Using our Size and Scale for Positive Change
Responsible Buying Practices
Embedding Responsible Buying Practices in the Business
A foundation of our program is integration with the business. Our Responsible Sourcing Business Enablement teams are embedded with our retail market buying offices and sourcing hubs to help integrate responsible sourcing practices into merchant strategies, processes, systems and buying decisions – from selecting suppliers to developing new products. Associates often participate in merchant and supplier meetings to help establish expectations up front.
Merchants and sourcing associates also participate in training to understand how their decisions can potentially influence supply chain conditions and how they can reinforce positive facility working practices with suppliers. They receive new associate onboarding from Responsible Sourcing and participate in workshops and educational sessions, which typically include information on forced labor, health and safety, and category-specific training. In FY19, Walmart trained more than 3,300 merchants and sourcing professionals in its United States, Sam’s Club and International divisions on responsible buying practices.
Merchants use data – such as KPIs and Health Check Reports – to help hold suppliers accountable for supply chain health and risks. These reports provide visibility of suppliers and supply chains that present the highest potential risks. Responsible Sourcing and merchant associates use this information to prioritize and drive improvements to supply chain health.
Impact Story: Promoting responsible buying practices in Asda
Asda – Walmart’s business in the United Kingdom – is a member of Stronger Together, an alliance working to reduce the risks of forced labor and human trafficking by providing resources for suppliers. In FY19, the UK Responsible Sourcing team collaborated with Stronger Together to help Asda associates identify indicators of modern slavery within their daily lives – a first within the retail sector and a new area for Stronger Together. The campaign reached approximately 135,000 associates across the Asda Home Office and stores. In addition, more than 2,600 Asda Home Office and retail associates completed Modern Slavery training via an eLearning module designed with Stronger Together. The module provides information on UK legislation, indicators of modern slavery, case studies, best practices, and how to report concerns. This online training is available free of charge on the Responsible Sourcing Academy. For more information about Asda’s work to combat modern slavery, view Asda’s Modern Slavery Statement.
Our suppliers own the relationship with facilities that produce the products we sell, and Walmart expects suppliers to cascade Walmart’s expectations throughout the entire supply chain. There are several ways we help empower suppliers to promote worker dignity.
The Responsible Sourcing Academy provides suppliers with access to training resources, best practice guidance, and educational materials developed by third parties and by Walmart. The Academy covers topics such as audit guidance – including the Global Compliance Guidance Tool – forced labor, health and safety, and supply chain controls. Many of these resources are offered in multiple languages.
As of January 31, 2019, more than 4,300 supplier representatives have registered on the Responsible Sourcing Academy, and more than 650 supplier representatives have completed Stronger Together training modules on the Academy. We plan to continue adding resources to the Academy for both merchants and suppliers in FY20.
In addition, Responsible Sourcing associates conduct training and onboarding sessions with suppliers around the world. In FY19, Business Enablement teams reported that more than 2,300 supplier representatives participated in onboarding or category-specific training, which can cover a variety of Responsible-Sourcing-related topics.
Governance and Monitoring
Assessing Supply Chain Risk
Responsible Sourcing conducts an annual risk assessment to better understand social compliance risks in the supply chain. The results help us design solutions in countries and industries where risk and opportunity converge. The assessment takes into consideration, among others, the following:
- Areas of the supply chain where key risks are most likely to occur and where the impact of those risks are greatest
- Analysis of country risk based on internal and external data, including raw counts of issues and rate of issues, as well as relative severity and impact on people, operations, and reputation (in which impact on people has the greatest weight)
- Commodity and product-specific risks based on Walmart-proprietary data, local intelligence, expert intelligence, official publications, and media/NGO reports to better understand the locations and supply chains in which issues are particularly acute
The final output of the assessment consists of specific issues in particular product supply chains, countries or both. The results feed into the Responsible Sourcing Strategy design process, which involves identification of root causes, assessment of potential solutions (including existing or emerging initiatives), and proposed measures to address the risk(s). These measures may include policy or procedure changes, influencing our approved audit programs, changing our supply chain monitoring and escalation process, or implementing new supply chain initiatives.
Governance and Policy
All suppliers of goods for resale are subject to Walmart’s Standards for Suppliers. Among other topics, our Standards for Suppliers require our suppliers – and those who supply to them – to: comply with the law; be transparent; not to use involuntary or underage labor; maintain a fair process for making employment decisions; comply with all applicable laws and agreements regarding compensation and working hours; recognize freedom of association and collective bargaining; and provide a safe working environment. Suppliers are expected to cascade these standards throughout their supply chain. We include the Standards for Suppliers in supplier agreements and post them for suppliers in seven languages.
Our Standards and policies are regularly reviewed by our Governance team to meet the demands of our changing business and potential risk areas. In FY19, Responsible Sourcing policies were reviewed or updated more than a dozen times.
Risk-Based Auditing Approach
While some facilities are exempt from Walmart disclosure – as outlined in our disclosure and audit and assessment policies on our corporate site – all facilities within the disclosure scope must be disclosed and available for audit. We take a risk-based approach to auditing suppliers’ disclosed facilities, which allocates more resources to facilities located in countries with greater potential risks. If we find that a supplier is producing merchandise in or subcontracting to an unauthorized facility, the supplier may become ineligible to do business with Walmart.
As of January 31, 2019, there were more than 25,800 facilities in more than 100 countries that had been disclosed by suppliers to Walmart in “active” status.
