John Oliver’s plea to apparel firms about their supply chains

A recent program aired by John Oliver in “Last Week Tonight” (first aired Sunday, April 26 2015) on HBO focused on the link between the demand for inexpensive trendy clothes and associated supply chains. He focused on examples where products for the Gap, WalMart, Children’s Place etc were produced by unauthorized subcontractors who violated safety standards and even used child labor. The retailers claimed that their contractors had in turn created these subcontracted tasks without authorization. John Oliver compared this lack of knowledge regarding the entire supply chain to the equivalent of mystery ingredients and processes in preparing food – sending such packages of mystery food – large quantities procured at cheap prices – to CEOs of apparel retailers to make the point. How much should we hold retailers responsible for knowing their entire supply chain and ensuring that all suppliers involved in the production adhere to the code of conduct specified by the retailer ? Is the consumer demand for low prices the cause of this proclaimed ignorance i.e., will rules have to be broken to deliver such low prices and fast turnaround ? Should the apparel industry turn to a third party to certify their supply chains or should only those who can certify their supply chains be permitted to sell product to the US consumer ?

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50 Responses to John Oliver’s plea to apparel firms about their supply chains

  1. The level of supply chain transparency is very low in nearly all industries, not just fashion. “Made in China” doesn’t tell the consumer what the working conditions are of that factory.

    Some businesses make extra effort to ethically source everything, but this is directly expensive (cost of observing) and indirectly expensive (breaking rules can be cheap). When a business successfully develops an ethical supply chain, they should promote those efforts in their marketing. This has been successful for many businesses, and I expect these efforts to be rewarded for differentiation.

    Another element of this is that importing good makes the manufacturer less personal. If my next door neighbor needs a kidney transplant, I’m likely to help. If someone in Spain needs one, I probably won’t. This de-personal supply chain makes consumers care much less about how it is made. One way to improve this issue is to make the supply chain much more personal for the customer. This led to the #whomademyclothes trend on Twitter.

  2. Nachiketa Mohanty says:

    Lets consider this scenario: A CEO asked his Senior Manager to get a job done. When the Sr. Manager gave his presentation to the CEO, he took full responsibility of whatever information he was giving to the CEO. Since it was the Manager presenting the information, the CEO would not go around asking the Manager’s subordinates (Junior Managers) how the job was done. However, does this mean that the CEO would be okay if the Junior Managers had used unfair means to get the job done? Even without the knowledge of the Manager? Wouldn’t the CEO hold the Senior Manager accountable for any breach in ethical conduct?

    Its more or less the same situation as a customer purchasing a product from a retailer. The customer is the CEO, the retailer is the senior manager and the suppliers are the junior managers. There’s no hierarchical power involved here as in the example I gave above, but the dynamics of the relationship remains the same. Thus, I feel that a consumer is perfectly in his right to be concerned whether the product being purchased has been produced by an ethical supply chain. A customer certainly cannot trace the whole supply chain of a product. It is the retailer with whom the customer interacts and thus, will expect the retailer to have full information of the entire supply chain. After all, a retailer has the freedom to select an appropriate set of suppliers, who would abide to the code of conduct set by him.

    On the other hand, if a customer expects his retailer to be informed, he should be ready to pay a premium for this information because it comes at a cost. Until the customer is willing to reward the retailer for maintaining an ethical supply chain, the retailer wont have any incentive to take the additional burden. Moreover, choosing a third party to certify supply chains doesn’t make sense. This is a moral issue we are talking about. Who will ensure that the third party is doing its job as it is supposed to be doing? Thus, adding another layer wont solve this issue.

  3. Prasant Goel says:

    As the Fashion brands grow bigger, they need to build a sustainable supply chain not only to match the rapidly evolving trends but also to control the degrading business practices across the various parts of their supply chain. In the cotton industry, children are made to transfer pollen from one plant to another and are subjected to long exposure to pesticides during the sowing in spring and weeding through the summer months especially in developing countries. Moreover, employers prefer children for cotton picking as their small finger are better at handling the delicate cotton crops Also there are no unions or social control mechanism in case of children to demand better working condition thus making them a more preferred choice. These gross violations are just some of the many that happen across the garment supply chain among other industries. Although it is difficult to track these supply chain across countries but there has to be a starting point to curb this menace
    Supply chain transparency is one such solution and may start with publishing names, addresses and other important information about the various production units. This would not only assert human rights of the workers but also build stakeholder trust. This information gives an opportunity for the workers and the Human right workers to at least alert the major fashion brands about the abuses in the supplier factories. Moreover, a regular update of the supply chain information can protect the brands from getting associated with older suppliers who they have parted ways with, for any future violations. The publishing of supply chain information is in line with various laws across the world like California Transparency in Supply Chains Act of 2010; “sweat-free” procurement laws in some of the US states; UK’s Modern Slavery Act 2015; and the corporate duty of vigilance, 2017 law in France. This transparency in Supply chain is also being supported by investors. The CHRB (The corporate Human Rights Benchmark) developed a publicly accessible scorecard for monitoring the human right practices and has been endorsed by over 85 major investors representing US$5.3 Trillion assets across the world. CHRB monitors the publication of the supply chain information as one of the key factors for monitoring the human rights violations, especially in the Fashion apparel. This can just be a start towards a completely transparent and responsible supply chain in the years to come.

  4. Harihara Subramanian says:

    It is indeed true that consumer’s demand for low prices lead to cost reduction and a subsequent chain of other incidents that might lead to violation of human rights & environmental norms.However, it is the onus of the primary producer of goods – in this case – the retailers to police the supply chain. There must be a ripple effect where every block in the supply chain gains visibility to at least 2-3 levels of sub-actors in the supply chain. A single agency monitoring the entire expanse is not possible. Stringent contracts and frequent reviews of every actor can maintain a good amount of control over the subject issue. The bigger problem is the variation in laws and regulation across different geographies. Legal activities in one nation might end up being illegal elsewhere. Pooling in a common approved vendors list developed by leading companies in the market such that it becomes mandatory for sub-contractors to become a part of the pool as a means of signalling, thus enabling them to adhere to certain agreements would work. The credentials of the sub-contractors and their sources need to be verified thoroughly and frequent audits can help. Engaging a third party agency for this might not be prudent. The supply chain is the crown gem of the retailers, bringing in third parties would only lead to spreading of information unique to this supply chain (depth of the supply chain and contacts of suppliers). Competitors will have an easier access to this and imitation risks would become higher. Finally, despite mitigation measures, the primary retailer cannot be held responsible for illegal measures at the tail end which would be way beyond his scope. There also exists the onus of the local government to resolve such issues. The primary retailer can only penalise (post any problems) the contractors responsible. Hence, the retailer possesses the responsibility to prevent breach of law by suppliers (but this is limited), but with regard to post issue actions, the retailer holds full responsibility to change the supplier/ penalise/ modify the supply chain to resolve the issue.

