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Developing a responsible and inclusive supply chain

Responsible Sourcing

SPAENG

We allocate audits based on the risk level of the country in which a facility is located so we can drive the biggest impact in our broad and diverse supply chain. We classified the facilities into one of three risk categories. The risk category of a facility determines the requirements of that facility under our Responsible Sourcing audit program. We currently use data compiled by the World Bank to determine the risk category of a facility based on indicators of good governance in the country where the facility is located.

We are always looking for ways to refine our risk-based audit program. In addition to a facility’s country, we may look at other variables, including industry-specific risks, supplier compliance management systems and other factors as we evaluate the risk of facilities over time.

Category 1

Lower Risk: Facilities located in Category 1 countries will not be required to complete an audit on a regular schedule. Rather, each year the Company will select a sample of facilities to receive an audit.

Category 2

Medium Risk: Facilities in Category 2 countries will be required to complete an audit and follow-up audits.

Category 3

Higher Risk: Same requirements as for Category 2 countries, plus new facilities in Category 3 countries will be required to receive an audit with a Green or Yellow rating prior to providing product for sale at Walmart.

These audits seek to verify that, among other things:

Workers are properly
paid
for the work they do

Labor is
voluntary

Facilities comply with employment
age laws and standards

Working hours are not
xcessive and are consistent
with local laws and standards

Facilities meet health and
safety laws and regulations

Where an audit is required, we instruct our suppliers to obtain an audit from a Walmart-approved third-party social compliance audit program so that we can evaluate the facility’s compliance with Standards for Suppliers. We currently accept audits from internationally recognized third-party programs.

We review the third-party audit reports that suppliers submit, looking for higher-risk non-compliances with Standards for Suppliers and issues that may be escalated for possible investigation. It will assign the audited facility a color rating based on the third-party program’s evaluation of the facility and our review of the report.

Through the Responsible Sourcing Academy Training Portal, suppliers can access training resources, best practices guidance, and educational materials developed by third parties and by Walmart. Our hope is that placing relevant and robust content in a centralized location will increase the use of these resources for the benefit of the entire supply chain.

Audits rating

Least severe violations.

Generally compliant with the Standards, but which have failed to meet at least one important requirement.

Serious violations of the Standards, but will continue to allow sourcing from that facility 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.

Violations of a nature that may make it appropriate to temporarily or permanently terminate the facility’s ability to produce product for sale by Walmart. 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.

6,037 suppliers with active
vendor agreements
for the Mexico and Central
America Markets

1,028 total active
facilities in Mexico
and Central America
supplying various
Walmart retail markets

8,244 Audits conducted at facilities physically
located in Mexico or Central America

4,631
Mexico

15%

59%

16%

1%

9%

3,613
Central America

14%

60%

15%

1%

10%

Others