Walmart accepts audits from the below internationally-recognized third-party audit programs:
- Best Aquaculture Practices (BAP)
- Better Work (BW)
- amfori Business Social Compliance Initiative (BSCI)
- ICTI Ethical Toy Program (IETP)
- Responsible Business Alliance (RBA)
- Sedex Members Ethical Trade Audit (SMETA)
- Social Accountability International SA8000
- Sustainability Initiative of South Africa (SIZA)
- Worldwide Responsible Accredited Production (WRAP)
Audits focus on a variety of issues, including worker compensation, voluntary labor practices, working age laws and standards, working hours, and facility health and safety standards. We continuously look for ways to improve; our Audit Program Management team collaborates with our approved audit programs to make enhancements and share best practices across the programs for the benefit of the broader industry and global supply chain.
At Walmart, we strive to continually improve our risk-based audit program so we can better allocate our resources to higher-risk facilities and help increase overall compliance. However, we recognize that, despite our efforts, no audit program can guarantee that every facility used by every supplier is in full compliance with our Standards for Suppliers. Read more about our efforts and approach below.
Impact Story: Convening programs to take on forced labor
While we are making efforts to find root-cause solutions in high-risk supply chains, we are also looking for ways to shape the audit industry to be more effective at uncovering forced labor and forced labor indicators.
In December 2018, Walmart Responsible Sourcing hosted the Forced Labor Forum, which brought together 50 representatives across audit programs, audit firms, NGOs and industry experts. Participants discussed the role third-party audit programs play in promoting responsible recruitment and the Employer Pays Principle (EPP), in addition to how programs can better identify, report, escalate and remediate forced labor.
When surveyed after the event, participants reported that they now place more importance on identifying and adapting to higher-risk situations and better understand how to measure EPP implementation than before the event. In addition, participants reported that they continue to build on relationships developed during the forum to improve practices across the audit industry.
Following the Forced Labor Form, we expect our approved audit programs to begin implementing additional processes to uncover forced labor, identify facility-specific risks, and measure EPP implementation.
Impact Story: Professionalizing the social-compliance audit industry
In 2017, third-party audit firms – supported by companies that rely on social compliance audits, audit programs and NGOs – established the Association of Professional Social Compliance Auditors (APSCA). APSCA is helping increase professionalism and credibility within the social-compliance industry. Since its inception, APSCA has developed a Code of Professional Conduct, created a Competency Framework for Auditors, registered auditors, and begun the auditor examination process. As of January 31, 2019, more than 3,200 auditors have registered with APSCA, indicating they have the qualifications to and intend to sit for the APSCA certification examination.
Walmart requires that reports from social compliance audits be conducted by an APSCA-registered auditor in order for them to be considered acceptable by Walmart. In the future, Walmart will expect audits to be signed by APSCA-certified auditors.
A senior member of the Responsible Sourcing team serves as a member of the APSCA Executive Board.
Walmart assesses each facility audit report against our Standards for Suppliers to identify higher-risk issues, including forced labor and trafficking, underage labor, and unsafe working conditions. These assessments provide us and our suppliers with important information to help address potential issues and make a positive impact for workers.
In FY19, Walmart reviewed and assessed more than 14,700 audit reports. Of the audits assessed, 23.7% received Green, 63.1% received Yellow, 10.8% received Orange, and 0.3% received Red. An additional 2.1% of audits were for facilities participating in our small supplier program and did not receive a color rating
Audits can receive an assessment of Green, Yellow, Orange or Red. Green ratings represent facilities for which we found general compliance; yellow ratings identify facilities that audits show to be generally compliant with our Standards but have failed to meet at least one important requirement. Orange and red ratings indicate facilities where we have found more serious violations, such as withheld or irregular payment, forced labor, worker intimidation or discrimination, unethical recruitment practices, and excessive working hours.
Walmart may continue to source from facilities with orange ratings as they work to remediate violations; we believe that staying engaged with suppliers can have a more positive impact on workers than abandoning the supplier relationship. For example, in FY19, more than 480 facilities remediated from Orange to Yellow or Green. However, facilities with three consecutive orange ratings or a red rating indicates serious infractions that may result in temporarily or permanently terminating the facility’s ability to produce product for Walmart.
Grievance and Investigations
Walmart provides a variety of mechanisms to raise concerns about violations of our Standards and to seek redress, including our anonymous Ethics hotline. To help inform supply chain workers of our expectations and the availability of reporting channels, we provide a series of posters that suppliers are required to place in their facilities. The posters focus on issues of higher risk to workers, including forced labor and trafficking risks, unsafe working conditions, working hours and wages, and intimidation and discrimination. The posters offer several channels to report issues of concern, including directly to Walmart, and are available on our corporate website. As of January 31, 2019, the posters were available in 24 languages, and we plan to continue to add languages this year.
Each allegation is reviewed and may be referred to the Responsible Sourcing investigations team or other compliance teams within Walmart.
Grievance Mechanism Case Example
In one case, an anonymous reporter in China stated a supplier had falsified information during a recent audit, and that the facility had additional issues that could cause potential risk to workers. Responsible Sourcing’s investigation substantiated these claims. The facility received a Red assessment rating.
Investigations and Supplier Engagement
In addition to monitoring suppliers’ facilities through audits, Walmart investigates certain alleged violations of our Standards for Suppliers. In FY19, our Responsible Sourcing team opened more than 600 cases involving allegations of supply chain misconduct. These allegations were the results of audits, internal referrals, and worker grievance mechanisms such as the Walmart Ethics hotline. Each case is reviewed and follow-up may include worker interviews and onsite visits.
Responsible Sourcing may also engage directly with the supplier. This issue response process typically includes a discussion regarding the allegations, a clarification of expectations, and review, approval, and follow up with the supplier on a remediation plan. In FY19, Walmart used the issue response process for more than 65 cases.
However, substantiated findings may result in consequences for suppliers, facilities or both – up to and including termination of business with Walmart and its subsidiaries. Since 2012, we have stopped doing business with more than 30 suppliers in response to serious violations of our Standards.