Business Ethics

High angle shot of three workers talking together while standing on a commercial dock

It’s true that trading and working with manufacturers in developing countries can offer many benefits to your business. However, often this strive for maximized profits can be at the detriment of legal, social, economic and environmental obligations and responsibilities.

When looking at the international issues of child labour, the environment and health & safety regulations, many businesses in developing countries aren’t regulated by international standards and these breeches of conduct are passed through the supply chain. So where does the onus fall? Ultimately it falls on you as a business to ensure your supply chain meets international standards.

But who is regulating this system? The sad fact is, there isn’t enough regulation within the manufacturing industries, which is shown through the case studies below. All these businesses involved in breeches are large, well-known companies, and the ramifications for their actions aren’t nearly strict enough. If big companies like these are being caught out in the limelight for doing the wrong thing, there must be thousands upon thousands of smaller companies mimicking these actions and flying under the radar.

Child Labour

According to the International Labour Organization, child labour is defined as, “Work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development.” In accordance with the UNICEF Convention on the Rights of the Child (1989), child labour is illegal in most countries – however it does still exist. Many businesses in third world countries employ children as they are low-skilled workers without a voice, making them easy targets.

According to the United Nations:

  • In 2008, there were approximately 215 million child labourers aged 5-17 in the world. Among them, 115 million children were in hazardous work (a term which is often used as a proxy for the worst forms of child labour).
  • Nearly 114 million child labourers are in Asia and the Pacific.
  • Most child labourers are working in agriculture (60.0%). 25.6% work in services, 7.0% in industry and 7.5% work in undefined areas.
  • Only one in five child labourers are in paid employment. The overwhelming majority are unpaid family workers.

Nike

While they are one of the most popular sporting brands around the world, Nike isn’t known for their labour compliancy standards. Their manufacturing practices are so well-known that it is likely everyone you talk to has heard about them – not just those with industry knowledge. Originally founded in 1964 as Blue Ribbon Sports, the name changed to Nike in 1971. Nike was able to grow so quickly using the model of outsourcing production to suppliers around the world where the costs are much lower.

It was in 1996 that Life magazine published a photograph of a child stitching footballs splashed with the Nike logo. This began the onslaught of protests. Since then, Oxfam has kept an extremely close watch on Nike, with a section of their website dedicated to the company. A few years later the company began to accept responsibility for their actions, with their CEO Phil Knight saying, “the Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse.”

While they have faced trouble since then, forced to change suppliers when another photo was released of children stitching balls in the lead-up to the 2006 World Cup, as a brand they still remain leaders in their industry.

Health & Safety

The International Labor Organization aims to protect workers from sickness, disease and injury that may be brought about through their employment. However, every day 6,300 people die from occupational accidents or work-related diseases.

According to the International Labor Organization:

  • Every year more than 1.1 million people die from occupational accidents or work-related diseases in Asia and the Pacific.
  • Every 15 seconds, a worker dies from a work-related accident or disease.
  • Every 15 seconds, 153 workers have a work-related accident.
  • Every day, 6,300 people die as a result of occupational accidents or work-related diseases – more than 2.3 million deaths per year.

H&M 

In 2010, a factory in Bangladesh supplying to Swedish-based clothing retailer H&M caught fire. The fire exits were blocked and there was no equipment available to help stop the fire. 21 workers were killed and 50 suffered injuries. H&M went on to become the first signatory to sign the Accord on Fire and Building Safety in Bangladesh, however today they are far behind in carrying out the mandated renovations, with many of their suppliers still lacking life-saving features, such as an adequate fire exit. According to Clean Clothes Campaign,  “all but one of H&M’s strategic suppliers remain behind schedule in making repairs and that over 50% of them are still lacking adequate fire exits.” Even more alarming, the report only looked at H&M’s highest-rated Bangladesh suppliers, which accounted for about one-quarter of the total.

Environment

According to World Resources Institute:

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Rio Tinto

This infamous company has been in the centre of many environmental scandals over the years. In fact, their polluting activities have inspired a campaign – No Dirty Gold – which is centered around cleaning up the mining industry and implementing anti-pollution work. Rio Tinto has been polluting communities around the world with toxic chemicals used in metals extraction and processing, yet all they have been slapped with are a few fines and regulations.

Where to now?

It is actually a tough position for these companies to be in. They have outsourced their manufacturing to developing countries, which has offered them cheaper costs and provided third world countries with valuable trade. However, it is the lack of regulations that has led to these cheaper costs. In China, there was a huge textiles manufacturing industry, that is until recently when they implemented industry-wide standards. This in turn drove up the prices and resulted in the trade moving to Bangladesh where it was cheaper.

One of the main challenges for large companies such as these is the extent of their supply chain. There are so many steps involved in the manufacturing of their products, that it is hard for them to be across them all, ensuring they are all compliant. This begs the question of who the onus should actually be placed on. Should it really lie with these companies?  What about the countries where these factories exist that aren’t enforcing standards, or the importing country that has no regulations on the products that enter. The bottom line is, that until there are regulations across the board, it is difficult to see widespread improvement on this issue. The best pressure should come from the buyer and the consumer, ensuring you only deal with companies who meet international standards. This is where QualityTrade comes in.

As a buyer, you can ensure your supply chain is problem free to avoid buying into these scandals. QualityTrade only promotes certified suppliers, so when trading with us you can rest assured that you are purchasing and trading from quality companies that meet safety, environmental and social international standards. While these standards aren’t compulsory for businesses, they are a great step in ensuring trade between countries and companies is regulated by a third party, avoiding getting wrapped up in any of these violations taking place.

 

ABOUT THE AUTHOR

QualityTrade is the exclusive business-to-business (B2B) marketplace for ISO-certified companies. Everyday we connect our users with ISO-certified companies, who meet international standards.