  5. Syed Qaim Mujtaba Kamoonpuri says:

    This kind of a problem exists in almost all domains that involve multiple stakeholders interdependent on one another to deliver the final product. If you take the example of academia, most research builds upon previous research. In academia the authenticating agencies are so strong that it is assumed that whatever research has already been done has been thoroughly audited and questioned and therefore it can be assumed to be authentic. In my opinion, the situation described in your blog is somewhat similar to this example.

    My view on this is that holding the retailers accountable for ensuring that each and every supplier and subcontractor abides the state laws is a bit too harsh. In a world where the majority of countries are democratic, it the responsibility of the government and the judiciary to ensure that firms adhere to ethical and safe practices. Therefore, it is not the responsibility of the retailers to do moral policing on their suppliers.

    However, here I do not mean to say that they turn a blind eye to whatever practices their suppliers are engaged in. For retailers sourcing from countries in Asia and Africa, where law enforcement is weak and hence many firms are engaged in unethical and unsafe business practices, more caution should be taken. Rather in this case as well, the governments can step. For example, the US government can pass a law stating that suppliers from such countries need to be audited before being given contract. This will have a two fold benefit. One is obviously that it will ensure ethical supply chains. The other is that these countries will now have an incentive to crack down on unethical businesses so that the cost of doing business with countries reduces.

    Businesses are supposed to be shareholder value maximization entities. Until and unless the customers are not concerned with unethical supply chains, firms have no incentive to ensure adherence to ethical or safety standards followed by their suppliers. This is the reason why doing a comparison of fashion business with food industry is incorrect. Any ingredients added by suppliers in a food product has significant effects on customer experience, whereas in case of fashion business, customers are not directly impacted by the safety conditions in the supplier’s factory, therefore retailers are not concerned about it.

    Furthermore, I think that using a third party for auditing would be a good idea. Supply chain auditing industry can flourish if the government mandates auditing of suppliers and sub-contractors. Expertise and historical information can be leveraged by firms in this industry to make the whole process more efficient.

  6. Rohit Mohan says:

    1. Apparel firms have the responsibility to ensure that they are fully aware of their supply chain from end to end. Since these brands charge premiums for the brand value they need to be held responsible for the supply chain as well. People associate themselves with brands for an emotional connect to something which is a reflection of their self and hence will not tolerate any ethical missteps from the brand
    2. Firms need to involve 3rd party auditors to ensure that they are aware of any flaws in the system and also to demonstrate to the consumer.
    3. Firms need to have a detailed supplier selection process which has objective criteria to eliminate suppliers with issues such as child labor or unsafe working conditions.
    4. Trace-ability in supply chains is not only important to eliminate such issues but also to figure out root causes of problems that arise in supply chains.A transparent supply chain will help in faster and more efficient root cause analysis and mitigation.

  7. Ashish Trivedi says:

    Firms globalize with three factors in mind:
    a) Arbitrage b) Aggregation c) Adaptability
    Aggregation and adaptability is usually under the control of the company. Arbitrage, especially labour arbitrage is something most companies use & practice as far as possible to offset the manufacturing cost as the retail segment is an extremely competitive environment with very low margins.
    Outsourcing is also done as it converts capital intensive manufacturing into a variable cost for the company rather than a fixed cost and reducing the risk significantly.
    So if so much thought has gone into the business strategy of a company to expand the supply chain globally, outsource manufacturing to external vendors on lowest cost basis, i am sure a trivial decision such as selection of the vendor and its control for following labour laws must also figure in this decision making process. No company can come up with an excuse saying we did not know or it was not under our control! They simply choose to ignore this as any enforcement of labour laws or ethical standards in manufacturing will simply raise the outsourcing costs.
    The fact however is that companies who believe in transparency and have good established ethical business practices will ensure a fair degree of control and standardization of process even on their tier-1 and tier-2 vendors (sub-suppliers). Corporate governance and the CEO both have to ensure that business and ethics go hand in hand and strict penalties and action must be taken internally for any deviation. Damage to brand equity is permanent and takes a long time to recover!

  8. Nishant Dhiman says:

    The issues related to human rights, ethical behavior and being environmental friendly are something which is seen differently by different stakeholders in a longer supply chain. On one end of the spectrum are the customers who are demanding cheaper but quality products and on the other side are the manufacturers finding ways to fulfill the demand and also earn profits. Customers when made aware about the fact how the products are being manufactured or under conditions the people work to produce the product feel upset and definitely want these things not to happen, but again are unwilling to pay higher prices for the products where there are no issues of human rights.
    Retailers or famous labels outsource their manufacturing to the regions where there is a possibility of enhancing the bottom line, it may be through cheap labor, lower cost of manufacturing facilities or other reasons. The excuse often provided by the retailers that they are unable to track the suppliers till the very end is not a justification for letting things happen the way they are. As a customer facing entity, it is entirely the responsibility of the firm to ensure that the sourcing is done from the areas where no illegal things are happening, the working conditions are acceptable for a human standard for all the labor throughout the supply chain even if it increases the costs of monitoring and enforcement.
    Apple is one of such firms which has mapped its supply chain till the very end of the source, metal mining in case of the metal parts, and regularly does audit of all its suppliers and make the data public to all the stakeholders. The data openly available on the website accepts that the adherence to the human rights or proper working conditions is not 100% and they are working with each supplier to achieve cent percent compliance.
    In an era where any negative news can spread within seconds and jeopardize the firm’s existence it becomes all the more important for the forms to ensure the compliances on a sustainable basis to be competitive and profitable.

  9. It is indeed the perpetual pursuit for lower prices that is driving the violation of safety and moral standards, as companies look to global suppliers to outsource manufacturing. As these contractors and subcontractors are governed by different local laws, the firms do not have much control over the processes of their suppliers. However, while on-boarding, the firms can do a thorough background check either on their own or through a third party provider such as Fair Labor Association (FLA), and can audit once in a while to ensure the standards are being met. Firms can also collaborate with NGOs and undertake the verification process under CSR activities. The firms can make their customers aware of their ethical practices which would enable them to pass on the costs to the customers, as today customers are ready to pay a premium for responsible supply chains.
    This should not be limited to apparel industry and US only, the same is applicable throughout the world across all industries. As the world shrinks, as supply chains get more connected, as more data is shared between firms and suppliers, companies do not have an option to hide behind their proclaimed ignorance but ensure that they are able to supply the products at lowest cost while not violating any human rights or environmental standards. We can look at the example of Nike, and the public backlash caused when the global workplace conditions became public, leading to huge earnings losses.

