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Wal-Mart toughens rules with its suppliers

Wal-Mart is now demanding its suppliers be authorized.

Wal-Mart is now demanding its suppliers be authorized. It claims a fatal fire in Bangladesh last year was at an unauthorized factory. (Nov. 25, 2012) Credit: AP

Wal-Mart Stores Inc. has alerted its global suppliers that it will immediately drop them if they subcontract work to factories they haven't authorized.

Wal-Mart's stricter contracting rule, along with other changes to its policy, comes amid increasing calls for better safety oversight after a fire in November at a Bangladesh factory that supplied clothing to Wal-Mart killed 112 workers. Wal-Mart has said the factory wasn't authorized to make its clothes.

In a letter sent Tuesday to suppliers, the company says it will adopt a "zero tolerance" policy on subcontracting without the company's knowledge, effective March. 1. Previously, suppliers had three chances to rectify mistakes. Wal-Mart also said it plans to publish on its website a list of factories that haven't been authorized to manufacture goods for Wal-Mart.

Also, starting June 1, suppliers must have an employee stationed in countries where they subcontract to ensure compliance, rather than relying on third-party agents.

"We want the right accountability and ownership to be in the hands of the suppliers," said Rajan Kamalanathan, Wal-Mart's vice president of ethical sourcing. "We are placing our orders in good faith."

Wal-Mart will meet with clothing suppliers from the United States and Canada Thursday to explain the new policy changes.

Critics quickly dismissed Wal-Mart's moves as inadequate and said that the retailer needs to do more.

"It shows that Wal-Mart is feeling a great deal of pressure in the wake of public scrutiny," said Scott Nova, executive director at Workers' Rights Consortium, a labor-backed advocacy group.

But Nova said the company's response isn't adequate unless Wal-Mart and others pay suppliers more so they can cover the costs of repairs.

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