updated 10/20/2005 3:50:18 PM ET 2005-10-20T19:50:18

Wal-Mart Stores Inc. will start holding its suppliers more accountable for environmental and social standards at foreign factories as public expectations in the United States rise, Chief Executive Lee Scott said Thursday.

Scott told suppliers at a business conference that the public has high expectations of the world’s largest retailer. The company has come under mounting fire from organized opponents over issues including the environmental and labor standards of low-cost manufacturers it buys from overseas.

Scott said Wal-Mart would be more involved in its suppliers’ businesses to make sure they are accountable. The company will work with them to find new products that meet demand for higher standards, such as new clothing lines made from organically-grown cotton that Wal-Mart plans to sell next year.

“Are you running your factories in a way that promotes environmental sustainability? Are you sourcing from people that causes there to be inclusion and opportunity for women and minority owned businesses?” Scott said.

“You’ll see Wal-Mart taking a stronger stand over the next several months in these areas,” he told a conference on retail trends held by the University of Arkansas’ Sam M. Walton College of Business.

Scott said Wal-Mart had to act because the public was targeting retailers, not the manufacturers they buy from, over environmental and social issues.

“The factories in China are going to end up having to be held up to the same standards as the factories in the U.S.,” Scott said. “There will be a day of reckoning for retailers. If somebody wakes up and finds out that children that are down the river from that factory where you save three cents a foot in the cost of garden hose are developing cancers at a significant rates so that the American public can save three cents a foot, those things won’t be tolerated, and they shouldn’t be tolerated.”

Scott said he would fly to Shanghai on Wednesday to visit Wal-Mart’s fast-growing store operations in China.

He said he believed some suppliers would be surprised he was talking about sustainability issues.

“There are people in this room that hear what I just said and say ’Wow, Wal-Mart is losing its way. Wal-Mart is not going to talk about customers. They’re talking about sustainability and the factories they buy from,”’ Scott said. But “I’m going to tell you, get ready for a real long struggle in your life if you can’t understand that you can do well by going good.”

As one example of the new approach, Scott said the company would start selling clothing made from organically grown cotton next year.

“We’re going to take thousands of tons of pesticides out of the environment and produce a better garment for our customer and a garment that they can be proud of. Those are the kinds of solutions that exist out there that take more sophistication,” he said.

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