  10. I think the pursuit of lower prices should not be justified by using any illegal means. Today consumers are more than aware of almost the entire supply chain of the product that they are consuming ( if they are not it doesn’t take much time to find it out). And no consumer in their right mind will ever want a product that is produced by illegal means. Going by a third party certification is a good way to have accountability for the manufacturing of products. It eliminates one portion of supply chain ( or value chain for the firm) and also as the local laws of different countries are different it helps retailers structure their legal costs.
    This also raises an ethical issue as to how the company will look at profit vs human rights. The conflict isn’t created in this modern era it has been there since the industrial revolution. Some conflicts are- Ford knowingly supply cars where rear crash can burn the car, exploitation of Bangladesh children in textile industry and much more. It is time we take forward the ideology of conscious capitalism and firms are held accountable for their actions.

  11. Mayank Agrawal says:

    There is a growing trend of global apparel companies adopting supply chain transparency. Such transparency is a powerful tool for promoting corporate accountability for garment workers’ rights in global supply chains.
    Actions towards greater transparency ensures identification of brands and companies whose products are made in factories where worker’s rights are abused. Enforcement agencies and NGO’s can take steps to ensure that these abuses stop and remedial steps are taken. Publishing supply chain information builds the trust of workers, consumers, labor advocates, and investors, and sends a strong message that the apparel company does not fear being held accountable when labor rights abuses are found in its supply chain.
    Recent past accidents in Pakistan and Bangladesh have exposed the seriousness of the problem and what’s surprising is that the brands themselves were unware of their products being sourced from these places.
    Increasingly, brands and retail chains are beginning to understand that being an ethical business requires them to publish where their own-brand clothes or footwear are being made. With more customers becoming conscious and looking to buy socially or ethically procured products, this move towards transparency can act as a good business opportunity for brands.

  12. Gaurav Suri says:

    The issue of supply chain transparency is a problem in not only the fashion industry in the U.S but also many industries across the globe. This issue is of prime concern in the food & beverage industry with the recent uproar about the unethical practices in the coffee industry again bringing it to light:
    https://www.theguardian.com/environment/2017/sep/13/chocolate-industry-drives-rainforest-disaster-in-ivory-coast
    I feel it is the responsibility of the respective firms to ensure that they are completely aware of their end to end supply chain. In an era of information, ignorance is a choice and firms can’t walk away saying that they weren’t aware of the supply chain of its suppliers. The firms should make a conscious choice to be aware of the value chain of its suppliers at all tiers.
    Sophisticated and well-rounded supplier selection processes should be adopted, ensuring visibility in the supply chains of the tier-I and other suppliers.
    In-house audit teams or third-party auditors should be involved in auditing the supply chains and ensure that sufficient checks and balances are in place for having an ethical supply chain.
    Having a transparent supply chain would attract higher costs, which to some extent can be transferred to the customers. Customers are usually associated with brands for the value they espouse and are willing to pay a premium for a brand if the firm adopts ethical practices and ensures that its entire supply chain is ethical. Firms should make an effort to market their best practices of ensuring ethical practices which would help them in having a better connect with the customers.
    Having an ethical supply chain with transparency would be costly initially but would benefit the firms in the long run and would help build a reliable and trusted brand which the customers want to be associated with and for which they are willing to a pay a premium.

  13. Gautham Ravindar says:

    I remember seeing this episode of John Oliver the day it aired. Retailers claiming that their contractors had, in turn, created these subcontracted tasks does not land well. This is akin to do a Senior manager passing the blame on to his subordinates for a lapse or failure citing he/she was not aware of what was actually going on.

    Retailers should be held responsible for the entire supply chain. The process of ensuring that all the suppliers adhere to the specifications/guidelines/code of conduct specified by the retailer would have the following impact
    (1) Increase in supplier management cost
    (2) Possible reduction in the number of suppliers who satisfy the code of conduct thus leading to increase in costs of raw materials
    (3) Increase in supplier power
    (4) Increased accountability across the supply chain with penalties associated with every stage

    This would then trickle down to increase the prices that customers would have to dole out to the retailers and this is something that the customers would have to come to terms with. The problem? Nash Equilibrium. As long as there are retailers that continue to get away with cutting corners thus providing at low prices and attracting customers, other retailers would try to do the same. Retailers should focus on improving their supply chain efficiency and achieving decreased costs through superior management and production rather than outsourcing and turning a blind eye to how they are actually produced.

  14. Chitrang says:

    Lots of interesting comments from my colleagues here, especially with respect to the ethics and morality of the issue. Here are my two cents:

    From a deontological standpoint, one would want the apparel company to take both moral as well as economic responsibility for the entire supply chain that leads to its final product. However, we need to take into account the unit economics from the company’s point of view. If it made financial sense to monitor and/or internalize the entire supply chain, these companies would have done it already as it would benefit them in areas of supply chain and inventory control. However, given the thin margins and cost pressures, it would be unfair to hold the managers accountable for happenings in the supply chain beyond their control. Having said that, if the consumer were to take a stand against such practices and force the companies into making sure that checks are in place, companies would have to comply any which way.

    As is true in most cases, ultimately money matters. Be it that of the CEO’s or of the thrifty shoppers’. If the customers decide to hold the companies accountable for the kind of practices that are prevalent in a company’s supply chain, only then will it have a lasting impact on any kind of corrective measures. Given the complex meshwork that can be weaved around these supply chains and the easy excuse of sub-contracts, companies will find ways to dodge the responsibility unless enforced by customers who vote with their feet.

