Walmart's China Suppliers Must Commit to Sustainability, Exec Says

If a Chinese supplier isn’t willing to cooperate with Walmart on sustainability, “it shouldn’t be doing business” with retailer, one of the company’s executives said Thursday.

Speaking at Fortune’s Global Sustainability Forum in Yunnan, China, Ronnie Tham, director of global sourcing, said the retailer has cracked down on suppliers in the country in its efforts to erase one billion tons of CO2 emissions from its global supply chain by 2030. Tham did not disclose what percentage of total supply chain emissions that represented.

However, that tactic does not mean Walmart immediately stops doing business with a factory that is violating its standards, Tham said. Rather, the company provides training and resources to help suppliers adjust, but the approach provides “a very clear message that, hey, if you’re not on this journey, then you shouldn’t be doing business with Walmart.”

Even that is a major shift, Tham acknowledged. In 2008, he said, Walmart’s focus was on just making sure suppliers were not breaking China’s environmental laws. Now, the focus is on meeting Walmart’s aspirational targets.

Walmart holds the No. 1 spot on the Fortune Global 500, and was also awarded the No. 5 spot on the Change the World list this year for the investment its made in its people.

Despite efforts by brands such as Walmart to put pressure on factories and push sustainability forward, meeting those basic standards of not violating Chinese law remains an enormous challenge, said Ma Jun, founder and director of China’s Institute of Public and Environmental Affairs.

The Institute’s database of environmental violators show more than one million factories out of some 3.3 million are still breaking the law, said Jun.

Meanwhile, the energy consumption of China’s mammoth manufacturing and export industry remains disproportionately dependent on coal, by far the most polluting source of energy, he said.

As China’s economy has slowed, there is also the rising risk that addressing environmental issues will be sacrificed, he said.

“The government is in some sort of dilemma,” he said. “We want to maintain a strategic focus, but on the other hand, how to keep up [economic] growth?”

That conundrum is only putting more pressure on business, Jun said.

“At this moment, China, and the world, needs business leaders to be more visionary.”