Wal-Mart, the world's biggest retailer, yesterday told its Chinese suppliers to meet strict environmental and social standards or risk losing its business.

“Meeting social and environmental standards is not optional,” Lee Scott, Wal-Mart's chief executive, told a gathering of more than 1,000 suppliers in Beijing.

“A company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts – will ultimately cheat on the quality of its products.”

Wal-Mart has been pursuing a drive to improve its reputation on environmental and social issues over the past three years, in response to growing criticism in the US over issues including labour conditions in its supplier factories.

The directive, which will be codified in a Wal-Mart suppliers' agreement, comes at a difficult time for China-based manufacturers, caught between rising production costs and the effect of the global financial crisis on consumer demand in their largest overseas markets.

The requirements include a clear demonstration of compliance with Chinese environmental laws, a 20 per cent improvement in energy efficiency at the company's 200 largest China suppliers, and disclosure of the names and addresses of every factory involved in the production process. The company will require a 25 per cent rise in the efficiency of energy-intensive products, such as flat-screen TVs, by 2011.