Ethical Sourcing Audit Process
Factory audits are a central pillar of Walmart’s ethical sourcing program. Because Walmart does not own any of the factories that produce merchandise for our stores, regular audits are conducted to verify that a supplier is complying with Walmart’s Standards for Suppliers and to find ways to strengthen working conditions and labor practices in factories.
When auditors visit a factory, the audit process enables them to determine if:
- Workers are treated with dignity and respect;
- Workers are paid appropriately and receive the legally and contractually defined benefits;
- Working hours comply with the law and Walmart’s standards;
- Well-defined hiring practices are followed, which include age verification and confirmation of the individual’s eligibility to work in the country;
- The working environment is clean, safe and well-maintained; and
- Open and safe communication between workers and management is established.
Factory prequalification is required for factories of suppliers managed by Walmart Global Sourcing or Direct Sourcing Group where Walmart is the importer of record. To be approved, a factory must receive one of Walmart’s two highest assessment ratings. Subcontracting factories must also be audited if they produce part or a component of a product, containing a Walmart private label or proprietary brand logo, including, but not limited to, a major component of a finished product that could be sold independently.
After a factory is approved to produce merchandise for Walmart, all subsequent audits are unannounced.
The audit process includes:
- Opening meeting – Auditors verify the factory’s business license and follow up with factory representatives on any noncompliance violations identified during previous audits
- Factory tour – Auditors conduct a factory walk-through and speak with employees on the production floor about the factory’s compliance with Walmart’s Standards for Suppliers. Auditors also check equipment and safety mechanisms and inspect for any health, safety and environmental hazards.
- Employee interviews – Auditors interview a representative sampling of workers (based on the size of the workforce) in a private area without management present. The selection of workers is representative of factors such as gender, nationalities, age and skill ratios at the factory.
- Documentation review – Auditors review personnel documents and records to check workers’ ages, contracts, compensation and working hours.
- Closing meeting and signing of the onsite report – During the closing meeting, the auditor will discuss any identified issues and recommendations to remedy any violations observed and present the factory with an onsite report containing this information for their acknowledgment and signing.
Once a factory is audited, the findings are reviewed and a rating is assigned by the Walmart Ethical Sourcing Assessment Team.
There are four types of assessment ratings:
- Green: minor to no violations; the factory will be audited within 2 years.
- Yellow: medium-risk violations; the factory will be re-audited within 1 year.
- Orange: higher-risk violations; the factory will be re-audited within 6 months; if factories receive three orange ratings in a two-year period, the factory is disapproved and prohibited from doing business with Walmart for at least one year.
- Red: most serious violations that warrant no future business with Walmart.
Walmart uses the audits to help make decisions about suppliers and factories – whether to develop them, make them a preferred supplier or to stop doing business with them due to the severity of violations.
Integrity of Audits
All audits are conducted by approved third-party audit firms. Walmart only contracts with accredited and internationally recognized auditing firms. Approved audit firms will be required to complete the equivalence process for the Auditing Competence portion of the Global Social Compliance Program.
All auditors must be approved and registered with Walmart. Auditors must have an understanding of local laws, requirements and collective bargaining agreements prior to the audit. Local language skills, gender and relevant audit experience in that particular industry are considered when assigning audit teams.
Walmart takes steps to ensure that all factory audits are conducted with integrity. Walmart implemented an industry best practice to conduct validation audits that check the accuracy of third-party audits. These re-audits are conducted by the Walmart Ethical Sourcing Special Audit Team. Validation audits occur within 30 days of the last audit, and they follow the same protocol including choosing the same workers to interview, reviewing the same set of records, etc. Validation audits are conducted at random or if Walmart has concerns about a particular audit.