Table of Contents
Introduction…………………………………………………………..3
Policy Documents
Risk-Based auditing…………………………………………4
Supplier Audit Requirements………………………..5
Small Supplier Audit Alternative…………………. 6
Assessment Process and Ratings………………… 7
Consequences for Non-Compliance…………..8
Investigations and Site Visits………………………...8
Guidance Documents
Risk-Based Audit Decision Tree……………………9
Audit Requirement Steps……………………………..10
Approved Audit Programs…………………………….11
Audit Assessment Process…………………………….11
Color Rating Guidance………………………………….12
Upgrading Facility Ratings………………………….. 14
2
Introduction
Walmart’s expectation of compliance with our
Standards for Suppliers extends throughout the supply
chain. We use third-party social, safety and
environmental compliance audits to help us evaluate
our suppliers’ overall compliance and to manage risk
in the supply chain. These audits seek to monitor
whether, among other things, workers are properly
paid for the work they do, labor is voluntary, workers
are not being exploited, facilities comply with
employment age laws and standards, working hours
are not excessive and are consistent with local laws
and standards, and facilities meet health and safety
laws and regulations.
Walmart reviews third-party facility audit reports
suppliers submit and assigns each facility a color
rating based on the third-party program’s evaluation
of the facility and Walmart’s own review of the
reports.
Audit & Assessment
Policy & Guidance
Policy
Any facility producing product for sale or use by Walmart may be
audited at any time. Nevertheless, we use a risk-based approach to
auditing that focuses on disclosed facilities and allocates audit
resources to those facilities that may pose a higher risk of non-
compliance with Walmart’s Standards for Suppliers or where non-
compliance poses a higher risk to the company.
We place disclosed facilities into one of three region/territory risk
categories, and the risk category of a facility determines whether
and when a facility must submit an audit to Walmart. The
region/territory risk categories reflect indicators of good
governance in the region/territory where the facility is located and
were derived using data compiled by the World Bank.
Category 1 – Lower Risk: Facilities located in Category 1
regions/territories will not be required to complete an audit on a
regular schedule. Rather, each year Walmart will select a sample
of facilities to receive an audit. Any facility in a Category 1
region/territory may be selected as part of this annual sample.
Category 2 – Medium Risk: Facilities in Category 2
regions/territories will be required to complete an audit and
follow-up audits as dictated by the supplier’s chosen third-party
audit program.
Category 3 – Higher Risk: Same requirements as for Category 2
regions/territories, plus a prequalification audit (discussed below)
is required for new facilities.
A current list of regions/territories organized by risk category is
available here. Walmart updates this list annually.
Prior to receiving orders to produce product for Walmart, new
facilities must meet the below requirements:
• New facilities located in Category 1 or 2 regions/territories that
produce Direct Import Merchandise (product where Walmart will
serve as the importer of record) must obtain a social audit and
receive a Green, Yellow, or Orange color rating.
• All new facilities in Category 3 regions/territories must obtain a
social audit and receive a Green or Yellow color rating.
Walmart may from time to time ask suppliers with facilities
producing certain kinds of products or in certain industries to obtain
additional audits. Walmart reserves the right to examine other
factors and to evolve its audit approach and requirements over time.
Additional Requirements for Bangladesh Facilities
In addition to meeting Walmart’s standard third-party Responsible
Sourcing Compliance audit requirements (and any additional audit
requirements of other Walmart departments), facilities within the
Walmart Responsible Sourcing Compliance disclosure scope located
in Bangladesh are required to participate in and be in good standing
with a Walmart-approved safety initiative. Suppliers interested in
using a facility in Bangladesh should check with a member of the
Responsible Sourcing Compliance team well in advance of disclosure
and planned production to learn more about this important
requirement.
