By Marcus Kable of The Associated Press and Stacey Roberts of the Arkansas Democrat-Gazette
Wal-Mart Stores Inc. found a higher rate of severe violations at foreign factories last year as the company stepped up inspections for labor and environmental standards in more than 60 countries where it buys clothes, toys, shoes and other products, it said in a report.
Only 23 factories were cut off from Wal-Mart’s business for repeated violations, a sharp decline from 1, 200 in 2004. But the retailer said that came in part because of a change in its auditing rules. It expects the number to increase again this year.
The report also noted that in 2005 the retailer permanently banned 141 factories because of underage-labor violations.
In 2005, Wal-Mart changed the underage-child labor policy from zero tolerance — one underage worker resulted in a permanent ban on producing anything for Wal-Mart — to one where one or two underage workers netted the factory a warning and gave it 30 days to remedy the situation. Either a follow-up inspection clears the factory of the underageworker problem, or the ban becomes permanent.
Wal-Mart said it made the change to lessen the potential financial hardship to legal-age workers at the factories. The number of underage worker violations in 2005 came to only 0. 8 percent of the audits, the report said.
Bentonville-based Wal-Mart posted its “2005 Report on Ethical Sourcing” on a section of its Web site last week but made no public announcement, spokesman Beth Keck said.
“In 2005, we audited more factories than any other company in the world, performing more than 13, 600 initial and follow-up audits of 7, 200 supplier factories,” the report said.
Last year, as Wal-Mart came under mounting criticism led by union-backed campaign groups, Chief Executive Officer Lee Scott said Wal-Mart would step up enforcement of workplace and environmental standards. It does not own factories but buys from others who do.
“Wal-Mart is committed to sourcing merchandise for our stores that has been produced in an ethical manner,” Amy Wyatt, Wal-Mart spokesman for international corporate affairs, said in a e-mail Wednesday.
“We continuously work to strengthen our efforts in monitoring supplier factories. The results highlighted in our report demonstrate that our program is effective with key changes made last year, including a 100 percent increase in unannounced audits and increased rigor of our supplier standards.”
Wal-Mart says it uses the findings to encourage factory owners to improve conditions. Inspectors who find violations give a list to the owners and return for a re-audit. Repeated violations, as well as such grave problems as using underage or prison labor, can lead to a ban on selling to Wal-Mart for up to one year.
The International Labor Rights Fund filed a lawsuit in 2005 against Wal-Mart contending that suppliers in China, Bangladesh, Indonesia, Swaziland and Nicaragua had to work overtime without pay and were fired for trying to unionize.
“It’s amazing how typical the pattern is we found in each of these countries,” Terry Collingsworth, a lawyer with the International Labor Rights Fund in Washington, said in September of 2005. “The supplier gets an order from Wal-Mart, and the workers are essentially forced to work until the order is completed.”
Trina Tocco, spokesman for International Labor Rights Fund, said Wednesday that she had received a copy of the 2005 report but had not read the document yet and so could not comment.
The fund’s suit is having some difficulty getting a hearing, Tocco said.
“We’re having a problem finding a judge who does not have Wal-Mart stock or other business dealings with Wal-Mart,” she said. “But we do have another hearing date set on our third judge. It is on Nov. 6 in Los Angeles.”
In 2004, the St. Petersburg Times reported that Wal-Mart permanently dropped 108 of its 5, 300 offshore factories for hiring underage workers or committing other major grievances.
Union-funded Wal-Mart Watch’s Nu Wexler said the report came as a serious selfindictment of Wal-Mart’s selfinspection program.
“They are announcing almost 80 percent of their inspections in advance and still finding medium to serious violations in 89 percent of them,” Wexler said Wednesday. “They need to address the larger problem. They are squeezing their suppliers so much the suppliers are unable to meet Wal-Mart’s minimum standard.”
In 2005, Wal-Mart’s inspectors reported what it calls “highrisk” violations at 52 percent of those factories, compared with 36 percent in 2004.
Medium-risk violations were reported at 37 percent of plants, down from 43 percent the year before.
Only 10 percent of factories were found with no violations or only minor ones, compared with 21 percent in 2004.
“Several consistently found serious violations at the factory level include problems with payment of overtime compensation, coaching of workers for worker interviews, and the use of double-books to hide the true numbers of hours worked or wages / benefits paid,” the report said.
Wal-Mart also said it would ban factories with repeat violations for one year — up from 90-day bans. Because of the severity of the change, Wal-Mart said, it gave companies a chance by wiping their pre-2005 records clean and counting violations from Jan. 1 of last year.
Critics called that cooking the books.
“You know Wal-Mart’s ethics have hit a new low when not only are your foreign suppliers exploiting workers more, but you actually wipe clean a record of past abuses to make it look better,” said Chris Kofinis, spokesman for WakeUpWalMart. com, another union-funded group.
The surprise inspections increased to about 20 percent last year from 8 percent in 2004, the report said, a rate that Wal-Mart intends to boost to about 30 percent this year.
Wal-Mart said violations were reclassified to strengthen and reinforce their severity. Violations such as false record keeping were reclassified from medium- to high-risk.
“Our auditors became more familiar with the factories and the factory workers. And as the workers became more accustomed to the interview process, they more openly shared their experiences,” the report said.
Wal-Mart’s standards cover health and safety issues, environment, compensation, working hours, forced labor, underage labor, discrimination, compliance with applicable national laws and regulation, freedom of association and collective bargaining, rights concerning foreign contract workers, and the right of audit by Wal-Mart.
A copy of the report can be found at: www. walmartstores. com / GlobalWMStoresWeb / navigate. do ? catg = 336. Information for this article was contributed by Marcus Kable of The Associated Press and Stacey Roberts of the Arkansas Democrat-Gazette.