Ethical Sourcing in Retail Industries and the Problem of Sweat Shop Labor - Term Paper Example

ETHICAL SOURCING COUNTERING THE PROMLEM OF SWEAT SHOPS Table of Contents Page 3 2 Introduction 4 3 Globalization or Exploitation 5 4 Ground Realities 7 5 Fair Trade Practices 9 6 Conclusions 10 7 Bibliography 12 1 Abstract The fact that Free Trade and Fair Trade are not same but can co-exist has been covered in this discourse. The Multinationals have for long exploited the workers of the under developed countries and have encouraged sweatshop practices for financial gains. However a movement created by the awareness aroused by Government and Non-Government agencies has lead to boycott of such products and has forced companies to rethink ethical sourcing to bring back alienated customers. Ethical sourcing is at a nascent stage and the consumer is the final decider of the issue. Only with the consumer’s strong convictions can this movement be taken ahead and for this communication of ethical issues including their damaging contribution to environment needs to be highlighted. 2 Introduction The expansion of civilizations has been largely based on trading practices. Trade and Commerce have been drivers of extension of territorial forays in the past and, in modern days, with the royalty become defunct, even extinct in some cases, the role has been ably taken over by large companies, the Multinationals. The twin objectives of war for territorial gains of the former kingdoms and the present day Multinational remain the same; expansion of markets to cater to larger populations and obtaining cheap labour for work from the new territories. Whereas formerly they made use of slave labour, often not caring about their survival, today they pay subsistence or even less for running their factories and establishments. All the high talk of Human Rights is meant for conference tables and for the populations of the victors and not the vanquished. In the present context the Multinational need to expand their markets and in search for consumers globally they are attracted by the huge populations of the developing or the under-developed world. They take advantage by offering them the goods that they have developed for their own affluent populations. However where they face the possibility of lower sales due to the high prices they tend to manufacture their products locally for local sales at lower prices compared to their home markets. The other angle to the story is that when they face competition from their rivals who are as big and as powerful, they need to lower prices to face such competition. The obvious way out is again to manufacture their products in the underdeveloped or developing markets at lesser cost and consequently be able to lower prices to their home markets. 3 Globalization or Exploitation With the demise of colonialism democracy became the chosen form of governance, barring few dictatorships, in the whole world. This brought about two major changes. One was the promotion of capitalism as a practice of free trade and the second was slow but certain removal barriers in trade between nations. The first gave the public a choice they never had before and rags to riches stories fired the imagination and fuelled the entrepreneurial spirit. The second offered the opportunity of equality in status that lured the buyers to opt for foreign made goods for raising their own standards of living. Multinationals have always claimed that the world is becoming smaller with the introduction of Free Trade practices that have evolved with the democratization of countries. But this was mere cover for their greed to add to their market share and to the bottom lines. It is true that some ethical values were also developed to offer better quality at competitive rates but the driving force was the capitalistic urge for more profits and better financial clout. The few bastions of non-capitalist countries were not prone to be left out and one by one they too fell for the lure of profits and their populations too could not remain immune to the world wide phenomenon of free trade. But the free trade was not fair trade as was trumpeted by the same Multinationals who were guilty of unfair trade practices for profit. Like the old kingdoms they too exploited the new markets and both the consumers and the workers were exploited unabashedly. The consumer of course had some choice by not buying their product, but the labour had none. For the first time most were getting employment, albeit at subsistence wages, and they accepted this as a gift. Local laws were either too skewed or were too subservient to the Multinationals wishes that they ignored the plight of the sweatshop labour practices. This situation came to such a head that consumers back home became aware of these practices and a movement began in the United States in mid 1990’s to avoid and boycott products of companies that used sweatshop labour practices in underdeveloped countries. The movement gained momentum by the special highlighting of the plight of the footwear and garment manufacturing Industries by various NGO’s and other Human Right movements. Some facts that were documented were so glaring that consumer backlash forced these companies to improve the conditions of the workplaces in the less developed countries. The glaring example was that of