Audit & Assessment
Policy & Guidance
4
Policy
It is the supplier’s responsibility to take all necessary steps to submit
an acceptable audit report to Walmart. This includes choosing an
appropriate third-party audit program from the list of Walmart-
approved programs, contacting the audit program chosen,
arranging for the audit, paying for the audit, having an audit
conducted by an APSCA-certified or APSCA-registered* auditor,
cooperating with the audit firm and/or program to complete the
audit, sending the results to Walmart within the specified timelines,
and working with the audit program and facility to remediate non-
compliances and to resolve issues.
Responsibility 1: Choose an Appropriate Program
Walmart accepts audits from several third-party audit programs.
Walmart may add or remove programs from its list of approved
programs from time to time.
Walmart does not limit suppliers’ ability to choose an appropriate
third-party audit program from its list of approved programs; if the
program is available to the supplier and facility, then the program’s
audits can be used for Walmart. There may be situations in the
future in which Walmart will recommend certain audit programs for
particular suppliers, industries, or in certain geographies as needs
and strategies dictate. We will update this policy if we make such a
determination.
Once a supplier chooses an audit program for a particular facility, it
must continue with that program until all findings resulting in an
Orange color rating have been remediated. Suppliers may switch
audit programs for their Green-rated or Yellow-rated facilities.
Additional information on color ratings is set forth in this policy.
Responsibility 2: Arrange, Pay For, Obtain and Cooperate
in the Audit
The supplier is responsible for contacting the third-party audit
program of its choosing, joining the program if necessary, paying
any necessary fees, and making its facility available for the audit
under the terms outlined by the program.
Walmart requires that the audit is conducted by an APSCA-
registered auditor.
Walmart expects suppliers whose facilities are subject to audit to
participate fully in the audit program chosen, to obtain all necessary
preliminary and follow-up inspections and audits in order to
maintain good standing with the program, to follow the program’s
prescribed corrective action or remediation plan, and to participate
in training programs. Failure to stay in good standing with the
chosen audit program may result in the facility becoming ineligible
for Walmart production.
Audit & Assessment
Policy & Guidance
5
APSCA is currently phasing out the “Registered Auditor” level. After June 1, 2023, all auditors conducting audits for Walmart-approved programs must be APSCA certified.
Policy
Responsibility 3: Submit the Audit Report to Walmart
Suppliers are responsible for submitting a valid audit report to
Walmart within the timelines and according to the methods
specified by Walmart. Walmart is not responsible for reminding
suppliers that audits are due; suppliers are solely responsible for
submitting a valid audit report in a timely manner. See audit and
assessment guidance for more details.
Responsibility 4: Remediate and Continuously
Improve
All suppliers using a facility are expected to work with the
facility to remediate all non-compliances identified in the audit
report in the manner specified by the audit program chosen. In
addition to this audit program-driven remediation, Walmart
expects suppliers to prioritize the remediation of higher-risk
findings that would lead to the facility receiving an Orange
color rating.
Small Supplier Audit Alternative
In order to cater for specific challenges small and less mature
suppliers face, while still providing Walmart with the ability to
identify and mitigate risk, Walmart affords an alternative option
to a traditional third-party audits. When an audit is normally
required, small suppliers have the choice to submit social
compliance audits from approved audit firms or participate in
the
approved small supplier program.
Suppliers meet the definition of Small Supplier if:
the supplier’s global sales revenue (total turnover) is
under $3 million per year; or
the supplier’s total global sales revenue to Walmart Inc.
is under $350,000 per year.
Supplier facilities located in a high-risk country category will
not be eligible to participate in the approved small supplier
programs.
Once a supplier’s business grows above the defined level, they
will be required to be managed under the normal Responsible
Sourcing Compliance audit program.
Walmart reserves the right to grant or withdraw exemptions to
audits at its discretion.
Audit & Assessment
Policy & Guidance
6
Policy
Assessment Process and Ratings
Walmart reviews third-party audit reports suppliers submit for
the facility and assigns the facility a color rating based on the
third-party program’s evaluation of the facility and Walmart’s
own review of the report. The most common facility ratings
are:
Green: Green ratings identify facilities whose audits indicate a
high level of compliance with the Standards.
