Ethical Issues in Retail Sector - Term Paper Example

Ethical Issues in Retail Sector Introduction Retailers in the clothing sector have been mentioned as contributing to propagation of unethical practices in the industry. While the management and stakeholders continue to earn millions in profit and dividends respectively, workers at the lower end of the supply chain have been neglected as they continue to earn low wages and work in substandard environment. Ethical issues have also been raised regarding the role of retailers in propagating animal cruelty in factory farming as management in these facilities seek to high profits from their stocks. The report highlights ethical factors arising from both internal and external factors based on PESTLE analysis while also including recommendations that might respond to the ethical concerns noted in the report. Background to UK Retail Clothing Sector The UK clothing sector is also characterised by dominant multiple store retailers who sale up to 70 percent of their finished products to markets in Western Europe and 85% percent in the United States (Allwood, Laursen, de Rodriguez and Bocken, 2006). The UK clothing and textile sector has recorded a significant decline since the turn of the 19th century. However, the 1990s were period of greater change for the industry as major players such as Marks and Spencer ended demand for supply from UK clothing and textile manufacturers shifting to importing over 70 percent of supplies from developing countries (Tait, 2000; Gereffi and Memedovic, 2003). The consequence of such changes is that the UK clothing sector has shifted focus from manufacturing to designing. However, the declining production has provided ground for development of innovative aspects of the sector as entrepreneurs and retailers seek to take advantage of niche or high quality products (Allwood, Laursen, de Rodriguez and Bocken, 2006). The decline in manufacturing has also had minimal negative impact on the sector as businesses, especially those operating from the end of supply chain, continues recording high profits. Retailers are now taking advantage of increased demand for innovative products to increase their profits in a sector where retailing and marketing generates higher returns than sourcing, manufacturing, assembly, finishing, packaging, and distribution. Social concern Ethical issues in social aspect of the sector revolve around labour practices mostly on the side of suppliers. Majority of the retailers in the clothing industry have adopted outsourcing of raw materials from different suppliers, especially in Asia, in order to establish competitive advantage over other players in the industry (Kumar and Arbi, 2007; Abernathy, Volpe and Weil, 2006). Additionally outsourcing reduces the cost of labour and production per unit with studies indicating European countries outsourcing their raw materials from Asia stand to cut their costs of labour by up to 20 percent (Peng, 2008) (See Map 1). The search for cheap labour has resulted to a negative impact for the sector due to increased social concerns that the subcontractors were engaging in unethical activities by employing minors and paying unskilled labourers less than what can sustain them. Various reports have indicated the extent of this problem with Human Rights Watch 2003 findings on silk industry in in India revealing that subcontractors had hired minors of up to five years old with daily work schedule going up to 12 hours and 6-7 every week (Human Rights Watch, 2003; Rediff, 2003). The consequence of such reports has increased demand for accountability on the part of clothing retailers who have been accused of being lenient on their suppliers. There was a 2009 campaign calling for retailers such as Zara and H&M to stop selling products made with cotton harvested by children as part of the efforts to end child labour and slavery. However, the retailers have sought to avoid being blamed for such occurrences by claiming there were no effective methods to guarantee products resulting from these forms of labour do not enter their supply chain (Doward, 2012). Legal Factors and Political Factors The highlighted social concerns have led to interested stakeholders in the clothing industry seeking legal and political interventions to alleviate the problem especially with regard to working conditions provided by manufacturers at the source of raw materials. There are calls for governments to introduce legislative frameworks that will be applicable in retail stores and their workers in overseas factories operated by subcontractors while also providing for legal redress in UK (War on Want, 2008). Legal and political issues arising in the retail clothing sector relate to how the management of these stores have reacted to existing complains about low pay and poor working conditions in factories of subcontractors. With regard to working conditions provided by third party suppliers, clothing retailers in UK are committed to ethical production through setting compliance measures based on codes of good practice. A number of UK clothing retailers have introduced internal frameworks for assessing what constitutes acceptable standards based on the existing legal framework both in UK and in suppliers’ countries (De Brito, Carbone and Blanquart 2008). However, while the legal framework in the UK provides for a higher minimum age for employment as well as realistic minimum living wage, suppliers from developing countries operate on different legal requirements that raises the possibility of child labour low wages. Employment of children in factories supplying products to retailers is an ethical issue that critics have called on the retailers to address. Given the law profits for manufacturers, many of them located in developed countries have decided to adopt child labour and employment of low skilled employees to cut the costs of production (Allwood, Laursen, de Rodriguez and Bocken, 2006). Adoption of Technology as Alternative to Fur, Leather and Hide Apart from ethical issues arising from social concerns, there are also technological factors, which retailers in clothing industry have had to deal with over the years. Technological factors in this sector revolve around how retailers respond to existing resources, production and demand for particular products in order to introduce new innovative concepts. One of the areas that retailers have to respond in is the use of leather, fur and hide in enhancing fashion by creating durable products. As a biodegradable material, leather lasts longer than some of the materials such as cotton and