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Saturday, 24 June 2017

Business ethics in supply chains: Focus on the UK Fashion and Energy industries

Ethics are moral codes of conduct that guide how businesses are conducted. It is about establishing what is right and wrong. It goes beyond the legal principles where the organisations are expected to desist from what may be wrong even where it is perfectly within their rights to engage in unethical conduct (Leube, 2012). At the centre of the considerations are the stakeholders of the business whose lives are impacted by its existence and activities. The main stakeholders include customers, suppliers, employees, government agencies and the general public. The ethical responsibility of organisations has for long been arguably limited to actions that they are directly engaged in (Krueger, 2008). However, increased awareness among consumers and the general public makes it imperative for organisations to take requisite actions to ensure that ethical standards are upheld across the entire supply chains. This paper evaluates the approaches taken by organisations in the UK fashion and energy sectors in ensuring that their supply chains uphold good business ethics.

In general, supply chains cover the entire value addition process which starts from the acquisition of raw materials to the delivery of finished products to the end consumers (Krueger, 2008). This means that there are many stakeholders involved and the organisation has a responsibility to all of them. Nevertheless, discussions on supply chains tend to assume a narrow focus on the suppliers; a focus that has also been adopted in this paper (Berzau, 2011). The most common trend among the consumers in the UK and around the world has been the need to be assured that the products consumed have been produced under circumstances that are acceptable. This is in addition to the need for them to be good quality products. Organisations have accordingly been forced to apply moral pressure on their suppliers to apply the minimum standards acceptable in ensuring that the supplies that are provided to them meet the required ethical thresholds.

The typical relationship between the organisations and the suppliers is a contractual one where supplies are provided at an agreed time and within the allotted timelines (Withers and Ebrahimpour, 2013). The norm in the past has been that of non-interference where the industry players do not meddle in the operations of their suppliers. Considerations such as price and quality have been the dominant factors used in selecting suppliers. Even where the suppliers may have been engaging in certain unethical practices, it would still be perfectly legal for them to ignore such knowledge and simply purchase the products. Despite this legal loophole, there is the moral expectation that the organisations would do all in their power to ensure that unethical conduct is not tolerated within their supply chains (Withers and Ebrahimpour, 2013). This is especially with regards to practices that are universally acknowledged as unethical.

Universalism in business ethics can be described as the existence of a consensus among multiple stakeholders that certain actions are right or wrong (Leube, 2012). This is as opposed to relativism where cultures and social context shape what is right or wrong. While acknowledging these different viewpoints, it is important to appreciate that an issue could move from relativity to universalism as common viewpoints emerge. For instance, slavery was acceptable in some cultures in the past but it is now universally recognised as wrong. In relation to supply chains, it is increasingly being recognised that it is immoral and unethical for organisations to fail to provide the producers of raw materials the basic necessities that they need (Krueger, 2008). The workers that produce the raw materials are expected to be protected from exploitation by getting them paid a living wage. They should also be free from abuse and exploitation. This is in addition to the need to provide good working environments for them where they are protected from common workplace hazards.

The question on whether the organisation should intervene in entrenching good ethics in their supply chains is one that is quite common. At the centre of the considerations are questions of price and the bottom line of the businesses. Entrenching ethics tends to have an implication on the cost of supplies (Berzau, 2011). For instance, an organisation that insists on suppliers paying their workers better and providing good working conditions would need to be ready to pay slightly higher for the supplies. While this could arguably not be in the interest of the shareholders, it is viewed as positive for the sustainable competitiveness of the organisation as customers are likely to acknowledge the brand and purchase from it (Krueger, 2008). Good ethics therefore have the potential to boost profitability hence the rationale for investing in it.

The hot issue in the fashion industry supply chains is the circumstances under which the fabrics and the clothes are made. Critics decry the fact that with every nice high-street cloth, there is a life somewhere that was oppressed and denied their rightful share (Siegle, 2013). Many of the fashion houses in the UK rely on sweatshops to manufacture the cloths that they sell to their customers. The main characteristic of sweatshops is poor pay, poor working conditions, and denial of certain basis human rights (Siegle, 2013). The owners of the sweatshops maximise on these conditions to make a profit where they either charge lower for the supplies or concentrate on making huge margins. Countries such as Bangladesh are most famous for hosting a large concentration of sweatshops which are poorly run and often putting their workers in mortal danger.

In April 2012, one of the buildings hosting several sweatshops collapsed killing over 1300 workers (Siegle, 2013). This incident brought to the fore the unfair conditions under which suppliers of clothes to the UK fashion industry and the rest of the developed world work. Investigations into the incident revealed that the employers had been warned of the impending danger but had opted to ignore it forcing the workers to continue working despite the obvious danger to their lives (Seeden, 2013). This led to questions on why industry players should allow such unfair practices to go on when they can take preventive actions to ensure that the suppliers’ employees are not exploited.

The rationale for applying ethics in the supply chains is based on the fact that supplier communities tend to be vulnerable and easy to exploit. In fact, arguments for the continued exploitation of workers in sweatshops are that the poor jobs are better than having no jobs at all (Wong, 2013). This makes it important for parties that are in a position to protect such vulnerable communities to play their part. In reference to worker rights, the moral authority can be drawn from the international labour laws that outline the minimum standards for worker pay and safety (Seeden, 2013). Several fashion houses in the UK have taken measures to ensure that the suppliers apply these minimum thresholds.

