Beware! Walmart will not do business with corrupt businesses!!!

12 Jun,2012

By Rasul Bailay

 

Walmart Stores plans to snap ties with companies that supply products to its stores if they are involved in any kind of corrupt practices, making it the first retail company to undertake such a stringent initiative in India.

 

Stung by the bribery scandal that surfaced recently in Mexico, the world’s largest retailer has recently hired consultancy firm KPMG to conduct due diligence on hundreds of existing vendors as well as potential future suppliers to ensure that they are not involved in any unethical or illegal activity.

 

Bharti Walmart, the equal wholesale retailing joint venture between the US retail chain and New Delhi-based Bharti Enterprises, sources supplies from vendors ranging from multinationals such as Hindustan Unilever and Colgate Palmolive to hundreds of small and medium enterprises.

 

As companies in India, like in Mexico, are susceptible to pay bribes at various levels to get reams of licences required to start and operate businesses, Walmart wants to make sure they do business with only those vendors who don’t indulge in such activities.

 

This is second such anti-corruption initiative launched by Walmart in India in recent months. Earlier, as reported by ET, the world’s number one retailer mandated KPMG to educate and create awareness among the Bharti Walmart’s staff about anti-corruption practices.

 

As an American multinational, Walmart is bound to abide by the Foreign Corrupt Practices Act (FCPA), a US law that prohibits companies registered in that country and its subsidiaries across the globe from indulging in any sort of corrupt practices.

 

A company spokesperson said this move was part of its “previously announced” worldwide review of its anti-corruption programme that was initiated in March 2011. “This includes developing and implementing recommendations for FCPA training, anti-corruption safeguards, and internal controls,” said the spokesman.

 

The latest initiatives by Bharti Walmart are the direct fallout of the bribery scandal in Mexico, a person with the direct knowledge of the situation said.

 

Earlier this year, a scandal surfaced in Walmart’s Mexico unit accused the subsidiary of bribing government officials in almost all the provinces in that country where the Bentonville-based retailer has operations. The US Justice Department has started its own probe against Walmart over the allegations of the systematic bribery to obtain licences in Mexico.

 

In India, KPMG will scrutinise the vendors and classify them in three categories of red, amber and green, the person quoted above said asking not to be named. Bharti Walmart will continue to do business with vendors rated ‘green” by KPMG while it will immediately snap ties with retailers rated ‘red’. It will be Bharti Walmart’s choice to engage with vendors that are placed in the ‘amber’ category by KPMG.

 

A KPMG spokesman said the firm does not comment on “company-specific matters”.

 

The head of one of Bharti Walmart’s local vendors said his company has already passed the KPMG test more than a month ago and he added that such a scrutiny has happened for the first time in the last few years that his company has done business with the cash-and-carry joint venture.

 

“It’s a very good step. It will help the retail industry if more and more companies undertake such initiatives,” says Saloni Nangia, president, Technopak Advisors, a consultancy firm. “Supplying goods to modern retailers are a huge opportunity and the vendors will not jeopardise this opportunity with companies like Walmart by not complying.”

 

After unsuccessfully lobbying with various Indian governments to open the country’s closed retail sector, Walmart finally entered the country in 2007 through a joint venture with Bharti in the cash-and-carry or wholesale retailing segment, an area where India allows fully-owned overseas ownership. So far, Bharti Walmart has opened 17 Best Price Modern Wholesale stores in various cities, which sells multi-branded products, but only to other retailers and businesses.

 

Source: The Economic Times
Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

 

 

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One response to “Beware! Walmart will not do business with corrupt businesses!!!”

  1. Abhilash says:

    i think there are chances to leave the India by Walmart, isn’t it?

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