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Are Walmart's Chinese Factories As Bad As Apple's?

Our fiction-free investigation finds that in many cases, the company's auditors are asleep on the job.

On a warm, sticky winter morning, I waited nervously in a parking lot in Foshan, a city in southeastern China's smog-choked Pearl River delta, for a man I'd never met. His name was Mr. Ou, and he ran the sprawling factory in front of me, a jumble of offices, low-slung buildings, and warehouses. Though the factory was teeming with workers, a Subaru SUV and BMW coupe were the only cars in the lot. Drab, gray worker dormitories loomed nearby, and between them ran a dusty road that led to the factory. At last a young man emerged from an office building. He motioned for me to follow him in.

I settled onto a plush leather couch and absorbed the decor. Framed awards and certificates covered the walls. A shopping-cart-size wooden frog stood sentry in the center of the room. Ping golf clubs leaned against one wall; a Rolling Stones commemorative electric guitar gathered dust behind a chair. And there were grills: a small kettle grill on a desk, a brushed-steel gas grill on the far side of the room, grills stacked atop other grills. This was Mr. Ou's trade: supplying Western retailers with the cooking apparatus of patio parties and Fourth of July bashes.

The young man closed the door. He took the chair to my right, lit a cigarette, and met my stare as if to say, Let's get on with it. Only then did I realize I was not talking to an assistant.

Mr. Ou had the good looks of a judge on one of those breathless Chinese talent shows. He wore a tailored blazer, an expensive-looking watch, polished leather shoes, and colorful striped socks. He asked why I'd come to China, why I cared about his factory. An American consultant, I said, had suggested I tour his operation, Foshan Juniu Metal Manufacturing, because Mr. Ou was part of a hallmark sustainability program launched by the company I had come to China to investigate—Walmart.

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In October 2005, Walmart announced plans to transform itself into one of the greenest corporations in the world. Then-CEO Lee Scott called sustainability "essential to our future success as a retailer." The company has been especially vocal about shrinking its environmental footprint in China, its manufacturing hub. But do the facts on the ground match Walmart's rhetoric? This was the question that had brought me to Mr. Ou.

Mr. Ou dragged on his cigarette, mulling my questions. "Okay," he finally said. "I will tell you what you want to know."

He was 33 years old and came from a manufacturing family. His parents ran a factory making packaging for barbecue grills and then, in 1994, began producing the grills themselves. By 2004, when Mr. Ou took over from his parents, Walmart was a major customer. In 2008, Mr. Ou signed his operation up as one of 200 plants whose energy efficiency Walmart would seek to increase by 20 percent.

Mr. Ou said all this in a smoky rattle of a voice, but he perked up when he talked about this program. "As the biggest retailer in the world," he told me, "Walmart has a responsibility to do this." For the energy efficiency program, he submitted monthly reports to Walmart and met with a Walmart consultant about energy-saving equipment. But he had his doubts. While Walmart executives preached sustainability, its buyers pushed him to lower prices by 3 or 5 percent each year. Operating on the thinnest of margins and scrambling to keep up with Walmart's demands, he said, factories just don't have the time or capital to invest in green projects. "They will work the suppliers to death," he told me.

After our meeting, Mr. Ou's assistant, who looked slightly older than Mr. Ou, took me around the factory grounds, 25 acres in all. One- and two-story buildings lined the road, and a bilious-looking river cut through the property. When I asked, the assistant said its pollution came from other factories. We passed through a dark, ear-splittingly loud packaging facility where, amid stacks of Styrofoam blocks and plastic-wrapped metal parts, workers eyed us warily before turning back to the production line. Kingsford grill boxes reached high toward the ceiling, WAL-MART printed on the side.

Near the end of the tour, the assistant led me inside a hangarlike plant filled with the whine of heavy machinery. Workers in jeans and T-shirts operated heavy presses, stamping metal sheets into grill lids. We sidled up to an unoccupied machine. Bits of metal glittered at its base like coins in a fountain. The assistant motioned for me to look closer, then pointed to a shoebox-size metal box affixed to one side that read "Mascot." When turned on, he proudly explained, this box slashed electricity usage. I had asked to see the factory's energy efficiency investments, and this was it.

