June 23, 2008
Retailers Try to Control Overseas Manufacturers
By Bernice Hurst, Managing Partner, Fine Food Network
For the past few years, retailers in the U.S. and Europe have reassured consumers worried about overseas manufacturers’ working conditions by saying that they monitor them frequently to ensure that workers are not mistreated or underpaid (by their own countries’ standards). They have particularly emphasized steps taken to eliminate child labor. Their efforts have satisfied many and resulted in booming sales.
Following an investigation for a BBC television program, however, one of Britain’s lowest priced fashion retailers, Primark, has dropped three of its Indian suppliers for sub-contracting embroidery work to companies using child labor.
Sarah Arnott’s report of the story in The Independent included a statement from Primark’s parent, Associated British Foods (ABF), that, “Under no circumstances would Primark ever knowingly permit such activities, whether directly through its suppliers or through third-party sub-contractors.” They stressed their quick response and said that they acted immediately after “being made aware of the facts…canceling all new orders with the factories concerned and withdrawing from sale the embroidered garments involved.”
ABF chairman George Weston also said that because the suppliers had denied the charges and been guilty of “wholesale deception,” the company was not working with them to change conditions as they might have otherwise.
“Tracking the provenance of every process in a garment is, with the best will in the world, almost impossible,” acknowledged Times journalist, Lisa Armstrong. For all the efforts being made by individual companies and the independently audited Ethical Trading Initiative which many have joined, critics still claim that voluntary sourcing codes need to be supplemented by government action to prevent exploitation. Pressure is often passed down the line from retailers to suppliers to sub-contractors. Each, in their turn, wants faster service and lower prices, which often results in compromises in both ethical standards and quality of the product. Relying on a voluntary code means that audits are infrequent and workers can be pressured to tell inspectors what their employers dictate in order to keep much-needed jobs.
Discussion questions: Do you think the retail industry is doing an adequate job looking after its outsourced workers? Are consumers recognizing these efforts? How can retailers persuade consumers that they are doing the best they can?
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Retailers, like most people, want outsourced workers everywhere treated humanly. But the U.S. retail industry exists on profits that arise from consumer-preference sales. Thus the industry’s main focus is on what seem to be the most compelling day-to-day interests of most U.S. consumers.
The “on-the-shelf” expectancy of product quality at a low accessible price would seem to register higher with a great many American consumers than the out-of-sight welfare of workers producing the products. Thus, retailers find themselves in a dilemma: either go with marketing’s flow and try to get prices that appeal to today’s consumer needs and desires or spend a portion of their time monitoring working practices in overseas cultures which may have different standards and values. Sounds a little like a Catch 22, doesn’t it?
This is a huge problem that is not going away any time soon.
Even vertically-integrated retailers have to be vigilant about their manufacturers, constantly checking them, and putting safeguards in place to verify the origin of all the work that is performed. Unscrupulous governments and lax regulation can’t be allowed to challenge the integrity of American retailers. Retail companies must be committed to ethical sourcing to ensure the continued reputation of their brands, and the public must demand nothing less.
Many overseas inspections by American retailers’ agents are done using the script from the movie Stalag 17. The inspectors inform the factories (prison camps in the movie) well in advance of their expected arrival date. On the date they arrive, all is well. The workers (prisoners in the movie) do not complain.
Hard to determine the provenance of every item in the supply chain? Tell that to kosher inspection organizations. They operate in every country on Earth, and have to document the source of every ingredient as well as its transportation and packaging, every step of the way.
Can’t tell if the workers are being treated humanely? Can’t tell if unconscionable child labor is being used? Install a few surveillance cameras connected to the internet at every factory. Don’t tell the factory when you’ll be watching and recording.
The demand for cheap stuff outweighs and outstrips to problem of child labor. As I said in my earlier post about counterfeit goods, as long as there is demand, factories will still produce.
I do believe it is up to the retailer to really control what comes into the store. With so many SKUs and lines, it is virtually impossible to check every single vendor and factory. Buyers need to be asking those hard questions to vendors. In the contract process, the issue of manufacturing conditions rarely (if ever) comes up. It’s all about price and allocation.
For the most part, companies in the Western world are doing an adequate job of looking after their outsourced workers. Is that job completely accomplishing the task? No. Will they be able to police 100% of their suppliers? No.
Primark took immediate and proper action when it learned that three of its suppliers were using child labor. Other companies have done so in the past.
Clear communication of standards and quick action when those standards are not being met is vital.
I listened in on a panel discussion about the implications of 10+2, the soon-to-be implemented new customs and security documentation guidelines. Wow, was there a lot of whining, and a lot of it focused on exactly this issue: as an importer, a retailer often doesn’t know all of the parties involved in manufacturing, and if the new rules go into effect, they will be required to gather and report that information–well before the container ever gets loaded onto the ship.
My problem is, shouldn’t you know this stuff already? Saying that it is hard to keep track of sub-contractors and every step of the manufacturing process to me sounds a lot like “but we’ve always done it this way and we don’t want to change!” I think David is right–while no one is going to buy an item that has “Made with grade-school child labor” on the label, not many people think too hard about who might have made what they’re wearing or using or eating.
But it’s not consumers that are going to force change on this “look the other way” process–it’s governments. It’s kind of depressing that it’s security concerns that are going to drive this visibility and enforcement (rather than ethical ones), but for the US at least, I wouldn’t be surprised if more of these kinds of discoveries come to light as 10+2 gets rolled out.
Perhaps in some countries, consumers are concerned about where and who is producing the goods they purchase. In my opinion, US consumers have an out of site, out of mind attitude. There would be no meaningful change in sales levels of products unless their was significant media exposure. In the age of 500 channels to watch on TV, a documentary on child labor in a country that our kids can’t find on a globe would go unnoticed. We did get concerned when we thought the Chinese were poisoning us, but we don’t really care if the same product is produced by a six year old.