  15. Balabhadruni Kamaraju says:

    Fashion apparel industry is having healthy growth. Having overall idea of the complete supply chain is very essential especially in this industry, where the demand is very uncertain and the product life cycle is too small.
    Following are the risks that are associated with not having complete understanding of the supply chain:
    1. Supply side:
    a. If there there is strict implementation of rules against child labor by the government in future, sudden non performances and closures of contractors and sub contractors will lead to not having enough supplies.
    b. Quality of the supply may fluctuate a lot, if enough standards and skill people are not employed.
    c. Even though we may save some costs in purchasing fashion apparels, they is always a cost of getting sued by the court.
    d. Company is sending a signal to its employees that company does not give attention to ethical values, this in turn will bring down the motivation in the employees.
    2. Demand side:
    a. Brand image is very important in this type of fashion apparels. Not following ethical standards either by the company or any contractor will lead to damage in brand image and loss of sales, if it comes in the media.
    b. If consistent quality is not maintained, retention rate of repeat customers will decrease

  16. Surbhi Sachdeva says:

    The entire scenario boils down to customer’s willingness to pay and the company’s value proposition. If the company is a retailer of a premium clothes, the customers purchasing the clothes, paying a premium give the company a benefit of the doubt that the premium pricing is due to the fact that no corners have been cut. The contractors, sub contractors employed by the company are conducting business within legal boundaries, humanitarian laws and environmental laws. If such a customer finds out that the clothes s/he is wearing have been produced employing illegal means or by unethical practices, will the customer return to the brand?
    Is the company ready to lose customers on this ground? If yes, then the company and its managers can turn a blind eye towards the certifications of every member in the supply chain, but if the answer is NO, the company needs to take proactive measures to be informed and take necessary measures.
    Has ZARA not lost sales and revenue over the news of unethical practices, non-payment of Istanbul works? The customers are dismayed, and question that why the premium price they are paying is not being passed down the trail? Even if a subcontractor was at fault and the company was not aware of this issue, the ultimate loser is the company.
    Hence, I believe that companies should be proactively involved in the supply chain down to a single thread. The customers should be willing to pay for such premium practices..

  17. Chaitanya Vallabhaneni says:

    Holding the retailers responsible for knowledge of their supply chain is an important step to ensure that they enforce their code of conduct onto the suppliers involved in the production, without the accountability the retailers would be free to cut corners and ensure they meet the low prices that the consumers are demanding. The root cause of the problem however lies with the consumers, if the consumers demand proof from the retailers that their supply chain is responsible the problems of child labor/ forced labor would not arise but most consumers demand only low prices and since the negative effects associated with the ignorance are felt in other parts of the world the US consumer doesn’t get emotionally involved in the issue. The economic conditions of the countries where production takes place leave the people with little choice over employers and often without the work (however horrid the working conditions maybe) there is no other source of income, allowing the suppliers to take advantage of them. Breaking rules may not be the only way to deliver low prices retailers could get together and pledge that they will ensure that their supply chains are responsible and educate the consumers that the extra dollar that they spend goes a long way to ensure no child labor/forced labor was involved in production of their product, however changing the consumer as large as the US is not easy.
    Using third parties to certify supply chains is a good solution but it runs the risk of driving up the prices of the products and agitating the consumer base, the political risks involved in such a move would discourage administrations to make such a law.

  18. Aditya Jain says:

    The transparency and social responsibility issue in business has been a genuine concern since ages. In case of retail industry, job of a retailer is to make goods available for consumers to consume. However, in order to survive, retailer needs to attract a large customer base. Customers look for low cost in order as a part of their purchases.
    Cut throat competition has forced retailers to procure goods from suppliers with cheapest cost and turn a blind eye to underlying reasons of the low cost. While it is true that customer demands for low prices create pressure on retailers, taking the shortcuts to achieve low prices is the easy way out for these retailers to cope up with the demand.
    However, I do not believe that breaking the rules and cutting corners is the solution to this long term problem. Government though have set standards and rules to convert ethical issues into legal boundaries, the enforcement of these standards have been weak.
    Enforcing retailers to sell goods whose supply chain has been certified can be an effective way of solving this issue. However, this is easier said than done. For small producers, it is a very costly exercise, for larger players it is a very complex exercise due to large number of suppliers, sub suppliers and sub-sub-sub suppliers involved.

  19. Chinmay Sahoo says:

    This is a very pressing issue that has been tackled at various levels. One, the source location – Country laws and enforcement, policing liable companies/contractors that actually resort to such tactics, and fines/audits against suspect companies that resort to poor contracting. While companies need to be involved in monitoring, external audits are crucial. There is however, a nuanced argument to be made.
    1. For example, for Tobacco, use of Child labour is banned in farming, and 3rd party auditors and NGOs actually go on site to do field evaluations and test whether corrent labour practices are being adhered to.
    2. Sociological factors: In Uzbekistan, traditionally, kids have helped out their families in the school breaks by picking cotton. This can be classified as child labour. There was a major hue and cry over this, with even World Bank being pulled down for such activities. (Link: https://www.rt.com/usa/407564-school-choir-cotton-song-racist/) So, should such a traditional thing be construed as child labour? Sociological and country specific traditions may be important, and one needs to respect that, while trying to change the practice by making people aware of the harm that kids go through.
    3. Responsibility – Corporate ethics are extremely important in today’s time. Even though studies show that consumer backlash and satisfaction may not have impact on bottomline, it is in interests of the company to serve the society at large by aiming for ethical actions. And that means implementing the same policies throughout its Supply Chain, end to end.
    4. Laws – It is thus to be argued that companies need to heavily penalised to ensure such activities do not occur. Monitoring by independent parties, periodic checks by Govt., and working with local Govts. to reduce Child labour, along with certification requirements for import can help regulate not just outsourcing-offshoring, but also ensure that the child labour goes down.

  20. Pulkit Gupta says:

    Apparel Firms are all in war to reduce costs and this definitely leads to ignoring of the supply chain contractors if they are supplying low cost. But ethically it is highly irresponsible of the manufacturing firm to supply products that are manufactured at the places that involve child labour or other unethical activities. Also, it is possible for the firms to have a bad PR in case some third party exposes them and the sources of their supply. And the loss because of a bad PR would lead to irreparable loss. To tackle this, firms should conduct due diligence of their suppliers and have an objective on-boarding process which needs to be followed diligently. They should also conduct periodic review of their supply chain to make sure that no such activity is conducted. Agreed this would lead to increase in costs but the firms could leverage this in marketing and increase the willingness to pay of their customers and also, leverage this to gain volumes.

  21. bharath chintapatla says:

    The issue of retailers being responsible to every step in the value chain is something that sounds like the right thing to do but almost every firm is guilty of this. With the advent of online shopping every customer knows exactly at what price they can get a particular product from every retailer in the country. With the increased competition and most customers only focusing on product quality and price, there is no incentive for the firm or manager to make a decision which will be morally correct but increases product cost.
    Given the fact that retailer itself is not involved in anything illegal or morally incorrect in case of any issues with subcontractors they just fire the contractor and get away with it. For a sustainable and scalable solution for this problem we can’t expect the companies to always make the right decision. For this issue to be solved properly we need to understand the core problem which is that customers focus on low prices and are unaware of all the supply chain intricacies. There should be third party organization which is responsible to rate all the contractors and this information needs to be made available to customers directly on each individual product.

