updated 9/27/2006 6:20:43 PM ET 2006-09-27T22:20:43

Wal-Mart Stores Inc. found a higher rate of severe violations at foreign factories last year as it stepped up inspections for labor and environmental standards in more than 60 countries where it buys clothes, toys, shoes and other products, it said in a report.

Only 23 factories were cut off from Wal-Mart’s business for repeated violations, a sharp decline from 1,200 in 2004. But the retailer said that was in part because of a change in its auditing rules. It expects the number to increase again this year.

Wal-Mart posted its “2005 Report on Ethical Sourcing” on a section of its Web site last week but did not make any public announcement, spokeswoman Beth Keck said.

“In 2005, we audited more factories than any other company in the world, performing more than 13,600 initial and follow-up audits of 7,200 supplier factories,” the report said.

Union-backed critics said the results showed Wal-Mart’s pledges to use inspections to improve conditions at foreign factories in Asia, Central America and elsewhere were hollow.

“Wal-Mart is ignoring the crux of the problem, which is that they are paying their suppliers too little to meet even minimal standards,” said Nu Wexler of Wal-Mart Watch, a union-backed group more accustomed to criticizing the retailer.

Inspectors found moderate to severe violations at 89 percent of factories, up from 79 percent in 2004. Wexler said that was an indictment of Wal-Mart’s ethics program; 80 percent of inspections were announced in advance, the company report said.

Wal-Mart said the worsened showing was due to more vigorous inspections, including more surprise visits, and stricter standards.

Wal-Mart does not own factories but instead buys from others who do. Chief Executive Lee Scott last year said Wal-Mart would step up enforcement of workplace and environmental standards.

Wal-Mart says it uses the findings to encourage factory owners to improve conditions. If violations are found, inspectors give a list to the owners and return for a re-audit. Repeated violations, as well as some grave problems such as using underage or prison labor, can lead to being barred from selling to Wal-Mart for up to one year.

The company is also the target of a U.S. lawsuit seeking class-action status for factory workers in Bangladesh, China, Indonesia, Nicaragua and Swaziland.

In 2005, Wal-Mart’s inspectors reported what it calls “high-risk” violations at 52 percent of those factories, compared with 36 percent in 2004.

Medium-risk violations were reported at 37 percent of plants, down from 43 percent the year before.

Only 10 percent of factories were found to have no violations or only minor ones, compared with 21 percent in 2004.

“Several consistently found serious violations at the factory level include problems with payment of overtime compensation, coaching of workers for worker interviews, and the use of double-books to hide the true numbers of hours worked or wages/benefits paid,” the report said.

Only 23 factories were barred from selling to Wal-Mart for repeated violations, a sharp decline from 1,200 in 2004. But the retailer said that was because of a change in its rules. It expects the number to increase again this year.

Wal-Mart also said it would ban factories with repeat violations for one year — up from 90-day bans. Because of the severity of the change, Wal-Mart said it gave companies a chance by wiping their pre-2005 records clean and counting violations from Jan. 1 of last year.

Critics called that cooking the books.

“You know Wal-Mart’s ethics have hit a new low when not only are your foreign suppliers exploiting workers more, but you actually wipe clean a record of past abuses to make it look better,” said Chris Kofinis, spokesman for WakeUpWalMart.com, another union-funded groups.

The number of surprise inspections increased to about 20 percent last year from 8 percent in 2004, the report said, a rate that Wal-Mart intends to boost to about 30 percent this year.

Wal-Mart said violations were reclassified to strengthen and reinforce their severity. Violations such as false record keeping were reclassified from medium to high-risk.

“Our auditors became more familiar with the factories and the factory workers. And as the workers became more accustomed to the interview process, they more openly shared their experiences,” the report said.

Wal-Mart’s standards cover health and safety issues, environment, compensation, working hours, forced labor, underage labor, discrimination, compliance with applicable national laws and regulation, freedom of association and collective bargaining, rights concerning foreign contract workers, and the right of audit by Wal-Mart.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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