I run a sourcing and supply management company in Asia and spend a lot time sourcing and auditing in India for our western clients. I am western and we have western ethics and processes – random auditing, to name a significant one. In the last 2 years I audited 100+ suppliers in India. Child labour, pollution, no health and safety, no accident insurance, paying staff below the minimum wage all found. We do not find forced work very often. We work to improve suppliers to western expectations or we do not trade with them.
However, to raise consciousness, much of the 1bn + population lives in poverty. In many families children are the breadwinners. The next best alternatives to work are not great; begging, having a hand cut off for greater returns or prostitution. Or collecting and selling cow dung in towns with no gas or electricity.
Ineffective government and corruption is a key factor and this has held back investment and subsequently trade. Profit expectations of big companies in the West and low quality B2C sales and only competing on price are others.
And we will still find child labour in India until the next best alternatives for them improve. Trade will make that happen.
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Retailers, like most people, want outsourced workers everywhere treated humanly. But the U.S. retail industry exists on profits that arise from consumer-preference sales. Thus the industry’s main focus is on what seem to be the most compelling day-to-day interests of most U.S. consumers.
The “on-the-shelf” expectancy of product quality at a low accessible price would seem to register higher with a great many American consumers than the out-of-sight welfare of workers producing the products. Thus, retailers find themselves in a dilemma: either go with marketing’s flow and try to get prices that appeal to today’s consumer needs and desires or spend a portion of their time monitoring working practices in overseas cultures which may have different standards and values. Sounds a little like a Catch 22, doesn’t it?
This is a huge problem that is not going away any time soon.
Even vertically-integrated retailers have to be vigilant about their manufacturers, constantly checking them, and putting safeguards in place to verify the origin of all the work that is performed. Unscrupulous governments and lax regulation can’t be allowed to challenge the integrity of American retailers. Retail companies must be committed to ethical sourcing to ensure the continued reputation of their brands, and the public must demand nothing less.
Many overseas inspections by American retailers’ agents are done using the script from the movie Stalag 17. The inspectors inform the factories (prison camps in the movie) well in advance of their expected arrival date. On the date they arrive, all is well. The workers (prisoners in the movie) do not complain.
Hard to determine the provenance of every item in the supply chain? Tell that to kosher inspection organizations. They operate in every country on Earth, and have to document the source of every ingredient as well as its transportation and packaging, every step of the way.
Can’t tell if the workers are being treated humanely? Can’t tell if unconscionable child labor is being used? Install a few surveillance cameras connected to the internet at every factory. Don’t tell the factory when you’ll be watching and recording.
The demand for cheap stuff outweighs and outstrips to problem of child labor. As I said in my earlier post about counterfeit goods, as long as there is demand, factories will still produce.
I do believe it is up to the retailer to really control what comes into the store. With so many SKUs and lines, it is virtually impossible to check every single vendor and factory. Buyers need to be asking those hard questions to vendors. In the contract process, the issue of manufacturing conditions rarely (if ever) comes up. It’s all about price and allocation.
For the most part, companies in the Western world are doing an adequate job of looking after their outsourced workers. Is that job completely accomplishing the task? No. Will they be able to police 100% of their suppliers? No.
Primark took immediate and proper action when it learned that three of its suppliers were using child labor. Other companies have done so in the past.
Clear communication of standards and quick action when those standards are not being met is vital.
I listened in on a panel discussion about the implications of 10+2, the soon-to-be implemented new customs and security documentation guidelines. Wow, was there a lot of whining, and a lot of it focused on exactly this issue: as an importer, a retailer often doesn’t know all of the parties involved in manufacturing, and if the new rules go into effect, they will be required to gather and report that information–well before the container ever gets loaded onto the ship.
My problem is, shouldn’t you know this stuff already? Saying that it is hard to keep track of sub-contractors and every step of the manufacturing process to me sounds a lot like “but we’ve always done it this way and we don’t want to change!” I think David is right–while no one is going to buy an item that has “Made with grade-school child labor” on the label, not many people think too hard about who might have made what they’re wearing or using or eating.
But it’s not consumers that are going to force change on this “look the other way” process–it’s governments. It’s kind of depressing that it’s security concerns that are going to drive this visibility and enforcement (rather than ethical ones), but for the US at least, I wouldn’t be surprised if more of these kinds of discoveries come to light as 10+2 gets rolled out.
Perhaps in some countries, consumers are concerned about where and who is producing the goods they purchase. In my opinion, US consumers have an out of site, out of mind attitude. There would be no meaningful change in sales levels of products unless their was significant media exposure. In the age of 500 channels to watch on TV, a documentary on child labor in a country that our kids can’t find on a globe would go unnoticed. We did get concerned when we thought the Chinese were poisoning us, but we don’t really care if the same product is produced by a six year old.
I run a sourcing and supply management company in Asia and spend a lot time sourcing and auditing in India for our western clients. I am western and we have western ethics and processes – random auditing, to name a significant one. In the last 2 years I audited 100+ suppliers in India. Child labour, pollution, no health and safety, no accident insurance, paying staff below the minimum wage all found. We do not find forced work very often. We work to improve suppliers to western expectations or we do not trade with them.
However, to raise consciousness, much of the 1bn + population lives in poverty. In many families children are the breadwinners. The next best alternatives to work are not great; begging, having a hand cut off for greater returns or prostitution. Or collecting and selling cow dung in towns with no gas or electricity.
Ineffective government and corruption is a key factor and this has held back investment and subsequently trade. Profit expectations of big companies in the West and low quality B2C sales and only competing on price are others.
And we will still find child labour in India until the next best alternatives for them improve. Trade will make that happen.