  22. Ayush Bajaj says:

    It is very true that in most emerging markets the companies try to cut corners by using low-cost child labour to reduce their costs such that the consumers would have to pay less. There are 2 ways to resolve this: Incentivise or Penalize. Let’s talk about penalizing first: The governments around the world should form laws barring the use of child labour and other malpractices. To ensure this is obeyed frequent audits [ through third-party contractors] must be done by companies operating in the space and they must be penalized if their break the law by any chance. The second thing that governments can do is incentivization, that is if the entire supply chain is child labour free the governments can give tax credits to the companies.

    The last thing is to find why such a problem exists and nip the bud at the source. most children take to child labour because of inadequate educational facilities and because their parents don’t earn because of unemployment. Governments must work together with the companies such that they foster education and employment in places they operate.

  23. Ramya Janakiraman says:

    Yes, the retailers should be held responsible for their entire supply chain.Though this is practically difficult in the Global market where most of the major players are thriving , Retailers should hold the ownership in getting morally and ethically acceptable products onto the store shelves. ‘Supply Chain Transparency ‘ is one major aspect that the retailers should demand when they enter into any contracts or sub contracts.At the time of tendering orders , suppliers should come up with a clear plan of how they are going to get the product ,either by their own production or
    sub-contracting, to the buyers.

    If an organization is going to go beyond the country in getting a product , it should be well acquainted with the regulations , licensing guidelines and permissible work conditions in that country.If there is even slightest evidence or warning that it involves child labour ,even partial or in semi condition ,or dangerous work conditions, that country /place is to be ruled out of options.
    In general , customers have a pride in getting associated with the retailer brands and that’s a major contributor of sales.Any slack in the chain can affect the brand with legal issues and penalty and at the worst case, can even get the brand out of the market .Getting a third party to do audits can be a costly task. So based on the development of supplier base , there can be surprise audits that can be planned instead of regular period audits.

    To conclude, though this blog entry deals only with apparel industry , the above mentioned principles and regulations are universal and hence can be applied right from firework factory to food processing industry.

  24. Abhijit Saurav says:

    According to International Labor Organization, an estimated 170 million children are engaged in child labor which is around 11% of the global population of children. The yarn and spinning mills in the developing countries employ a great number of child labor in its production activities. Reasons which are majorly responsible for this are- firstly, these type of work do not require highly skilled workforce and employing children provides a low cost avenue for these manufacturers. Secondly, tracking child labor in such industries is very challenging due to complexity of the supply chain, for example a contract from a retailer can be subcontracted to many other small players by the main contracting party, thereby making it difficult to track the child labor.
    However, it is important for each retailer to take up social responsibility of such kind of human rights violation and design their supply chain in a way that makes the supply chain more transparent. One way to go forward would be to build a system of information flow that lists each and every supplier in the supply channel. A system of accreditation should be developed that ensures each and every supplier practices code of conducts instituted by the retailer. Regular audits of the supply chain nodes and developing a culture where suppliers are aware about the banes of child labor and avoid using children as labor should be developed.

  25. Ankit Singh says:

    Consumer’s demand for low prices cannot be used as an excuse by apparel industry for turning a blind eye towards its supply chain. Each retailer should take complete ownership of the product it is selling and should be responsible to ensure that the product is manufactured without flouting any environmental or ethical norms. In order to bring down the cost, the retailers should invest in their supply chain to improve the efficiency ensuring that every worker involved in the supply chain enjoys humane conditions and no ecological damage is done in the process of manufacturing or transportation.
    Apparel industry can partner with NGOs, third party certification companies who can audit the supply chain and certify if the same is ethically managed.

  26. Joydeep Kundu says:

    In my opinion, retailers should always be aware about their entire supply chain. Customers’ demand of low prices & fast turnaround can’t be the excuse for this ignorance. In apparel industry, there are always price wars going which drives down the margins even further; hence contractors turn to subcontractors and they take shortcuts to increase their profitability. This is why there should be a 3rd party regulating agency that monitors and validates all the associated members. These agencies should be responsible for monitoring the applications of all safety & humanitarian norms. I don’t think self-certification is the way to go; since these companies will more often than not exonerated themselves from any kind of wrong doings.
    While, the 3rd party regulating agency would be responsible for enforcing the norms, companies themselves should also be more aware of their contractors & subcontractors. They can always take a legal route against any of the guilty parties if they don’t abide by the law. If the company itself becomes stricter then the concerned parties will not take certain actions that might drive them out of the business.

  27. Monomit Nandy says:

    In my opinion the big retailers should be held responsible for the lack of knowledge of their entire supply chain. It is not something which is a new concept as the same has been applied by large automakers like Toyota when it comes to quality of its auto-parts and other safety issues. Strict protocols have been placed in order to make the cars safe and it includes knowledge of the entire supply chain and making their sub- contractors follow strict norms. The same can be done by big fashion retailers where “safety” is replaced with different metrics like absence of child labour, use of responsibly sourced material etc. An elaborate system can be made to keep checks on such issues. These mechanisms may lead to increased prices but fashion retailers like Zara and other fashion power houses have their reliable customer who are willing to pay for the increased prices. Industry wide certification agencies can be created so that costs can be shared among all the industry players can be another solution. We all know and are willing to pay a little extra for a Hallmarked (BIS certification) gold jewellery which is a proof of high quality and if customers are willing to pay for higher quality then why are we assuming that they will not be willing to pay for responsible and ethical sourcing? The excuse that many big retailers give that their subcontractors were the ones who are actually guilty is not acceptable anymore in this world where information flow is becoming easier by the day.

  28. Ankur Jain says:

    Ignorance cannot be taken as an excuse in these cases. Big retailers ought to know the entire supply chain right from origin to delivery at their stores. Sighting the reasons of customers’ demand of low priced products is the cover retailers generally take. Such manufacturers would cease to exist if they are not supported by an ecosystem of retailers. Ethical sourcing should be one of the major criteria for the vendors. This will ensue checks and balances at every level of the value chain. To enforce this strictly, third party agents cannot be ruled out initially. Third parties can establish control by regular audits, white glove checks and certifications. Slowly once the processes and transparency have been established, then the third parties can be removed. Once the norms are set, they will become the guidelines of purchasing.
    Here, the other aspect of the supply chain is very crucial i.e. information flow from the source to the customers.

