Ethics, supply chains and consumer responsibility

The horrific Bangladesh factory disaster has highlighted a number of business issues and proved a stark reminder of the global effects our purchasing decisions may or may not have on people halfway around the world. Tom White has already put up a blog with some initial thoughts; I thought I’d pose some further questions and examine some of the issues raised in that post.A great starting point would be to listen to the ever-reliable Business Daily, from the BBC World Service. Their programme In the Balance invites guests to debate a topical business issue, and this week, the Rana Plaza disaster was under discussion.One of the first questions to ask is to examine the extent to which firms which are supplied by such factories are responsible. There were more immediate causes, of course, such as the owner’s actions and the culpability of local regulation and enforcement (or lack of). But this is not the first time there have been such disasters, nor are the poor conditions in such factories surprising. So is it right that chains such as Primark continue to use such suppliers? Isn’t it their fault, with their demands for low prices and increased flexibility to meet the needs of the fast fashion market? Do they have a responsibility to ensure fair and safe working practices in factories they don’t own and which they are merely customers of? A lot of people would argue that yes, they do. But isn’t that the same as arguing we as consumers should audit the supply chains of the shops which we buy from? Primark is as much a customer as we are.

The difference is, of course, that they have the ability to do so, whilst we, browsing in the shop, have very little information to go on, and must go on trust. So, Primark could, if it wanted to, make sure that conditions were adequate, that buildings were made safer, that pay was higher in these factories. But where would that desire come from? Here, we are in classic CSR territory. On the one hand, we argue that the firm’s main obligation is to the shareholders – profit is key. If Bangladeshi labour produces higher profits, then that’s where they will locate. Maybe consumer pressure (perhaps after such a disaster) will put pressure on Primark to do something about the situation, in which case it still won’t be clear if any action taken is done out of moral obligation or reacting to potential loss in profits as shoppers turn to more ethical providers.

There is an interesting disparity here between food and clothes. We as UK consumers are quite comfortable with Fair Trade and the concept of paying a little more for our chocolate in the knowledge that farmers are getting paid a little extra and some money is going to their community. And whilst you can now see that some cotton products are being sold as Fair Trade, the manufacturing side of things is rarely mentioned; there is no equally prominent campaign for better working conditions in return for a few extra pence on your T-shirt. There is an organisation called the Fair Wear Foundation, but it is not active in the UK yet.

We also shouldn’t forget the benefits of trade, and the damage that would be done if this disaster saw companies leave Bangladesh. Chris Dillow, in a post about press bias, points out here that 125,000 children a year die from poverty-related causes in Bangladesh (based on mortality rates for there and the UK). Whilst still horrible, the sweatshops are better than rural poverty and malnutrition. Who are we, globalisation advocates would argue, to deny Bangladesh its route out of poverty? textiles account for 80% of the country’s exports, after all. And what would happen next? If better working practices were instituted, either through local legislation or pressure from some western governments or NGOs, or simply through higher wages, prices would go up. And then what would the companies do? Quite possibly move. In the In the Balance programme, Myanmar is suggested as an up and coming producer. Hardly a hotbed of civil rights itself.

Ultimately, is it us, as consumers, who are responsible? Can we really blame clothing retailers for trying to make a profit supplying what we want, i.e. cheap disposable fashion? They do have an obligation to their shareholders – not the only one, granted – to make profits, and they do so by meeting our consumer needs. As long as we want £5 shirts, somebody will make
them, in appalling conditions. It would take a brave CEO to rise above the pack, take the moral high-ground and find more ethical supply chains at higher cost. He also has an obligation to his employees, home and abroad, and voluntarily reducing his competitiveness endangers their livelihoods. Why should we pass that decision onto the companies?

In economics, a common question is what to do about things like pollution, e.g. from driving. If a tax on a good (fuel) gets passed on to the consumer rather than hurting the firm, we’re generally pretty neutral about it. The consumer is using the fuel, it’s at least reasonable that they should pay. Maybe the same should apply here. Why do we accuse firms of acting immorally and hardly pause to examine our own actions? When we buy things, generally we only think of the two parties involved in the transaction, you and your needs, and the firm and the price they’re selling at. Too little do we think of the others in the chain. Maybe we should start asking, thinking, and buying a little more responsibly.