Nike, the world’s foremost footwear and sports apparel manufacturing company, also making apparels for sports industry. The wanted to expand globally. This expansion has of course come at a price. Not everyone can afford American and European prices, so the price had to be brought down to suitable level. This meant cost cutting which was not possible in US and Europe. In came the concept of local manufacturing at local rates for local markets. To get permission was tough in some cases, so a carrot was offered in form of manufacturing for overseas markets. This satisfied the dollar starved economies of South Asia and cheap and abundant labour became available for mass production. So far there was no rouse. But with the need to improve the bottom line, came the blind acceptance of local labour practices as well. The Fashion Industry too is dependant on sweat shops of the East to thrive. Be it Wal-Mart or GAP, they attract shoppers for fashion clothing mostly made in dangerous sweatshops of Bangladesh, Pakistan, China and Vietnam using child labour as well as underpaid workers. Wages paid were so low that in most cases the worker was unable to feed his family properly. Besides hazardous work conditions, work and gender abuse, child labour are accepted as common local practice and the managements ignore it all. Owners/Managers of the factory refuse to engage in good-faith bargaining with workers regarding wages and working conditions. Unions are not permitted. There are political undertones as well. Large corporations, being multinational in nature, carry their own clout akin to a foreign power. They were, and to a large extent still are, treated as royalty and obeisance is paid by rote. Few could raise their voices for fear of reprisals. Getting a job is better than having no job. Being paid is better than starvation. This is what they cash on. 4 Ground Realities From the mid 1990’s there began an awareness movement in USA and the consumers began active abstentions from buying clothes manufactured in countries using unfair labour practices. Even the US Government Accounting Office reported in 19994 that “sweatshop working conditions remain a major problem in the U.S.”. In general, the description of today’s sweatshops differs little from that at the turn of the [20th] century (U.S. Department of Labor, n.d. p. 3).” The backstreets of Los Angeles bear witness to this fact. In a report published in the Independent, UK, Andrew Gumbell stated that he visited an outfit called Fashion 2K along with a team of inspectors from Californias Labour Standards Enforcement Bureau, in response to a worker complaint. The conditions found were atrocious. Low wages, long hours, inhuman working conditions existed in the heart of thriving Los Angeles. (Gumbel, Andrew). The jean manufacturing company Guess Inc. outsourced their production to contractors who underpaid their workers. Eventually Guess Inc. agreed to pay up to $1m to settle the 1996 lawsuit. (Gumbel, Andrew). This is what was happening in the US in the 21st century where regulations and monitoring is on a high scale. One can imagine the plight of those who are located in the less developed countries with even their legislators and law enforcers are uncaring. Studies conducted and sponsored by major US universities as well as International Labour Office discovered that serious abuses were practiced in these sweatshops the world over and workers rights were violated throughout the garment manufacturing centres. (O’Rourke 2000) Companies that sourced their products from such countries were forced to rethink their strategies and undertook steps to either source from more ethical sources or to issue strict directives to their suppliers on compliance issues. With growing concern for fair trade practices there has been a negative impact both in the US and Europe about cheap imports. The effect on jobs and the economy has come under question. There have been successful efforts at creating and patronising firms like No Sweat Apparels (nosweatapparel.com) that insist on and ascertain decent working conditions. This proves that fair trade and free trade can co-exist. The retailers, often forced by inter-trade rivalry, are forced to offer cheap goods manufactured under conditions of unethical practices. This encourages the manufacturers to provide them with unethically sourced goods. Here the consumer awareness comes into play. When the consumer is educated about the inhuman conditions of his fellow human being elsewhere, generally he veers around to boycott such apparels and is willing to pay extra money for an ethically sourced article. But this movement is yet to catch on universally. Greed, both at the consumer end and that of the manufacturer or retailer end, still ensures a thriving sweatshop somewhere in the world. In the UK the Government has taken the initiative and their Office of Fair Trades has laid down systems of codes for fair trade practices and through this the consumers can force a retailer to ensure that he sources his goods from companies practicing fair trade practices. The aim of the Consumer Codes Approval Scheme is to promote and safeguard consumers interests by helping consumers identify better businesses and to encourage businesses to raise their standards of customer service. (Office of Fair Trade) 5 Fair Trade