Soon after, the assistant led me back to the parking lot. The tour was over. Mr. Ou gave me his card and told me to stay in touch.

It was never made clear to me how those energy-saving boxes exactly worked. What I did know was that Mr. Ou had welcomed me into his factory, served me tea, answered my questions, and let me snoop around. He seemed like a forward-thinking businessman with a strong belief in sustainability—exactly the right type to carry forward Walmart's vision for a leaner, greener supply chain in a country smothered by pollution.

Except, as far as Mr. Ou was concerned, that vision never came to life. And no one, he later told me, ever explained why.

Walmart's campaign to green everything from its break rooms to its global supply chain is one of the most publicized, and controversial, experiments in American retail. The company had made a halfhearted attempt in the '80s and '90s, with a few green products and ecofriendly stores. But this latest effort was different. It was sweeping, embracing every part of the company's business. It emanated directly from the CEO's office. And, perhaps most remarkably, some of Walmart's erstwhile critics in the environmental movement—the Environmental Defense Fund (EDF), Natural Resources Defense Council (NRDC), and World Wildlife Fund, among others—got on board. Former Sierra Club president Adam Werbach was hired to spread the green message among Walmart's 1.4 million US employees.

Almost seven years into the program, many environmentalists remain convinced that Walmart is serious about sustainability—and that its actions can have a major impact on the world economy because of the gravitational pull of its vast network of suppliers, customers, and employees. Walmart's environmental initiatives in China have been heralded—most recently by Orville Schell in The Atlantic—as a key force in spurring other corporations to embrace sound environmental practices. My reporting—more than a year of research that took me from Arkansas to China—suggests a more complex, less flattering story: Walmart has made laudable though modest progress on many of its goals. But with the global economic slowdown tugging at the company's profit margins, people involved with the environmental campaign say the momentum seems to be stalling or vanishing entirely.

Since launching its sustainability program, Walmart has pledged to eliminate waste, use only renewable energy, sell more organic produce, support small farmers, and slash its energy footprint. That's no easy task: Each second, 330 people buy something from one of Walmart's 8,970 stores worldwide. With 2.1 million workers, it is the world's largest private employer. Its carbon footprint—from its stores, distribution centers, company offices, corporate jets, and so on—totaled 21.4 million metric tons in 2010, more than that of half the world's countries, according to data Walmart provided to the Carbon Disclosure Project.

But that figure doesn't include Walmart's supply chain, a web of more than 100,000 suppliers from Tennessee to Turkey, Cambodia to Mexico. These companies fall largely into two categories: Some make house-brand products to Walmart specifications: Great Value (food), George (clothing), Mainstays (furniture). Then there are name-brand products, like Del Monte pineapples, Coleman tents, and Bic pens. Sometimes, a brand will make a Walmart-specific product; General Electric, for instance, sells kitchen appliances exclusive to Walmart and is subject to Walmart's factory regulations. But neither the house-brand nor name-brand suppliers necessarily produce the jeans, tents, or toothbrushes they sell to Walmart. That work is done by contractors and subcontractors, which include many unregulated "shadow" factories—and that's where some of the most carbon-heavy, polluting parts of the manufacturing process happen.

Counting all the suppliers, factories, mills, farms, and so on in its supply chain, Walmart estimates its total carbon footprint is closer to at least 200 million metric tons. And even that estimate doesn't include all of the companies Walmart does business with, such as its distribution trucking firms.

In the past, Walmart's outsize carbon footprint had made the company a favorite target of environmentalists. But in 2009, as hope for a congressional cap-and-trade deal evaporated and the Copenhagen climate talks ended in a stalemate, they began to see Walmart in a different light: If they could make the world's largest retailer greener, other businesses might follow suit. EDF had opened its own office near Walmart headquarters in Bentonville, Arkansas, embedding its employees in the "belly of the beast," as one staffer put it. "Even though they're a party of last resort, they're our only hope at the moment," said Linda Greer, an NRDC scientist who works with Walmart. "They have the potential to change the world."

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