“Save Money, Live Better”: Wal-Mart’s Sourcing Paradox in China

By Cindy Shuck, ILRF intern

This afternoon, Beth Keck, the Senior Director of International Sustainability and Strategy at Wal-Mart, spoke at the Johns Hopkins School of Advanced International Studies about Wal-Mart’s new sustainability initiatives targeting their retail stores and suppliers, specifically in China. Mrs. Keck recently returned from Wal-Mart’s Sustainability Summit that was held in Beijing on October 21, where she met with Chinese Wal-Mart executives and other government officials to talk about the corporation’s new goals for responsible sourcing and how best to implement them.[1] Though the bulk of her presentation was focused on environmental sustainability efforts, she also mentioned the company’s social sustainability goals, which were quite interesting to hear considering Wal-Mart’s record since their opening in China in 1996.[2]

She started out by presenting Wal-Mart’s new and ambitious goals to use 100% renewable energy, produce zero waste, and sell products that sustain resources. Though Mrs. Keck admitted their loftiness, she contended that these goals are a great place for the company to start. She pointed out that Wal-Mart can make a large difference by making simple changes such as minimizing products’ packaging materials, recycling more efficiently, and reducing the use of plastic bags in retail stores, all initiatives that the company has recently implemented. She emphasized that energy efficiency and water conservation are also main concerns, and the company is working to build prototype sustainable factories that may serve as a model for new retail locations.

Mrs. Keck also devoted a considerable portion of her presentation to responsible sourcing, and I found that while the plans she outlined seemed excellent ideas for the more developed markets in which Wal-Mart operates, I questioned the feasibility of some of the initiatives the company hopes to launch in China. For example, she highlighted Wal-Mart’s emphasis on auditing their suppliers to ensure that factories not only comply with Chinese laws and regulations, but also provide adequate health and safety measures for their workers. At the same time, however, she pointed out that another major goal of the company is to increase the transparency of their supply chain so that they have full traceability of the factories, since past suppliers have frequently declared factories unclearly. While I agree that Wal-Mart should certainly work on implementation of socially responsible standards, I’m wondering how the company has been able to regulate their suppliers up to this point if they openly admit that they’re sometimes not sure who they are.

When further questioned about Wal-Mart’s suppliers and how the company goes about choosing socially responsible factories, Mrs. Keck responded that factories in China exhibit “different levels of sophistication,” and that Wal-Mart in China must simply work harder to ensure that they choose socially responsible firms. She explained that Wal-Mart will do business with factories if they demonstrate that they follow the proper standards and that this provides a positive incentive to perform well. However, considering the company’s goal to expand their retail locations in China, the feasibility of raising production while simultaneously ensuring good factory protocol certainly creates an interesting equation to solve.

A recent interview with a Chinese supplier released by Wal-Mart Watch is evidence that the company might not have as much leverage with “positive incentives” as it seems, especially with their efforts to keep prices low. The Chinese factory owner explains that while suppliers “used to do business with Wal-Mart for the glory,” the company has driven prices so low that it is impossible for firms to fulfill contracts and at the same time ensure that they are maintaining high factory standards.[3] I gained further perspective on this problem while walking out of the presentation, when an American business owner lamented that she, too, is unable to meet Wal-Mart’s low costs at the factory she owns in China because she instead chose to spend money on worker insurance. Thus, suppliers the world over are being forced to choose between implementing better standards for their workers and meeting Wal-Mart’s low-cost demands.

As Mrs. Keck showed today, though Wal-Mart’s efforts to improve environmental and social sustainability are certainly commendable, the company should be more realistic about the demands that they place on their suppliers. At the end of the presentation, a Wal-Mart representative, noticing my skepticism, handed me a pamphlet titled “Sourcing ethically through a socially responsible program” so that I might look at the company’s standards for socially-sustainable suppliers.[4] I’ve read the pamphlet and the website, but in my opinion, in the end it still comes down to the simple question of whether Wal-Mart’s desire to create more socially responsible suppliers will keep up with its goal to keep those prices rolling back.

---

[1] You can learn more about the Wal-Mart Sustainability Summit on their website at http://walmartstores.com/Sustainability/8685.aspx?p=232

[2] To read a Wal-Mart’s China Fact Sheet, go to http://walmartstores.com/FactsNews/FactSheets/#InternationalOperations

[3] Read the interview at http://walmartstores.com/Sustainability/8685.aspx?p=232

[4] You can read information similar to that in my pamphlet http://walmartstores.com/ethicalstandards

Comments

[money-saving-tips]

I like the irony of China being the one trying to hold the line on WalMart for things like fair labor practices, environmental responsibility, etc.

[Jason]

Strike! All workers of the world will strike until the corrupt system of capitalism is destroyed.