Wal-Mart gets tough on suppliers after toxins scandal

Wal-Mart, the world's largest retailer, said yesterday that it will impose tough new standards on suppliers after it was found to be selling milk products containing toxins in China, casting doubt over the ethics of its sourcing policies.

Factories will have to meet higher targets for reductions in energy use, carbon dioxide emissions, water use, disposal of hazardous waste and management of toxic substances.

The initiative, beginning next month, aims to introduce greater transparency to the supply chain, said chief executive Lee Scott.

"I firmly believe that a company that cheats on overtime and on the age of its labour, that dumps its scraps and chemicals in our rivers, that does not pay its taxes or honour its contracts will ultimately cheat on the quality of its products,” he said.

And by next year, all direct suppliers of store-branded and unbranded goods will have to identify the name and location of every factory used to make a product Wal-Mart sells.

Wal-Mart has signed an agreement with China's Ministry of Science and Technology to help suppliers meet the standards.

The agreement will be phased in beginning with suppliers in China in January 2009, and will expand to suppliers around the world by 2011.

Wal-Mart has 20,000 suppliers in China and says it will replace those that do not comply.

The milk scandal – which has badly damaged Wal-Mart's reputation – is the latest in a series of incidents involving products originating in Chinese factories that have been found to contain industrial toxins.