  29. Sankalp Srivastava says:

    In an attempt to enhance the bottom line, the obvious act by most suppliers/subcontractors is to reduce operations cost by neglecting the safety processes or decreasing labor cost by employing child labor. Part of the problem is because of poor regulatory framework at the sourcing sites/countries which motivate suppliers to indulge in such activities. However, it is very important for Governments and for the retailers to smoothen their supply chain. For doing so, the third party certifying agencies seem to be most effective because investing time, money, and resources in coming up with certification processes require a great deal of scale of economies. Hence third party players focusing entirely on certification and auditing processes can drastically reduce the costs associated and enhance the quality of the auditing processes. Further, such agencies could set up benchmarks for the operations which would rate the suppliers on different aspects and which would clearly indicated the metrics on which the supplier is loosing out with respect to competition.

  30. Mrigank Mishra says:

    Firms need to have end to end knowledge of their supply chain. Many of these products charge a premium for brand name and they need to deliver the value. In other cases, consumers can be informed about the little price rise for maintaining ethical standards. Involving a third party to audit supply chain would bring more transparency to the complete system. An exhaustive supplier selection, checking their past records and work standards can help alleviate this issue to a great extent. As a single supplier works for multiple retailers, threat of blacklisting will force suppliers to abide by regulations.

  31. Abhishek Sharma says:

    A proper treatment of human beings and respect of human rights should be one of the major goals of any industry. Since the retailers have a strong hand in the clothing supply chain, they are the ones who can drive implementation of ethical and moral practices across the chain. The move to create an ethical supply chain has to come from whole retail industry as the transparency and improvement will come with additional cost. Though it may be difficult to achieve otherwise, stricter norms and regulations in the industry can do this turnaround. It is also very logical that retailers should be held responsible for the supply chain as they are the ones selling the product to the end consumer. Regular audits and ratings for the practices across the supply chain should come from a third party, well known for its ethical audit practices to avoid any malpractices. Only such a third party involvement can ensure the ethical functioning of supply chain as desired. If the audits are left to performed by retailers themselves none of them would like to hurt its margins by firing its most economical or reliant supplier that is using unethical means to cut down the production costs.

  32. Bikas Panda says:

    Apparel industry is a high risk industry due to the nature of product and huge forecast error associated with full price sell thru of any product. This means retailers try to sell the product at high margin while leaving extremely low margins for the manufacturer. This uneven sharing of margin and risk is at the heart of the issue as it leaves the manufacturer across the globe to try and reduce the cost of manufacturing by shifting the manufacturing to third party manufacturers in countries like Bangladesh, Vietnam etc where manufacturing compliance are easily flouted.
    This is where the responsible retailers must pay greater attention to see where the products are actually made and not let the subcontracting happen without its knowledge. Most of the key retailers do have local buying house across the globe so ideally they should be able to control these issues, however due to the pressure of getting higher margins often the retailers choose to ignore the warning bells. Certainly ignorance is not an answer to a global issue and retailers must take steps to avoid working with such manufacturers.

  33. Sethuraman Subramanian says:

    This presents a very challenging conundrum for Sourcing and Supply Chain teams alike, and gains even more relevance in an industry like textile and clothing where the volumes are high and the costs paid for a lost sale are enormous, owing to the short-lived nature of the fashion and trend. While, on one hand, there is increasing awareness to do a thorough due diligence while constructing a supply chain, the firms are faced with the incredible challenge of having to absorb the costs of “going the extra mile” in ensuring that the supply chain, for instance, does not employ children anywhere. As some of my colleagues pointed out, this exposes the hypocrisy among the customers. If one were step in the shoes of a consumer, wearing a dress made by an innocent child with no access to education and food makes one feel miserable However, if the same person were to step in the shoes of the shareholder of the company, increased operating expenses to thoroughly validate the supply chain would lower the profit margins, thereby earning the shareholder’s ire. On one side, the firm cannot pass on the cost to the customer, while it also has to remain competitive by improving its margins and lowering is overall cost structure.

    While it does seem improbable from the surface, a potential solution could a consortium of manufacturers adopting a resolution to ban such practices in their supply chain, while also highlighting that the consumers will have to support them by having to pay a slight premium to absorb the costs.

    However, this presents a Catch 22 situation, where some of the firms that may not adhere to such a resolution might find a new avenue to make these garments cheaper with children again.

    So, while these companies certainly do become an easy and attractive target for media, the larger onus would lie on the respective nations to bring about systemic changes that encourage children to go to school, thereby increasing the minimum wages to work.

    However, owing to the globalized economy that we live, I am only concerned that the need to continually improve profit margins for the corporations will drive them to newer avenues to exploit this non-equilibrium.

  34. Kreena Patel says:

    Brands and retailers convienently claim ignorance on the issue of facilities, standards of employment and work conditions. Big corporations like Walmart limit there corporate social responsibility merely to their workers and their organization, but there is a growing concerns on the responsible sourcing of commodities, especially from Asian and other ‘low cost’ counties. Tier II/III companies keep cutting corners to stay cost competitive and safety is more often than not gets overlooked.
    Similar to AIAG setting standards for safety and quality of automotive commodities, world textile and apparel association should set standards for their Tier II/III and ISO safety certifications and the retail giants should not source products from brands that do not enforce such stringent measures.

  35. Devika R Krishnan says:

    With supply chains becoming global and complex, there is a dire need and requirement for the manufacturers to have transparency across its supply chain architecture to identify, assess and mitigate risks. The case mentioned above is a clear example of the manufacturers’ lack of visibility across their multi tier supply chains. Majority of studies show that manufacturers do not have information and control over the indirect links in their supply chains and hence carries huge risks of cost, responsiveness and brand reputation in case of a disruption in any one of the entities. In the race to being the lowest cost retailer, GAP, Walmart etc. have overlooked the “Co-ordination” element and hence have amplified the level of risk , in case something goes wrong. The cost for manufacturing may be low, but the cost of a disruption will be expensive. As told in the show, the price for chasing cheap is huge and the customers will start looking at the manufacturer as an unethical player.
    In general, all manufacturers should develop a strong supply chain visibility across all the entities downstream in their supply chains which will help in improving overall supply chain efficiency through collaboration. Although not an exhaustive list, manufacturers should impose labor standards, utility requirements, safety regulations at all levels of manufacturing below them. With various technology enabled modes of control possible, the task will not be as challenging and daunting. In case the firms don’t have capabilities or resources immediately to do by themselves, a certified third party may be employed for maintaining the control and understanding sources of risks w.r.t the tier 2 and 3 suppliers.

  36. Ankur Bansal says:

    I think not just the retailer and brands, but everyone involved in the supply chain should be held accountable to adhere to the code of conduct. In today’s world technology can provide a solution to all the problems. If we can track how a shipment has reached us, as a consumer I should be able to track how the product I am using has come to me.

