Transcript eportfolios.fox.temple.edu

Businesses Are Not Responsible To
Ensure Fair Labor Practices
Throughout Their Supply Chain
By: Timothy Walker, Juyeon Park, Ka Chun Chan, Xin Ye, Cole Nowlin,
Michael Palmisano, Jinsoo Han
CSR and the Supply Chain
● Many may argue that a business has to be active in its corporate social
responsibility.
● Indeed, there is evidence that a business which is active with CSR, for
instance by monitoring the labor practices of it supply chain, have better
public image (Karnani).
● However, this does not mean that a business should feel any ethical
obligation to do so.
● It would be nice for an organization to monitor all members of the supply
chain, but it is almost impossible and definitely unnecessary.
CSR and the Supply Chain
● As Friedman’s(1970) famous discourse argues, businesses should be less
concerned with CSR.
● In fact, businesses exist to make profits and maximize shareholder value.
● Watchdogs and activists should go to the grassroots and find out
whether members of the supply chain are being ethical in their labor
practices instead of bothering with the chief businesses/conglomerates.
● It would be nice for an organization to monitor all members of the supply
chain, but it is almost impossible and definitely unnecessary.
What Constitutes an Assurance?
● “To deliver on the promises made in CSR policies, companies need
to effectively monitor performance… A firm may talk about a
sustainable supply chain, but if they aren't auditing their suppliers
how can they back up their claims?”- The Guardian
● A valid assurance that labor is fair means rigorous auditing is
needed
o Fosters tenuous relationships between suppliers.
o Can be anticompetitive and damaging to efficiency.
o Often prohibitively expensive to effectively monitor supply
chain
Costs of an Assurance
● The Business Costs of Ethical Supply Chain Management:
Kenya Flower Industry Case Study
o Key Finding: Portion of monitoring costs must be transferred
to consumers.
o Will customers pay more for products they know are made
using an ethical supply chain?
● Even companies with vast resources cannot ensure their supply
chain meets ethical standards.
Nike: Nightmare in The Supply Chain
•Early 90s – Nike’s image was tarnished involving underpaid workers in Indonesia, child labor in Cambodia and
Pakistan, and poor working conditions in China and Vietnam.
•1996 – Nike spent millions to improve working conditions at supplier factories. Established department to
improve lives of factory workers.
• adopted a code of conduct & rigorous social auditing protocols
• required its suppliers to observe some basic labor standards
• expanded its compliance staff & invested heavily in training of suppliers
• internalized auditing.
•1997 – Vietnamese factory workers were made to run until they collapsed for failing to comply with factory
regulations.
•2005 - Nike becomes first in industry to list the factories it contracts with and a report detailing factory
conditions
•2006 - The Worker Rights Consortium publishes report on Nike suppliers detailing worker overtime and abuse
•2011 – Nike crisis, workers in Indonesia kicked and slapped while making Converse
Who’s Responsible?
●
Multinational corporations can’t satisfy all the workers. It’s the local government’s
responsibility to protect their workers’ interest.
●
Take iPhone 6 as an example. In the process of making an iPhone 6, thirty-one
countries get involved. The total iPhone 6 production process includes 100
production lines and 200,000 workers.
●
Most manufacturing factories are in developing countries. A lot of workers live in
these countries are struggling to survive. For them, finding a job and compensation
are the priorities.
●
Workers in developing countries are often willing make sacrifices, such as long
hours and unsafe conditions for employment
Why Businesses Can't Ensure Safe Labor Practices
● Global brands and suppliers often locked in "low-trust trap",
mixed messages between two parties
● Suppliers claim businesses insist on faster cycle times, better
quality, lowest prices while being policed for poor working
conditions
● Brands argue that production and labor problems comes
from lack of professionalism from suppliers
Government’s Responsibility
● Who is ethically responsible to assure fair labor practice throughout supply
chains?
o Cotton
 Uzbekistan
●
The government shuts down the schools to send kids to the
cotton fields
o Heparin
 China
●
Chinese defines as chemical, not pharmaceutical
 United States
●
Jurisdictional problem
Supply Chain Integrity
● Managing a global supply chain is complicated. When one product has 80
or more different supplier nodes, it can be a difficult and cumbersome task
to put systems in place to ensure the integrity of your supply chain.
● Most companies are aware that their global supply chains are vulnerable to
risks, but not many are prepared to manage those risks.
● Supply chains practices can be interpreted to reflect a company’s values,
often with small scale businesses. But on a larger scale, supply chains are
still strictly defined as systems designed to deliver a product to a customer.
Private Regulation Is Ineffective
Former U.S. Secretary of Labor Robert Reich:
“A declaration of corporate commitment to social virtue may forestall
government legislation or regulation in an area of public concern where one or
more companies have behaved badly, such as flagrantly failing to respect
human rights abroad. The soothing promise of responsibility can deflect
public attention from the need for stricter laws and regulations or
convince the public that there is no problem to begin with.”