Yellow: Yellow ratings identify facilities whose audits indicate
general compliance with the Standards.
Orange: Orange ratings identify facilities whose audits indicate
more serious violations of the Standards, but from which
Walmart will continue to allow sourcing while the violations
are remediated. Three consecutive Orange ratings may
result in a Red rating, regardless of whether the facility
remains in good standing with the audit program chosen.
Additionally, suppliers who submit an audit report that
results in an Orange rating must continue to use the same
audit program until the facility improves its rating to Green
or Yellow.
Red: Red ratings identify facilities for which Responsible
Sourcing Compliance has discovered violations of a nature
that may make it appropriate to temporarily or permanently
terminate the facility’s ability to produce product for
Walmart. Red ratings may also be used to identify facilities
whose third-party program seal or certification has been
revoked, and for facilities that may have been terminated by
a third-party audit program. If a facility is assessed a Red
rating, its ability to produce product for Walmart may be
ended indefinitely, its production halted and/or its product
refused.
Each audit report submitted will correspond with an initial
“base” color rating for the facility, which is based on the audit
rating generated by and/or findings made by the audit program.
Certain audit program ratings will correspond with Walmart
colors—Green, Yellow, Orange, or Red.
Walmart assessors will then review the report’s findings to look
for higher-risk issues that may change the facility’s color rating
to Orange or Red and that may be escalated for possible
investigation or supplier engagement. Where such higher-risk
issues are identified, the final facility rating may be Orange or
Red even if the “base” color rating for the facility derived from
the audit program’s evaluation of the facility was Green or
Yellow.
The facility ratings are provided to all suppliers using the
facility.
Audit & Assessment
Policy & Guidance
7
Policy
Consequences for Non-Compliance
Facility assessments may cause suppliers to lose the ability to
use a facility for manufacturing product for sale or use by
Walmart. Typically, where a facility receives a Red rating or
three consecutive Orange ratings, the supplier’s ability to use
the facility will be suspended or terminated. Walmart reserves
the right to suspend, reduce, or terminate a supplier’s ability to
use a facility even absent a Red rating or three consecutive
Orange ratings.
Suppliers may be issued consequences—including a supplier
“strike” and/or reduction, suspension, or termination of
business—where the supplier is associated with a facility that
receives a Red rating, for the supplier’s own conduct, or where
the facility’s conduct is reflective of the supplier’s overall
compliance with the Standards for Suppliers. Three Strikes in a
two-year period will typically result in a suspension or
termination of the supplier’s business relationship with
Walmart.
Suppliers and facilities may also receive consequences for
failing to comply with the requirements outlined in this policy,
including but not limited to failing to obtain and provide a valid
audit for a facility where an audit is required and failing to make
a facility available for inspection. Failure to obtain and provide
an audit where an audit is required will also subject the facility
to inactivation in the Walmart system, making the facility
ineligible for production. Failure to cooperate in an audit,
inspection, or investigation may lead to consequences up to
and including termination of supplier, facility, or both.
Investigations and Site Visits
In addition to monitoring suppliers’ facilities through audits,
Walmart investigates certain allegations that suppliers and their
facilities have engaged in conduct that may violate Walmart’s
Standards for Suppliers. Responsible Sourcing Compliance
receives allegations through several sources, including
escalations from audit programs, the Walmart Ethics hotline
and inbox, anonymous tips, Walmart internal business partners,
media and NGO reports, and other sources. Substantiated
findings may result in consequences for suppliers, facilities, or
both, up to and including termination of business with Walmart
and its subsidiaries globally. Suppliers must cooperate and make
facilities available, in accordance with the requirements set out
in an applicable supplier agreement and/or Walmart’s Standards
for Suppliers.
