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The challenges of ethical trading - perspective of a retailer

Updated Wednesday, 4th November 2015
Derek Jackson gives the retail perspective on the impact of ethical trading in the clothing market.

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Regent Street, London Since the 1990’s, ethical trade has grown in significance as companies with global supply chains (especially those in the clothing and accessories sectors) have come under increasing pressure to provide decent working conditions for workers who make the goods they sell. It would be easy for many retailers to rebuff the situation and do nothing - after all isn’t this the problem for local and national governments who are failing in their duty to enact and implement laws to prevent worker exploitation?

Retailers are however, aware that consumers are increasingly concerned and care about the employment conditions of workers and these concerns are increasingly reinforced by media campaigns which draw attention to their exploitation. All this has caused a negative impact on corporate image, reputation, sales and to some extent profitability.

Such concerns have pricked the conscious of many retailers who now realise that ethical trading is essentially the right thing to do and wish to be seen to be acting responsibly. This has led many to take responsibility for their supply chains to ensure that labour conditions meet conditions which are deemed to be acceptable.

This then raises the questions of what are acceptable working conditions and how should a retailer ensure that these conditions are met?  There is no easy answer to this as the situation is recognised as complicated and can be difficult to implement given diverse living standards found in a global economy and the complexities of supply chains.

Ethical trading can mean different things to different people. To some it is an umbrella term for all types of business practices that promote more socially and/or environmentally responsible trade, but more specifically ethical trading means taking responsibility for the labour and human rights practices within the supply chain.

Faced with these challenges most companies have now developed and implement Corporate Social Responsibility (CSR) strategies and ethical trading sit within the social accountability frame work which is one of the 3 pillars which support the CSR process i.e. economic, environmental and social accountability. 

So what does ethical trading mean in practice? It means that retailers help to reduce poverty by improving labour practices for workers in their supply chains through the implementation of an adopted code of conduct or ethical standard. It means using the company’s buying power and influence to implement the Code and ensure that workers enjoy better working conditions.

Communication of the company’s aspirations via its Code is vital, both to suppliers and internally and this has manifested a new skill set and the requirement for specific training in social accountability. It has bought about the need for CSR and ET specialists and the need to raise awareness both internally and externally (for e.g. buyers, HR teams, managers’ suppliers and stakeholders’).

It is essential that company codes are fully integrated into supply/buying agreements and incorporate ethical principles in a wider approach, with the aim of securing improvements and maintaining standards through effective business partnerships - it is important to recognise the essential contribution that suppliers and agents make. Commitment to ethical trading must be embraced at the highest level in the business and continuous review of strategy is undertaken to assess fitness for purpose in a dynamic environment to ensure provision of sufficient resources to deliver the strategy. A Silo mentality within an organisation can inhibit progress and active participation in collaborative forums such as the Ethical Trading Initiative to apply best practice and learning should be considered. Notification to other interested parties of findings and learning is especially important when confronted with difficult and systemic issues

Execution requires transparency, both internally and externally. The former requiring the mapping of supply chains, which in turn requires wider support.  The vastness of the task and the finite resources available necessitates risk assessment and prioritisation of supplying sites, complemented with a monitoring and improvement programme to ensure continuous improvement.

Such strategies have caused a dramatic growth in social auditing albeit by second and third party auditors.  Whilst auditing provides the retailer with a snapshot of the status of a factory at a given point in time, their efficacy is questionable. For example, time available, audit protocol the experience of the auditor(s) and the openness of the supplier are some of the variables that impact on the findings (or lack of).  And of course having conducted an audit and found many noncompliance’s, manifests the problem of how serious the issues are and how to manage the situation going forward. This of course has implications for reputational risk (caused by continued trading) and how to implement a corrective action plan that is suitable.  Experience has shown that audits on their own do little to improve and attain sustainable improvement. The challenge here is to look further and apply strategies that go beyond audit.

Tackling systemic problems and to addressing the root causes is not easy, hence the need to involve other interested parties to design, test and implement effective solutions. Support and encouragement in the development of effective and sustainable management systems should take account of workers views. In this regard encouragement and progress towards participatory approaches tending towards the development of mature systems of industrial relations should to be addressed.

In conclusion, it is important that retailers recognise that ethical trading and CSR issues generally are not going to go away and that they will assume even greater significance in future. Responsible retailers are advised to take cognisance of the impact on their reputation caused by media exposure of the exploitation of workers and thereby suffer the commercial consequences. A do nothing strategy is clearly high risk and the consequences could be severe.

The Life Story of your T-shirt

This blog was written as part of an online event run by The Institute for Social Marketing as part of the Festival of Social Science week (7th-14th November 2015).

Visit our event hub to learn more about how t-shirts are made, make decisions about sustainability and share the story of your own favourite t-shirt.


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