental, Health and
Safety (EHS) Academy in Bangladesh. Through the EHS Academy, apparel manufacturers in Bangladesh will have access to high-quality,
affordable and comprehensive training on fire safety and environment, health and workplace safety. In addition to funding, Walmart will also
provide technical support and advice to ISC. The goal of the academy is to provide a local, long-term platform for addressing challenges in the
supply chain related to fire safety through technical training and engagement.
Finally, through our participation in the Bangladesh Buyers Forum (BBF), Walmart has collaborated with 18 other brands to create a training
program to increase fire safety awareness among our suppliers and their employees in garment factories. With an expected reach of more than
3,000 exporting garment factories in Bangladesh, the Bangladesh Garment Manufacturers & Exporters Association (BGMEA) and Bangladesh
Knitwear Manufacturers & Exporters Association (BKMEA) are providing training for factory management on the use of the films as
educational tools.