Ethical Challenges In The Retail Industry: CSR Obligations Of Retailers
Ethical Responsibilities of Retailers in Indian Factories
It can be seen in the video Blood, Sweat and Tshirt that the workers who are employed in the Indian Factories are subject to poor work and health conditions. They are paid minimum wages and the retailers are not taking any steps to ensure their well being and welfare. It can be stated that ethical decision making ensures that justice and order is maintained in a society. Thus for ensuring that the operations of the retailers are conducted in ethical manner, the retailers have the obligation to adopt a policy of Corporate Social Responsibility. As opined by Schwartz (2017), Corporate Social Responsibility is defined as the responsibility of business organizations to operate in a sustainable way with the aim to create social, environmental and economic benefits for all the stakeholders. The principles of Corporate Social Responsibility can be said to be closely associated with the corporate ethics (Carroll, 2015). Corporate social responsibility has also been defined as the ethical expression of a business.
As stated before, workers who are employed in Indian factories are subjected to extremely adverse work conditions. Such workers are underpaid and live in extreme poverty. This can be considered to be the ugly side of the retail industry. For understanding the ethical obligations of the retail industry it is essential to first have a proper understanding of the functioning of such industry. As opined by Rabine (2017), retailing can be defined as the interface which exists between the buyer and the individual who purchases the goods for personal consumption. Retailing industry can also be defined as the last connection that exists between the individual client and the appropriate assembling chain. A retailer generally engages in demonstration of pitching product to the individual buyer with a profit margin. Some of the unethical practices of the retail industry include pitching higher prices of products, misleading stakeholders and exploiting the workers by paying them lower wages (White, Nielsen & Valentini, 2017).
According to the theory of Utilitarianism it can be stated that that individuals must act in ways which ensures that the greatest benefit is created for the maximum number of people (de Lazari-Radek & Singer, 2017). The actions of individuals are to be assessed by the utility created for the stakeholders. Utility can be defined as the summation of benefit which is created minus the efforts required to create such utility (Barrow, 2015). Utilitarianism is one of the main branches of the consequentialist theories of Ethics.
Broad and Narrow View of CSR in the Retail Industry
In order to assess the operations of the Retail industry by the theory of Utilitarianism, it is first essential to identify the relevant stakeholders involved in the process of retailing. The primary stakeholders in the retail industry are the workers who are employed in the factories for manufacturing clothes. As shown in the video Blood, sweat and Tshirt, the workers who are employed in the Indian factories for manufacturing garments live in poverty and are exposed to adverse working conditions. They are underpaid. The retailers outsource the task of manufacturing clothes to developing nations so that they can hire cheap labor and get the job of manufacturing clothes done at a cheap rate. However they do not take any steps to ensure the wellbeing of the workers. Such retailers only focus on profit maximization. Thus by the application of the ethical theory of Utilitarianism it can be stated that operations of the retail industry re inherently unethical as it does create any benefit for the primary stakeholders involved.
As stated before Corporate Social Responsibility is defined as the choices of businesses to conduct its operations in a ways which have positive impacts on the society, environment and the economy. As stated by Pedersen (2015), Corporate Social responsibility has a triple concern which includes individuals, benefit and the planet. Corporate Social Responsibility and the retail industry are very closely interrelated. It has been perceived by the retailers that Corporate Social Responsibility is a great opportunity to reach out to the masses. Due to globalization the process of outsourcing has increased significantly and its best use has been made by the retail industry (Rabine, 2017). The retail industry in the modern times outsources the task of manufacturing, assembling and disseminating clothes to the developing nations.
