A Wal-Mart PR Issue Brews Anew


The retailer's initiative to offer fair-trade coffee is pleasing environmentalists but reheating a debate over treatment of its workers

With a simple cup of coffee, Wal-Mart Stores (WMT) finds itself back in the charged debate over how it treats workers. The world's largest retailer is introducing three house-brand coffees that are certified as fair trade. And that, of course, renews the prolonged discussion about just what sort of treatment the world's largest retailer offers its own workers. After all, fair trade, in essence, is about paying a fair wage—and much of the criticism heaped upon Wal-Mart in recent years concerns whether the Arkansas-based company pays employees fairly.

The fair-trade coffee brands are part of the bold environmental goals Wal-Mart Chief Executive H. Lee Scott set forth on Oct. 24, 2005: "To be supplied with 100% renewable energy, to create zero waste, and to sell products that sustain our resources and our environment." In the last few years, Wal-Mart has cut packaging to curb waste, cut the energy consumption in its truck fleets and stores, and is selling sustainable products like compact fluorescent lightbulbs. Wal-Mart is also encouraging its suppliers to reduce their environmental footprints and seeking sustainable products.

"A Lot of Promise"

The latest effort, announced Apr. 1, is six coffees sold under Wal-Mart's Sam's Choice brand. They cost $5.88 for 10- to 12-oz. bags. Three of the brands are Fair Trade Certified, while the other three are certified by the Rainforest Alliance and USDA Organic. "We recognize our customers' desire to buy products that have a positive environmental and social impact, and we are proud to offer an affordable line of coffee that is sourced and roasted with sustainability in mind," says DeDe Priest, a Wal-Mart senior vice-president and general merchandise manager.

CEO Scott's green manifesto, and his company's massive global reach, has won plaudits among environmentalists for its ambition and promise. "Because of its scale, Wal-Mart has the power to change the whole corporate world, and there is a lot of promise there because they are looking upstream and downstream in finding ways to reach their environmental goals," says Kert Davies, research director at Greenpeace USA, the environmental activist group.

Better Health Benefits

Fair trade, however, is all about social and workers' rights—and labor groups are crying foul. "Wal-Mart cannot claim the mantle of sustainability and neglect its own employees," says Mary Beth Maxwell, executive director at American Rights at Work, a nonprofit workers' rights group based in Washington. "Consumers who want to respect workers' rights around the world have helped create a demand for fair-trade products, but Wal-Mart should know that the same consumers also care about how companies treat their workers in the U.S. as well."

Wal-Mart workers earn an average of $22,500 annually. According to the U.S. Census Bureau, the threshold of poverty in 2006 for a family of four was $21,200. Wal-Mart spokeswoman Tara Radohl says the retailer offers competitive pay. "Our average, full-time hourly wage is $10.83 and is even higher in some states," she said. "For example, as of January, 2008, the average full-time hourly wage is $12.06 in Massachusetts, $11.32 in Illinois, $11.22 in New York, $12.17 in New Hampshire, and $11.12 per hour in California."

In recent years, high-profile politicians like U.S. Democratic Presidential candidate Barack Obama have called on Wal-Mart (BusinessWeek.com, 11/16/06) to provide its workers adequate wages, health care, and retirement benefits. Wal-Mart has responded to such criticism by offering its workers better benefits. Among other things, last year the company said it will offer its workers 2,400 generic prescription drugs at $4 a prescription, and it eliminated a $150 fee to cover spouses and some deductibles, such as $1,000 for a hospital stay. It offered several different choices of health coverage. All of these attracted 100,000 more workers to sign up for the company's benefits.

A Double Standard—Or a Good Start?

Despite the six-figure jump in benefit enrollments, the changes weren't enough to lure many employees overall. Today, Wal-Mart still insures just half of its 1.3 million employees in the U.S., and it still takes a year for part-timers to qualify. As many as 30% of Wal-Mart's employees work part-time, and the company has told analysts in the past that it hopes to increase its part-time workforce to 40%.

Wal-Mart has come under fire not just for its stinginess with employees, but for the labor practices of many of its suppliers abroad (BusinessWeek, 11/27/06). Several times in the last few years, activists have found that sweatshops produced several items that are sold in Wal-Mart stores. And now, activists say that the fair-trade coffee it touts stands for the company's double standards. "If Wal-Mart wants to ensure that producers of coffee are paid a living wage, it should show the same concern for people who produce the 139,000 other products that they sell at the store," says David Nassar, executive director of critic Wal-Mart Watch, a union-funded activist group.

Of course, Wal-Mart's decision to offer the new coffee brand is a big boost for proponents of fair trade. "Wal-Mart will help thousands of fair-trade farmers rise out of poverty," says Paul Rice, president and CEO of TransFair USA, a nonprofit organization that is the only independent, third-party certifier of fair-trade products in the U.S. "This is also the beginning of Wal-Mart's expansion of its sustainability initiative into a social and labor route," he says.

Gogoi is a contributing writer for BusinessWeek.com.

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