Marks & Spencer avoids cheap supplies and focuses on long term relationships with suppliers (Siegle, 2013). It is said to be the first major fashion house to institute measures to compel suppliers to pay their workers a living wage for suppliers situated in India, Bangladesh and Sri Lanka. In addition to this, the company has pioneered a model factory program in Bangladesh whose re-engineered assembly line enables factories to pay their workers better. The company’s commitment to ethical supply chains has been consistent in the past. In 2004, Marks & Spencer partnered with Shell Foundation a new type of supply chain aimed at alleviating poverty in Africa (Marks & Spencer, 2005). In this programme, the poor suppliers are provided with expert advice on how to thrive in their business.

John Lewis has a firm focus on promoting quality lives among the supplier communities. It has developed a long term approach with its suppliers where there is collaboration in ensuring that workers are treated right and that the communities benefit from the company’s activities (John Lewis, 2013). While Tesco is not strictly a fashion house, it stocks and sells clothes to the end consumers hence its inclusion. Tesco is noted to have been the first major retailer to ban Uzbek cotton from its list of products (Tesco, 2013). This was because the cotton was being picked by exploiting forced labour among children.

Primark was deeply affected by the Bangladesh accident in which 1300 workers died with over 450 workers working for a factory that supplied to Primark (Primark, 2013). In addition to providing material help to those affected, Primark resolved to conduct a survey on all factories from which they source materials. This is with the intention to ensure that all suppliers comply with the basic ethical standards by 2014.  The company also collaborates with suppliers and other stakeholders to ensure that the rights of women are respected (Primark, 2013a). The application of ethical standards in the energy sector is as shown below.

In the energy sector, the ethical concerns include the need to management climate change responsibly even where this calls for forfeiture of profits. There is also an ethical dilemma when it comes to the need to weigh between the quality of supplies and the price of energy (Bahaj, 2013). Energy is a necessity in the society and this makes it important that it be kept affordable. Failure to do so can make life unbearable for the vulnerable poor populations. The concerns on the fate of the workers also lingers among the main ethical concerns for the energy sector players (Bahaj, 2013). Different organisations take different approaches in ensuring that their suppliers adhere to the established ethical thresholds. One good example is EDF Energy.

EDF’s determination to maintain an ethical supply chain is reflected in its decision to establish a framework for the prequalification of suppliers (EDF Energy, 2013). The prospecting suppliers are taken through a prequalification process that test their compliance in terms of their human right records, anti-corruption record, environmental conservation, and other metrics. Since the institution of the process, EDF has reviewed over 1,000 responses and certified about 639 of them as compliant with their ethical standards (EDF Energy, 2013). The preoccupation of British gas is on the responsible disposal of wastes and minimisation of pollution (British Gas, 2013). The company embraces the challenge to ensure that the future generations are secure and endeavours to stay below the legally allowed emission minimums. This is a consideration that is emphasised greatly when choosing their suppliers. Joint initiatives for research and determination of waste disposal as well as discovery of more energy efficient products dominate the relationship with suppliers.

Like the fashion industry, the question of worker rights is very crucial. EDF cites the human rights record as among the main considerations when prequalifying suppliers (EDF Energy, 2013). Work in the energy sector can be very hazardous with workers handling corrosive chemicals and handling equipment with a grave potential to cause bodily harm. This requires training and provision of protective gear. Worker rights are universal and are protected through various unions in addition to the international labour organisation. Players in the energy sector, like their counterparts in the fashion industry, understand that the ethical standards in their supply chains can determine their level of competitiveness hence the need to invest in it.

As can be seen from the examples provided, the major industry players take a keen attention on the ethical standards within their supply chains. This is the clearest indication yet that investing in good ethics can determine the competitiveness of businesses. The main concern in supply chains is the ability of the organisations to impress on their suppliers to entrench acceptable ethical standards in their practice. This is especially with regards to worker rights and the welfare of the local communities. It is generally acknowledged that the industry players have a moral authority to whip suppliers into action. For instance, prequalification of suppliers can be done on the basis of certain ethical thresholds as is the case with EDF Energy. Similarly, a proactive approach can be done to impose requirements for worker pay and working conditions as has been done by Primark in Bangladesh, India and Sri Lanka. These proactive approaches contribute to the entrenchment of ethical standards in supply chains and are justified by better brand image and increased consumer support.

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Berzau, L., 2011. The Business Social Compliance Initiative: A system for the continuous improvement of social compliance in global supply chains. Zeitschrift für Wirtschafts- und Unternehmensethik 12(1), pp. 139-141
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Primark, 2013. Ethical trading: our work in summary. (Online) Available at: http://www.primark-bangladesh.com/ (Accessed 21 November 2013)
Primark, 2013a. Better rights for women workers. (Online) Available at: http://www.primark-ethicaltrading.co.uk/our_work_worldwide/c/better_rights_for_women_workers (Accessed 21 November 2013)
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Wong, A., 2013. Two Faces of Economic Development: The Ethical Controversy Surrounding U.S.-Related Sweatshops in Developing Asian Countries. (Online) Available at: http://www.globalethicsnetwork.org/profiles/blogs/two-faces-of-economic-development-the-ethical-controversy (Accessed 21 November 2013)

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