Wal-Mart sees gains in foreign plants

BENTONVILLE, Ark. - Wal-Mart Stores Inc. found a decrease in the worst types of labor violations at foreign factories last year during inspections of nearly 8,900 plants from which it buys clothes, toys, shoes and other products.

But the rate for moderate violations, such as failing to document worker pay, rose to 52 percent from 37 percent in 2005. And the share of the inspected factories with only minor or no violations fell to 5 percent from 10 percent in 2005.

In an annual report released yesterday, the retailer said its inspection program found a smaller percentage of factories with severe violations of safety, labor and environmental standards than the year before.

It said challenges remained, including how to collaborate with other big companies and local governments in other countries to make lasting improvements for workers.

What Wal-Mart calls "higher risk" violations, including failure to pay overtime, were found in 40 percent of inspections in 2006. That is down from 52 percent the year before.

The percentage of factories barred permanently from selling to Wal-Mart for egregious violations, such as using prison labor or child workers, remained stable at 0.2 percent.

The executive in charge of the inspection program, Rajan Kamalanathan, said the drop in the most severe violations reflected Wal-Mart's stepped-up efforts to educate factory managers rather than just punish them by withdrawing orders.

"Orange rates have improved, which is a good sign," said Kamalanathan, vice president of ethical standards. Orange is the color code Wal-Mart uses for high-risk violations.

"On the other side, we recognize that it is not significant enough of a change to talk about making a huge impact on the supplier factories," Kamalanathan said.

He said Wal-Mart must collaborate with other companies that buy from foreign factories, as well as with governments and activist groups, to make permanent improvements.

Wal-Mart is starting to consider how to do that, including talking with the United Nations' International Labor Organization and a trade group called Business for Social Responsibility.

Religious investors who work with big companies to improve labor standards in foreign factories said Wal-Mart's report showed progress, but much remained to be done.

"It is beginning to help," said the Rev. David Schilling, director of the global corporate accountability program of the Interfaith Center on Corporate Responsibility.

Schilling said Wal-Mart's 2006 report acknowledged that factory inspections by big buyers were not enough to force lasting improvements for workers in mainly developing countries. Instead, the companies have to work with labor groups, governments and activists.

Wal-Mart does not own factories, but instead buys from others who do.

Wal-Mart says it uses the inspections to encourage factory owners to improve conditions. If violations are found, inspectors give a list to the owners and return for a reaudit.