A recent PIU blog post on Apple's recent supply chain mishap written by my colleague Maggie Slowik caused quite a furore last week when blog contributors disagreed over who should take responsibility for suppliers' ethical issues. One standpoint was that these companies are big enough to accept social responsibility throughout the supply chain. Whereas another argument was that governments should be held liable as it is their responsibility to implement regulations to control manufacturers. So, are companies 100% responsible for their supply chain blunders?
First, it is important to question why large companies place factories in and use suppliers in developing countries. Lax environmental standards and low rates of pay, combined with lower health and safety standards make these countries extremely attractive to companies looking to save money in production costs. But, why do the governments of low-cost countries allow these slack standards to stand? The answer is simple - the system also saves them money and resources. Implementing regulations to improve health, safety and environmental standards, as well as legislation to introduce modest rates of pay is a costly business. Therefore, should companies from developed nations take responsibility to improve the working standards in developing countries?
Some would argue that companies that conduct business with or in developing countries have a duty to ensure that their products and services are produced in an ethical way. In recent years brands including Gap, Nike and Apple have come under the spotlight for the discovery of poor ethical standards in their supply chain. All three brands claimed that they were unaware that their factories were breaking ethical working rules. Since the discoveries, Nike and Gap have pledged to ensure that their factories improve their conditions and if not, the companies stated that they would withdraw from the area. Despite these assertions, discoveries like these can be extremely damaging for a brand's image, and companies need to question whether buying products and services at the lowest possible cost is worth the risk if their entire brand image could be destroyed.
The International Labour Organisation helps to establish international labour standards, although it cannot dictate a global base wage. It has been suggested that a global labour law should be introduced to address the issue. Similarly, it has been proposed that governments take total responsibility for monitoring manufacturing in their countries. This could include capping the number of hours worked, introducing health and safety regulations, introducing a base wage and ensuring a good level of environmental standards. Some developing countries are already beginning to introduce regulations to improve their working standards. This is particularly evident in countries like China, which would like to be considered as a growing economic leader.
Whether a company is responsible for ensuring ethical working practices or whether a government is accountable for working standards is a hot topic of debate. However, the issue isn't completely black and white, and placing the responsibility entirely on one side would lead to many 'ifs and buts'. In an ideal world, companies would produce their goods in a wholly ethical way and poor working standards and inequality would be eradicated, but unfortunately we do not yet live in an ideal world.