silk used in the sector; however, there has been opposition to the use of leather materials especially from those who subscribe to the vegetarian perspective that abhor the use of animal products to satisfy human needs. This opposition to the use of leather has also been linked to concern over the treatment of animals reared for meat and hide (Vegetarian Resource Group-VRg, 2014). Although leather has been used throughout history as an important material for shelter housing and clothing, the development of fast fashion product cycles means the demand has grown exponentially as consumers seek to satisfy their appetite for cheaper products. Given that over 20 percent of revenue generated from millions of cows, rabbit, sheep goats and pigs slaughtered annually are incomes from selling hides, there is increased focus on the role of retailers in propagating the treatment of animals in factory farming facilities (People for the Ethical Treatment of Animals-PETA, n.d). Factory farming has been blamed for cruelty against animals with many proprietors harvesting hides and fur while the animal is still alive. One area that has seen increased concern has been the treatment of rabbit producing Andorra fur. There has been increased pressure on major retailers such as Gap and Zara to act against suppliers accused of cruelty against animals while other players such as H&M, Marks & Spencer and Next have already act by banning the use of angora furs as material for their fashion. This reaction follows exposure of Chinese subcontractors propagating cruelty against animals through violently ripping fur from screaming animals (See picture 1 and 2). Such actions have threatened the clothing retailers as consumer organizations request customers to boycott stores that have continued selling products made from angora fur (Daily Mail Reporter, 2013). Economic Factors As noted above, retailers in the clothing sector have higher profit margins than the rest of players in the industry such as farmers and manufacturers. Consequently, there exists an ethical concern with many feeling it is not right for retailers to earn make astronomical profits while those at the lower end of the supply chain remain poor (see Graph 1). Retailers as Corporations in clothing sector are seen as encouraging exploitative behaviour in the industry as their practice of seeking minimal costs for materials at the expense of the rest of stakeholder that propagates unfair treatment of workers in subcontractor’s factories. Payment of minimal wages to unskilled labourers has been attributed to the fact that retailers are not ready to pay subcontractors enough to ensure they pay workers enough for improved lifestyle. However, retailers are also faced with challenges in attempting to meet consumer demands for affordable products while also responding to the need for sustainable business (Nordås, 2004; EIRIS, 2009). Promotion of fast fashion has also been noted as a strategy for financial gain while failing to provide effective disposal policies to respond to high volume of clothes that are out of fashion after a short period (Fletcher, 2008). The promotion of fast fashion has led to increased consumerism as retailers market their products a turnaround time that is compressed a few weeks (Tokatli, 2008; Skov, 2002; Tokatli and Kizilgun, 2009; Schrank, 2004). Social disappointment in mindless consumption has been expressed through anti-market sentiments presented in terms such as rebellion, consumer resistance, boycotting, countercultural movements, and non-consumption (Shaw and Riach, 2011). Conclusion This report has identified and evaluated a number of ethical issues facing organizations in retail clothing sector. The ethical issues existing in both internal and external environment have been discussed based on the PESTLE analysis of the sector. Social concern has been evaluated based on increased reports about child labour and poor wages in subcontractor’s factories with management in UK retail clothing sector on the spotlight for not doing enough to end these practices. The report has also evaluated political and legal concerns with retail storeowners complying with various government and legislative efforts to end child labour and poor wages. However, these efforts have been infective so far since countries where subcontractors operate from have not implemented strict legal policies to end the labour practices. The use of fur, leather and hide has also been evaluated particularly as a contributor to animal cruelty. The report has also highlight the role played retail stores in exploitation of workers based on economic perspective where the retailers in the sector has been found to encourage exploitative practices by paying subcontractors less while they continue to make exorbitant profits. Recommendations With regard to working conditions provided by subcontractors, there is a need for clothing retailers to introduce a more integrated supply chain that will ensure closer relations between the suppliers and management of the retailers. Retailers should increase their participation in the manufacturing process by sending representatives to manufacturers’ factories in order to oversee the running of these factories (Abecassis-Moedas, 2006). Even without the introduction of quality assurance measures to determine standards of subcontractor’s factories, retailers should ensure suppliers meet conditions of the set by the International Labour Organization (ILO, 2014). Additionally frameworks with important contribution to improvement of standards in factories include the codes of the International Confederation of Free Trade Unions and the Clean Clothes Campaign that should respond to issues about child employment and low wages for unskilled labourers (Merk, 2007). Standard adoption provided by these international frameworks is important in ensuring manufacturers provide working conditions that respond to the needs such as appropriate safety measures that promote observation of ethical and moral standards for the employees. However, manufacturers have also complained that money paid to them is not enough to cover their experiences, a situation that will be exacerbated if they increase wages and reduce working hours. Understanding of retail clothing sector leads to a conclusion that effective solution to poor working conditions require the input of all stakeholders in the sector in order to respond to the interests of every group (ILO, 2014). Appendix Picture Picture 1: violent removal of fur from angora rabbit Source: Mail Online. 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