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Wal-Mart Stepping Up Bangladesh Inspections

Mike Duke, the retailer's president and ceo, gave a speech on integrity and business practices at The Consumer Goods Forum Global Summit in Tokyo.

TOKYO — Mike Duke, president and chief executive officer of Wal-Mart Stores Inc., said the world’s largest retailer is stepping up factory inspections and safety measures in Bangladesh.

This story first appeared in the June 17, 2013 issue of WWD.  Subscribe Today.

“We are allowing third-party companies to inspect and approve factories from a structural standpoint,” Duke said Friday, just after giving a speech on integrity and business practices at The Consumer Goods Forum Global Summit here. “We now are trying to redouble the efforts on the areas of auditing, inspecting and training. I will say, though, that we didn’t quickly…you know, jump to a conclusion of abandoning the country. I think in some cases helping markets like Bangladesh to raise the standards is better than abandoning a market like that.”

Labor activists and other organizations have criticized Wal-Mart and Gap Inc. for not signing on to a binding, international Bangladesh fire and safety agreement that already has broad support of 50 other retailers and brands. Wal-Mart and Gap have said they are formulating their own alternative safety plan but have not provided specifics.

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Duke said Wal-Mart is implementing a zero-tolerance policy in terms of its suppliers using substandard factories. “We don’t own factories in Bangladesh. We will purchase from suppliers who then may contract and sub-contract so the supply chain may have multiple layers. We’ve also implemented a zero-tolerance approach.…If unauthorized factories are found to be used, then we terminate relationships with that supplier and intend not to do business with them again.” He went on to specify that even prior to April’s factory collapse in Savar that killed 1,129 people, Wal-Mart had made a “standard decision” not to purchase from “multibusiness, multilevel factories” like Rana Plaza.

Duke’s statements on Bangladesh emerged from a brief Q&A session at the forum. After giving a speech in which he extolled Wal-Mart’s mission to improve people’s lives by offering them low-priced goods and stressed the importance of integrity, Duke sat down to speak with summit moderator Alex Thomson, British presenter and chief correspondent for ITN’s Channel 4 News.

Thomson asked Duke a few questions about integrity before addressing the Bangladesh issue. “When you look at [the factory collapse], what do you think personally, but also in terms of business? What can and should be done to make sure that stuff is consigned to history?” he asked.

The Wal-Mart executive said that he had an initially emotional reaction to the disaster and couldn’t “even comprehend a tragedy like that.” The executive said he thought of the workers’ families and recalled his own past visits to Bangladesh’s factories and villages.

“But then I think you step back….I think if we spend all of our time being defensive, we miss the opportunity to be a better company,” he said.

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Earlier in the Q&A, before addressing the Bangladesh issue, Duke spoke candidly about Wal-Mart’s food labeling snafu in China. In 2011, Chinese government officials alleged the retailer was selling ordinary pork and fraudulently labeling it as organic. The incident temporarily closed down 13 Wal-Mart stores in China. Wal-Mart China’s president and chief executive officer and the vice president for human resourcesresigned shortly afterward — although Wal-Mart said they left for “personal reasons” and did not mention the pork issue.

“Mislabeling can be accidental but it’s hard to tell. The product has to be labeled properly. So we had a mislabeling issue that became world news,” he said, adding that Wal-Mart has since stepped up its training and compliance in this area. “I don’t think you get a yellow card. You get a red card on any mistake like that. So we had to really raise our standards.”

Duke spent much of his time at the summit speaking about the importance of integrity in business.

“Tuesday’s sales weren’t so good. Wednesday was OK. You can say our sales are kind of average for the week. In the area of integrity, you tend to be measured at the lowest point. You know when you have let that slip, that becomes that person’s standard of integrity.”

Duke said he is all for transparency. “Bring it on. You know, I think it’s fantastic,” he said.

“Some people have said ‘Gosh, you know, Wal-Mart, if you’re the largest retail company in the world, you have more sales, you have 2.2 million people.’ And guess what? None of those 2.2 million people are perfect. So we’re going to have mistakes and it gets publicized. And some of our own people will say sometimes we’re held to a higher standard,” Duke said. “I’ll say ‘Isn’t that wonderful? Don’t you love working for a company that’s held to the highest standard? Why would you want to work for a company that’s held to anything less?’”