Walmart or a designated representative may investigate or visit
any facility producing product for Walmart at any time. The
risk-based approach to auditing described above does not apply
to investigations.
Audit & Assessment
Policy & Guidance
8
We place disclosed facilities into one of three country risk categories, and the risk category of a facility determines whether and when
a facility must submit an audit to Walmart. The country risk categories reflect indicators of good governance in the country where the
facility is located and were derived using data compiled by the World Bank.
A current list of countries organized by risk category is available here.
Guidance – Risk-Based Audit Decision Tree
*Facilities located in Bangladesh must comply with additional
onboarding and prequalification requirements as set forth by policy
Category 1
Category
3
START
All facilities required to submit an audit from an
approved third-party program and follow-up
audits
All New Facilities
Prequalify by obtaining an audit and receiving a
Green or Yellow rating
Which risk-based
category is the facility in?
Facilities randomly selected each year to
submit an audit from an approved third-party
audit program
New Direct Import Facilities
Prequalify by obtaining an audit and receiving
a Green, Yellow, or Orange rating
Audit & Assessment
Policy & Guidance
9
Category
2
All facilities required to submit an audit from an
approved third-party program and follow-up
audits
New Direct Import Facilities
Prequalify by obtaining an audit and receiving a
Green, Yellow, or Orange rating
It is the supplier’s responsibility to take all necessary steps to
submit an acceptable audit report to Walmart. This includes
choosing an appropriate third-party audit program from the list
of Walmart-approved programs, contacting the audit program
chosen, arranging for the audit, paying for the audit,
cooperating with the audit firm and/or program to complete
the audit, ensuring an APSCA-registered auditor conducts the
audit, sending the results to Walmart within the specified
timelines, and working with the audit program to resolve issues.
Step 1: Choose an approved audit program
Step 2: Complete a facility audit
Step 3: Link Walmart in the audit program platform
Step 4: Submit your audit report
A detailed 1-page guidance document can be found at this link.
Reasons a Factory Audit Report May Be Rejected
•
Audit type not acceptable
•
Incomplete / unclear report
•
Audit conducted is expired or outside validity period
•
Facility information in the report does not match with
Walmart records
•
Not a Walmart-approved audit program
•
Not an APSCA audit firm in good standing
•
Not an APSCA-registered auditor
•
Facility is not eligible for Walmart production
•
Valid audit already on file
•
Report is not submitted in English
•
No program reference number provided
•
Facility must continue with the same program until rating
improves to Yellow or Green
Guidance – Audit Requirement Steps
Audit & Assessment
Policy & Guidance
10
Guidance – Approved Audit Programs
Audits from the following programs are available for Walmart
suppliers to use to satisfy their Responsible Sourcing
Compliance audit obligations:
• Best Aquaculture Practices (BAP)
• amfori Business Social Compliance Initiative (BSCI)
• Responsible Business Alliance (RBA)
• ICTI Ethical Toy Program (IETP)
• SEDEX Members Ethical Trade Audit (SMETA)
• Social Accountability International (SA8000)
• Worldwide Responsible Accredited Production (WRAP)
• South Africa Agriculture - Sustainability Initiative of South
Africa (SIZA)
• Equitable Food Initiative (EFI)
• Fair Trade USA
Audits are not mandatory for small suppliers, but we do require
participation in a capacity-building program.
Small Supplier Program administered through Intertek
Audit Assessment Process
Walmart reviews third-party audit reports suppliers submit for
the facility and assigns the facility a color rating based on the
third-party program’s evaluation of the facility and Walmart’s
own review of the report.
Supplier submits audit
report
Walmart validates
that the report meets
acceptance
requirements
Valid reports are
assessed and assigned
a color rating
Assessment ratings
and next steps are
communicated to
supplier
Audit & Assessment
Policy & Guidance
11
Guidance – Color Ratings
Color Ratings
Walmart reviews third-party audit reports that suppliers submit and assigns the facility a color rating based on a combination of the
third-party program’s evaluation and Walmart’s own evaluation. It is the supplier’s responsibility to understand and comply with color
ratings
Rating Defined Is production allowed? Rating Notes
Red ratings identify facilities for which
Responsible Sourcing has discovered
violations of a nature that may make it
appropriate to temporarily or permanently
terminate the facility’s ability to produce
product for Walmart.
