Wal-Mart Supplier Accused of Sweatshop Conditions

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While allegations of sweatshop conditions in apparel factories that produce for Wal-Mart aren't new, the latest report raises questions about the auditing process the chain has set up to monitor its suppliers, most in distant countries. On Aug. 15, 2007, Wal-Mart released its annual "ethical sourcing report" in which CEO H. Lee Scott contended that Wal-Mart conducts more factory working-condition audits than any other company in the world—as many as 16,700 audits at 8,873 factories.

However, at Bangladesh's JMS Garments Factory, workers say that the visits are always preannounced. Managers prepare them for the auditors' visits and threaten to fire them if they tell the truth, employees told the labor research group. One worker, Ritu, is quoted in the SweatFree Communities report as saying: "The day when the Wal-Mart representative comes to visit, everything changes in the factory."

Fewer Ethical Sourcing Reports

Wal-Mart spokesman Richard Coyle said the company uses its own staff of 200 people to conduct audits and also supplements that with independent audits. Wal-Mart wouldn't provide any names of third-party groups that conduct its audits.

The retailer's own Web site says that only 26% of its auditors' visits are unannounced. Critics say that reflects an incomplete commitment to improve labor conditions in its supply chain.

"Wal-Mart has taken positive steps on environmental and sustainable issues, but when it comes to working on issues that question its purchasing practices or where its way of doing business would have to change, that's where things hit a wall," says Ruth Rosenbaum, executive director of CREA, a Hartford-based socioeconomic research center that focuses on human and labor rights. Rosenbaum has advised Wal-Mart as part of a group of activists who were invited to be in a Transparency Advisory Committee.

This year, Wal-Mart decided to stop issuing ethical sourcing reports annually, as it had done every year since 2004. Wal-Mart said it now will issue one every two years and will post quarterly progress updates on its Web site. BusinessWeek asked Wal-Mart to point to any updates since last year, but the company didn't provide any. A visit to the company's Web site seems to show that since last year's publication, Wal-Mart has not updated the information on ethical sourcing and its progress.

Gogoi is a contributing writer for BusinessWeek.com.