    Compromising on the safety aspect of production and blaming it on increasing pressure for profit margin can’t be a valid excuse. As a firm, they need to source responsibly and be accountable for cutting corners. It’s high time all the countries of the world come up with a standard code of conduct that should be applicable to each and every firm and strictly followed.

  37. Gita Kumari says:

    In my opinion, retailers should not be held responsible for the cases in which subcontractors of the contractors are involved in any sort of unethical behavior. In such cases, it becomes the responsibility of the contractors to ensure that the subcontractors, they are dealing with, are not involved in such kind of behavior. With the increase in competition, switching cost of the consumers have decreased and in order to be competitive and sustainable, companies need to compete on costs. As a result, retailers have established their supplier base in emerging economies due to cheap labor costs etc., making it difficult to keep an eye on the suppliers’ activities. It has also increased the length of the supply chain, increasing information asymmetry as well as coordination issues.
    To prevent the unethical behaviors, control measures need to be in place. every party which is part of the supply chain has to be held responsible to ensure that no violation of safety standards happens. Retailers and contractors could enter into contracts with their suppliers threatening to end business if any such behavior gets promoted by their suppliers. Companies could also arrange for a third-party auditing of these workplaces. Involving in unethical behavior could cost a lot to the business in terms of loss of reputation and customers.

  38. Vasu says:

    A good supply chain, especially in areas such as fashion and lifestyle categories rely on three important pillars of commerce – selection, price and service.
    The pressure on selection in such categories induces pressure amongst the suppliers and brands to create a large portfolio thus reaching out to several suppliers across geographies.
    Consumer demands on optimal pricing further increases the pressure to produce these products at lower costs.
    Best consumer experience leads to higher investments in the final sales (ambient showrooms, sales staff, consumer purchase decisions, marketing etc) thus leading to higher gross margins.
    The impact of all these three elements to the entire supply chain is : large number of suppliers, pressure on producing products at low lead times, low cycle times, constant churn, low mechanization thus requirement of large pool of skilled labor. Hence the recent emerging trends of poor working conditions across developing markets.
    However, brand equity plays a major role in the development of high value fashion products. Thus, it becomes imperative for large retailers across the world to tighten controls on quality of suppliers not only in terms of product quality but supplier quality as well. Hence, these retailers should invest heavily in ensuring innovation in technology comes at the production stage improving the lives of workers. Not only this, regulatory pressure could be added for outsourcing products which require complete transparency in procurement and supplier networks of companies, thus increasing liability.

  39. Simrat Bir says:

    No matter what the cause may be, unauthorized use of child labor is unacceptable. This is a violation of basic human rights and is not justifiable under any circumstances. I feel that it is absolutely vital that any firm which is manufacturing apparel, or for that matter, any product, must have ne to end visibility of its supply chain. Ethical sourcing is the talk of the day, and rightly so. Several companies such as Starbucks are publishing their objectives centered around ethical sourcing, on their web page. This is to ensure complete transparency of the origin of its raw materials such as the cocoa beans. If a firm is unable to certify its own supply chain, then a 3rd party auditor is the way forward. However, no firm should be allowed to escape from its liability by shielding itself under the garb of “we didn’t know!”- You better know.

  40. Aayush Jain says:

    Retailers such as Walmart, Gap, etc in their efforts to price products lower for increasing their demands are cutting corners to drive down the costs. They should be held responsible for the entire supply chain of the products they are selling and ignorance is not an excuse for malpractices that are happening higher up in the supply chain. They need to have a complete understanding of the supply chain and train the suppliers regarding the different laws and processes and hold them accountable for any violations. Regular supplier visits and audits along with penalties for violations would deter the suppliers from unethical practices.

    Consumer demands for lower prices cannot be used as an excuse to break rules. Operational cost reductions can be reduced by better planning removing inefficiencies by better monitoring of different parties in the supply chain and sharing of information and technological processes between the retailers and the suppliers. Violating the code of conduct presents risks to the reputation and legal consequences which far outweigh the small short-term gains in costs.

  41. Hanumantharao V says:

    I feel that the demand for cheaper clothes is driving all the illegality in the supply chains. End consumers want cheaper products and are expecting the prices to fall and enough demand will not be generated until the prices drop enough to be attractive for the consumers and to generate such demands to meet the target sales retailers has no other go than reduce the prices and to maintain sufficient margins costs have to cut and hence the entire supply chain tries to reduce the costs and use illegal methods to reduce costs. Who is responsible for this? I feel the expectations of end consumers regarding the drop in prices is partly a reason and the greediness of retailers and manufacturers to generate excess profits is also partly a reason and also the risk of stock outs and over stocking partly do explain the causes of such illegal supply chains.

  42. Akhilendra Kumar says:

    Retailers should be held accountable for their entire supply chain as they are the ones directly dealing with customers and have the capability to make a difference in their supply chain if they want to. As far as price competition is considered, someone will have to take an initiative and only then the industry will follow suite. We have already started observing a shift in focus on hygiene of supply chain by companies, eg Apple submitting their suppliers info on their websites. I understand that this kind of move may impact bottom line of the companies but if the entire industry does the same, there will be no loss to competition. In addition to it, if a company takes the responsibility of its supply chain it may generate enough goodwill by its customers to mitigate the increase in supply chain cost.
    As far as how to go about doing it – Its really difficult for retailers to have a complete control over their suppliers. Even surprise audit might not be a feasible solution because of suppliers being situated in different parts of world. The best way to ensure a smooth supply chain flow is by partnering with third party agents who are experts in this area. There are also some NGOs who invest in the education of workmen’s children at suppliers end and certify the supply chain. Such certifications can ensure the hygiene in supply chain.

  43. Atul Shrimal says:

    An ever-increasing pressure to reduce costs especially on high volume retailers exposes them to risks of abuses in supply chain. While in some cases, it may be true that these retailers weren’t aware of such abuses by subcontractors of their contractor or further down their supply chains, their lack of proactive audit of supply chain is also to be blamed. In my opinion, retailers should be made responsible to proactively map their supply chains for any abuses. Daunting as it may sound, it is worth the efforts considering the long-term impact of any reported violations on their reputations. For e.g. in December 2014, Nestle had to launch an investigation of its supply chain after news of slavery like working conditions of fishers from Myanmar and Cambodia employed in its supply chain of sea food such as shrimp, prawns supplied by Thailand based contractors.
    These firms can start by enforcing employee working condition standards and disclosure requirements on their contractors and asking them to ensure the same further down the supply chain. For e.g. Nestle published report of its aforesaid investigation along with its solution strategy involving imposing suitable requirements on all suppliers, enrolling independent observers. People in sourcing countries and all along the supply chain can act as independent observers, while the consumers can further create pressure by demanding ethically sourced goods and at the same time incentivize such practices by paying the justified price premium. At the same time, there have been instances wherein such observers have been found to be driven by ulterior motives. For e.g. a video allegedly showing use of child labor in rug manufacturing by one of the suppliers of IKEA forced IKEA to drop the supplier, whereas later investigations found the video to be fabricated. The solution to me lies in independent observers under the aegis of multi-national fora like UN or WTO along with educating customers and people in general.