Red ratings may also be used to identify
facilities whose third-party program seal or
certification has been revoked, and for
facilities that may have been terminated by
a third-party audit program.
A Red rating typically terminates the
facility’s ability to manufacture product
for sale or use by Walmart.
Walmart will provide instructions to suppliers
associated with Red-rated facilities outlining the
terms of production and shipment associated with
the Red rating.
Contact your Walmart Responsible Sourcing manager
to understand requirements to activate a Red facility.
Orange ratings identify facilities whose
audits indicate more serious violations of
the Standards.
In Category 3 countries,
prequalification is required, and an
Orange rating will not be sufficient to
allow production to begin.
Only facilities in “active status” are
approved for production.
Facilities in “active status” that receive
an Orange rating typically may
continue to produce product until the
audit expiration date while violations
are remediated. Walmart will notify
suppliers if this is not the case.
Three consecutive Orange ratings may result in a Red
rating, regardless of whether the facility remains in
good standing with the audit program chosen.
Suppliers who submit an audit report that results in an
Orange rating must continue to use the same audit
program until the facility improves its rating to Green
or Yellow.
Suppliers are expected to prioritize the remediation
of higher-risk findings that led to the facility
receiving an Orange rating.
Audit & Assessment
Policy & Guidance
12
Guidance – Color Ratings
Color Ratings
Walmart reviews third-party audit reports that suppliers submit and assigns the facility a color rating based on a combination of the
third-party program’s evaluation and Walmart’s own evaluation. It is the supplier’s responsibility to understand and comply with color
ratings
Rating Defined Is production allowed?
Yellow ratings identify facilities whose audits indicate
general compliance with the Standards.
Only facilities in “active status” are approved for
production.
Yellow facilities in “active status” are approved for
production until the audit expiration date while
violations are remediated.
Green ratings identify facilities whose audits indicate a
high level of compliance with the Standards.
Only facilities in “active status” are approved for
production.
Green facilities in “active status” are approved for
production until the audit expiration date while
violations are remediated.
Audit & Assessment
Policy & Guidance
13
Guidance – Submitting Information for Possible Facility Rating Upgrade
Remediation is the formal process of improving the facility’s
compliance. Normally, a facility’s rating will be upgraded only
after an ordinary full-scope audit in the ordinary course.
Remediation which has taken place after the initial assessment
of the report and which is verified by the relevant program will
be reviewed for acceptance and the possibility of an upgraded
facility color rating. Evidence of remediation outside the
program’s normal audit cycle will be accepted only if:
• The current facility rating is Yellow or Orange;
• Evidence of remediation is submitted along with a copy of
the Standard Audit (Full Scope Audit)
Submitting information to upgrade your facility rating:
1. Supplier sends evidence of remediation to the Responsible
Sourcing Supplier & Facility Administration team. Evidence
should come from approved audit program documentation.
For example, from a published remediation audit report
issued by the approved audit program.
2. Walmart assessor verifies report and reviews it to confirm
the remediation has taken place.
3. Color rating changes from Yellow or Orange to the base
color.
4. Results are communicated to the supplier and captured in
Retail Link systems.
Submit remediation evidence by email:
• Suppliers based in North & South America -
• Suppliers based in China & Far-East - rssfacn@walmart.com
• Suppliers based in other countries - [email protected]
To be accepted the email should include:
• Supplier ID Number
• Supplier Name
• Factory ID Number
• Factory Name
• Original audit report
• Remediation report issued through Approved Audit program
Audit & Assessment
Policy & Guidance
14