The rationale behind outsourcing the task of manufacturing to the developing nations is that labor is cheaper in Countries like India and China which are developing nations. According to Razalan et al. (2017), Retailers all over the world aim to take measures which ensure the well being of the employees, maintain quality and of the products in all the stores of the retail network. However such a task has become more complicated than ever before due to globalization. The clothing industry is centered in the hands of large corporations which have vast chains of supply that are based on outsourcing. Thus it means that such measures as discussed need to be implemented all throughout the network of retailing. It can be said that the textile and the clothing industry are closely related (Dabija, Pop & Postelnicu, 2016). The textile industry form the vertical linkages of the Clothing industry. It can be stated that for a garment to be sold, it has to go through a lengthy process from manufacturing, to designing to reaching the shop of the retailer. The clothing and the textile industry are generally treated as a single unit and addressed as a single unit. It can be stated that companies that companies that are involved in the fashion industry face cut throat competition from the other companies. Due to the cut throat competition fashion companies strain them to obtain a higher profit margin. The fashion companies aim to lower the cost of their apparel to obtain an edge in the market. However cutting down such costs has made companies very difficult to adhere to the CSR rules and adopt a CSR policy.
Utilitarianism and the Operations of the Retail Industry
Further it can be stated that in recent times clothes are not assessed by their endurance. Desire of the consumers can be considered to be the driving factor for fast fashion. The Clothing companies have adopted to the new trend of innovating the styles of the garments so as ensure that such garments are preferred by the consumers (Burnes & Towers, 2016). However this practice has led to a lot of wastage of the garments that are outdated. The factors of cut throat competition, low pricing of the garments and remarkable short life span of the clothes have made the companies involved in the clothing industry realize the need to effectively manage their chains of supply. Supply chain management can be considered to be instrumental for the success of the companies of the fashion industry. According to Dabija, Pop & Postelnicu (2016), it is the responsibility of the management of such companies to choose their suppliers wisely so as to make sure that such suppliers not only perform the tasks that have been assigned to them but also address environmental and social issues and exhibit responsible behavior. However as shown in the video “Blood, sweat and Tshirt” the suppliers do not exhibit responsible behavior. They exploit the workers in order to ascertain a higher profit margin.
According to Ferrell& Ferrell (2016), a fashion company cannot claim that such company adheres to the rules of the CSR if the supply chains of such company do not follow the CSR policies. It can be said that multinational fashion companies have more pressure on them to act in a socially responsible and ethical manner. No consumer wishes to buy garments which were made in exploitative environments and by abused workers. Consumers refrain from taking the guilt of harming people in the process of manufacturing garments by purchasing such garments and want to be assured that the garments which were purchased were manufactured in decent working conditions. The main ethical issues that exist in the industry of retail are : poor working conditions of workers, long hours of work and low wages that are paid to workers. These factors can be termed as social responsibility of the management of the companies (Burnes & Towers, 2016).. Thus it can be stated tat since fashion companies chose to outsource the production of clothes to the developing countries, they need to ensure ethical practices are not only followed at the head quarters but also in the factories. To ensure that the operations of the retail industry are carried out in ethical manner, the companies must ensure that the workers employed at the factories and the manufacturing units must be provided with a safe workplace, hygienic work environment, decent wages which is not less than the minimum wage level which has been set by the government, reducing environmental damages, contributing the local communities and having good relations with the relevant stakeholders.
CSR Policies for the Fashion Industry
The CSR policies of a company can be categorized in two Categories; the broad view and the narrow view (Carroll, 2015).. The Broad view of CSR takes into account the influence and the power which is exerted by the large corporations on the society. Such power and influence of the large corporations over the society can be said to have increased significantly in the recent times especially in capitalist markets. The Broad view of CSR perceives companies and organizations as individuals and therefore asserts that such companies have ethical responsibilities towards the society in addition to only making profits (Vertigans, & Idowu, 2017). The broad view of Corporate Social responsibility of businesses had been coined by Keith Davis. He had stated that businessmen cannot make decisions primarily focusing on economic benefit. They are required to perceive that their decisions are likely to have social consequences. The main rationale behind adopting the broad view of CSR by businesses is that businesses exist in the society for the purpose of providing essential goods and services and therefore they have certain obligations to their relevant stakeholders witch which such businesses share primary and secondary relationships (Schwartz, 2017). Businesses earlier had been judged by the single bottom line which took into consideration the economic responsibility of businesses however after the broad view of CSR had been invented businesses were judged by a triple bottom line which took into consideration social, financial and environmental services to be rendered.