Practices Stung by criticism and loss of brand equity Wal-Mart took drastic steps to reverse the situation. “Wal-Mart’s Ethical Standards vision is to have strong relationships with our suppliers and the confidence of our customers that we are taking the appropriate steps to achieve our goal of procuring merchandise for our stores that has been produced in an ethical manner”. This was their statement made in 2005 by Lawrence Jackson, President and CEO along with a long list of what they have accomplished and how they will pursue it further. (Wall-Mart .pdf). The Highlights of this report are that out of the over 6000 factories they audited in 2005, over 1000 were those manufacturing and supplying high risk items in “high-risk” categories: apparel, shoes, sporting goods, accessories and toys. Here high risk meant production in unethical conditions including violation of worker rights. Of these 141 were permanently banned from doing business with Wal-Mart due to their under age worker employment practices and a further 23 were disapproved for their non-compliance of the standards fixed by Wal-Mart. Wal-Mart has created an Office of Ethical Standards that has 23 offices and 200 associates worldwide to audit and enforce its ethical standards policy. This includes audit, inspections, training and protection of stakeholder’s rights. Indeed this is a step in the right direction and will restore customer loyalty to a great extent. However the scope of ethical source is not just related to sweatshops although that is the main concern of the consumer. It also effects the environment. It starts at the stage of cotton that is purchased at fair prices that does not exploit the farmer and ends at rightful wages and decent working conditions without violation of worker rights at the factory. It has been estimated that ethical sourcing can increase production costs between 5% to 10%. What portion this cost can be absorbed by the companies themselves and what has to be passed on to the consumer will really determine the fate of ethical sourcing. Beyond the costs it also involves additional investments by both the companies and retailers and that can be recovered only over a period of time. These issues will also have a bearing on attitude of both the retailer and the consumer alike. “An ethical sourcing policy is only as strong as its weakest link and every aspect of a retailer s ethical sourcing programme requires investment.” (The Future of Ethical Sourcing) 5 Conclusions The emphasis on Fair Trade is generally consumer driven.  There is research that 25% people are making their decisions on social and ethical issues rather than price (Otacnet). This percentage is big but not significant enough to change the retailers who have larger patronage from people who look for bargains and discounts and have little concern of the source. Unless the consumer feels strongly about it, out of concern or guilt, not much will change. It is futile to expect the retailers and Multinationals to go out of their way and change the situation by adopting ethical habits. They will do so only when compelled by consumer movements. The Multinationals have a larger stake as they are in the eye of the storm both from consumers and governmental regulators, egged on by the NGO’s. They do take confirmative action but the idea is more to appease the noise makers. They care to the extent to which they can get away with the exercise without damage to their bottom lines. However it is now easier to send information across to consumers. The net savvy population turns to the World Wide Web and this is the surest way of connecting to the ordinary consumer and telling him to join the global concerns. Communication of the plight of the sweatshop workers needs to be highlighted through various mediums and in time there is a good chance that people will matter more than price. The consumer is the last link and the last resort to put things right and the right perspective needs to be hammered home for effectiveness and for achieving the goals of ethical sourcing to end the menace of sweatshops. With Global warming now affecting the ordinary person everywhere in the world this would be the right time to touch the humane chord and inform the consumers that this is partly due to wrong manufacturing practices, aided by unethical means of sourcing that is contributory to the predicament of mankind. Maybe this will ring true and consumers will finally accept that better practices can delay if not avert the larger environmental disaster that seems to loom over the planet. 7 Bibliography Gumbel, Andrew in Fashion Victims Inside the Sweat Shops of Los Angeles Published on Friday, August 3, 2001 in the Independent / UK © 2001 Independent Digital (UK) Ltd available at: http://www.commondreams.org/headlines01/0803- 02.htm Office of Fair Trade available at: http://www.oft.gov.uk/oft_at_work/consumer_initiatives/codes/accessed on 26 Aug 2007 Otacnet available at: http://www.otacnet.com.au/PageId/pg740476839edoras U.S. Department of Labor, n.d. p. 3 available at: O’Rourke 2000, Appelyard et al. 2000, ILO 2000 The Future of Ethical Sourcing [Report] by Datamonitor Published in June 2006 available at: http://www.the-infoshop.com/study/dc53184-ethical-sourc.html Wall-Mart, available at: www.walmartstores.com/Files/05_ethical_source.pdf - Read More