  44. Prateek Tiwari says:

    With supply chain becoming complicated and more extended, keeping tabs of everyone contributing in some way to the production is becoming difficult and impossible. While retailers can keep tabs on direct suppliers to a certain extent, making sure every subcontractor is following norms is increasingly very difficult. While some organizations take a very strict ethical stand in these scenarios, not everyone does so.
    Holding retailers responsible for entire chain may seem a bit harsh. Doing so to me look hypocritic. Do we ensure every activity we as an employee is involved in is entirely ethical and do not have specific consequences beyond the obvious ones? Do we as a customer ensure we are purchasing goods only from companies that follow ethical practices? While making a purchase, the lower price and higher quality govern our decision keeping other concerns aside. When the news comes out of unethical supplier practices, we start blaming the retailers and firms.
    Having third-party certifiers seems like a good option, but it will also incur additional costs in the entire supply chain network. Can we not make simple solutions work in which each point in supply chain becomes responsible for one layer? For example, the manufacturer will keep tabs on its suppliers and retailers, and not just sourcing or production practices but other aspects involved in supply chain itself. Perhaps a certification from someone downstream effected by the corrupt practices directly will keep the entire chain in check

  45. Sowmya Dasika says:

    Industries such as Apparel industry charge heavily for the brand value in addition to the price that is paid directly to the product. Customers , heavily associate themselves with the brand. That is why the willingness to pay is very high. Hence, the customers are need to be made aware of what really happens behind the supply chain operations.
    Any violation of rules comes with huge cost be in child labour , be in unfriendly working conditions.
    Providing visibility and creating a metric on how retailers chose their suppliers should be made available to the customers. Creating such transparency in the complete value chain and making it open to the customers will reduce such implications to a an extent,

  46. Debojyoti Ray says:

    In the demanding world of fashion, where the forecasting business is tricky, most retailers end up only focusing on whether or not their suppliers are being able to quickly react to the demand projections. This taken together with the fact that the consumers demand inexpensive clothes make it imperative for the retailers to scourge for low cost manufacturing.

    However, provided the above constraints, employing unauthorized subcontractors and child labor can never be excused, not only from a conscientious point of view but also from a business point of view. Citing negligence compounds the issue that there is absolutely no ‘co-ordination’ between the supplier and the retailer and this does not exactly exude confidence in the supply chain. Co-ordination is one of the most important tenets of a successful supply chain, and every CEO should be held accountable for the work standards being followed by their suppliers. This could be done by ensuring that the suppliers are selected on more stringent grounds, followed by regular and constant monitoring.

  47. Debojyoti Ray says:

    In the demanding world of fashion, where the forecasting business is tricky, most retailers end up only focusing on whether or not their suppliers are being able to quickly react to the demand projections. This taken together with the fact that the consumers demand inexpensive clothes make it imperative for the retailers to scan for low cost manufacturing.

    However, provided the above constraints, employing unauthorized subcontractors and child labor can never be excused, not only from a conscientious point of view but also from a business point of view. Citing negligence compounds the issue that there is absolutely no ‘co-ordination’ between the supplier and the retailer and this does not exactly exude confidence in the supply chain. Co-ordination is one of the most important tenets of a successful supply chain, and every CEO should be held accountable for the work standards being followed by their suppliers. This could be done by ensuring that the suppliers are selected on more stringent grounds, followed by regular and constant monitoring.

  48. asimanpanda says:

    Yes, retailers should be held accountable for unethical practices in their supply chain. It is true that cost considerations cause supply chains to become so convoluted and extended as to make visibility and auditing difficult, but then again, maybe if a retailer looked hard enough for a solution, it would find it. Consider the cases where the retailers swoop into action to rectify lapses once such lapses are out in the open. So if a retailer had the wherewithal to bear costs of damage control, if certainly has the wherewithal to bear costs of damage prevention.
    More and more retailers, at least the reputed ones, should consider going the local way – producing locally and/ or owning plants, a la Zara. This could mean having to own plants where said unethical practices are prevalent. This also sets a precedent for the lesser known retailers. This figuratively shortens the length of the supply chain and affords better visibility over more and more elements of the supply chain.

  49. Bhawarth Sangwan says:

    In my opinion, the retailer should be responsible for the knowing the entire supply chain. It might sound bit idealistic to make a person sitting in the Headquarter of a large clothing line MNC, responsible for the violation of safety standards by sub-contractors in the some third world country. However, it is utmost important to ensure that child labor shouldn’t be encouraged anywhere in the world. One amicable solution to this issue could be a penalty clause (as mentioned in class as well) in the contracting work. If the sub-contractor is found guilty of violating the rules, the contract should be ended with a penalty. It will automatically ensure that contractors will try to increase the visibility into their sub-contractor’s production.
    The low prices cannot be a justified argument for deployment of child labor and violation of safety norms. There are many companies who take pride in calling themselves most ethical firms while delivering the products at competitive prices. BASICS, PACT, EVERLANE are the few such examples. The third party auditors might bring some agency problems in the scene. The third party auditors have every incentive to certify production as ethical in order to earn more business from other high end retailers. The best solution would be to have an internal department with the responsibility to ensure ethical value chain of the firm. Moreover, employing third party certifying firms again gives the clothing MNC an excuse for the error in judgement (to determine ethicality of source production) by the third party.
    Hence, I truly believe that, it’s the high time that retailers own this responsibility to ensure ethical production.

  50. Mahesh Sharma says:

    I think a good question to ask is – ” Do customers care about the safety conditions of production? “.
    Also, a good place to start answering this question would be diamonds.
    We all know how unethical practices are employed in diamond mining. However, I have rarely seen anyone even talk about it (apart from the few hours after watching the movie blood diamond).
    In short, customers do not care and hence the supply chain doesn’t care.
    Firstly, I think a study is necessary to see how much premium customers are willing to pay for ethical practices in production of apparels.
    If the above doesn’t make significant economic sense, regulators have to intervene and go for audits, transparency in supply chain and appropriate penalties.

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