The narrow view of CSR takes into consideration how the profits earned by the business are to be utilized. Thus the narrow view of CSR focuses only on the morive of the business to earn profits. The narrow view of CSR had been advocated by the American writer and commentator Milton Friedman. Milton had stated that a business has responsibility other than profit maximization (Bhattacharya et al. 2017). A business must aim to utilize its resources fully while focusing on profit maximization.
Thus after analyzing both the views of CSR, it can be stated that retail industry as showed in the video Blood, sweat and Tshirt only adheres to the narrow view of CSR. The retail sector of the fashion industry only focuses on profit maximization and no other social responsibility. This can be exhibited by the poor working conditions, low wages and poor lifestyle of the workers employed in the factories. However it can be stated that all businesses must adhere to the broad view of CSR as they have social, environmental and economic responsibilities.
Thus to conclude, it can be stated that retailers in the retail industry have the ethical responsibility of complying with ethical standards to ensure the creation of well being of the employees. They also have the responsibility to ensure that their operations have positive impacts on the environment and create sustainable development. Retailing in the fashion industry constitutes a vital link between the manufacturers and the final consumers. There are a lot of stakeholders involved in the process of retailing which include workers employed in the factories, the clients who purchase the clothes produced by such workers and the final consumers. Hence complying with ethical standards is a must to ensure that the lives of all the stakeholders re affected positively. The actions of the Retail industry which outsources the task of manufacturing garments to the Indian factories can be said to be inherently unethical as assessed by the ethical theory of Utilitarianism. The retail industry only adheres to the narrow view of CSR which focuses on profit maximization and ignores the Broad view.
Barrow, R. (2015). Utilitarianism: A contemporary statement. Routledge.
Bhattacharya, C. B., Korschun, D., Sen, S., & Routledge, H. (2017). Corporate social responsibility. Journal of International Law, 26(2).
Burnes, B., & Towers, N. (2016). Consumers, clothing retailers and production planning and control in the smart city. Production Planning & Control, 27(6), 490-499.
Cao, X. (2017). Corporate Social Responsibility. In Fair Development in China (pp. 119-134). Springer, Cham.
Carroll, A. B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), 87-96.
Chernev, A., & Blair, S. (2015). Doing well by doing good: The benevolent halo of corporate social responsibility. Journal of Consumer Research, 41(6), 1412-1425.
Dabija, D. C., Pop, N. A., & Postelnicu, C. (2016). Ethics of the garment retail within the context of globalization and sustainable development.
de Lazari-Radek, K., & Singer, P. (2017). Utilitarianism: A Very Short Introduction. Oxford University Press.
Ferrell, O. C., & Ferrell, L. (2016). Ethics and social responsibility in marketing channels and supply chains: An overview. Journal of Marketing Channels, 23(1-2), 2-10.
Pedersen, E. R. G. (Ed.). (2015). Corporate social responsibility. Sage.
Rabine, L. W. (2017). Globalization and the Fashion Industry. Retrieved November, 1.
Razalan, D. M., Bickle, M. C., Park, J., & Brosdahl, D. (2017). Local retailers’ perspectives on social responsibility. International Journal of Retail & Distribution Management, 45(2), 211-226.
Schwartz, M. S. (2017). Corporate social responsibility. Routledge.
Vertigans, S., & Idowu, S. O. (2017). Corporate Social Responsibility. Springer International Publishing:.
White, C. L., Nielsen, A. E., & Valentini, C. (2017). CSR research in the apparel industry: A quantitative and qualitative review of existing literature. Corporate Social Responsibility and Environmental Management, 24(5), 382-394.