Unethical Practice and Outsourcing Manufacturing on Developing Economies

INTB603 Dynamic Environment
Assessment 2:
Topic 2-Ethics and CSR
Student’s Name：
Executive Summary
Global Apparel brands such as Nike, Adidas, and H&M are continuously looking to manufacture their products and commodities in developing nations. Through the move, they benefit from cheap labor and access to abundance of low-cost but quality raw materials. Despite the advantages of operating the low-cost destinations, global apparel companies have been accused of mistreating and exploiting the workers. The research paper will examine extensively on the unethical practices that characterize MNE’s in developing nations. It will highlight some of the factors that encourage MNE’s to outsource manufacturing to the emerging regions particularly those in Asia. The research paper will delve further to denote the nature of Corporate and Employment Practices in Apparel Manufacturing in Developing Economies. In that regard it will highlight aspects such as worker exploitation and lack of fair wages and provide examples where necessary and applicable. It will also share on the role of MNE’s that outsource to developing/emerging economies in ensuring that the workers employed by the contractors get fair treatment. Finally, the research paper will provide recommendations on the roles that governmental agencies and global institutions such as the ILO and the UN can play in ensuring the protection of vulnerable workers in the developing nations.
Table of Contents TOC \o "1-3" \h \z \u INTB603 Dynamic Environment PAGEREF _Toc42781582 \h 1Assessment 2: PAGEREF _Toc42781583 \h 1Topic 2-Ethics and CSR PAGEREF _Toc42781584 \h 1Executive Summary PAGEREF _Toc42781585 \h 2Introduction PAGEREF _Toc42781586 \h 3Factors that facilitate the outsourcing of production to Developing Economies by International Apparel Companies PAGEREF _Toc42781587 \h 4Examination of the Nature of Corporate and Employment Practices in Apparel Manufacturing in Developing Economies PAGEREF _Toc42781588 \h 4Ethics and CSR PAGEREF _Toc42781589 \h 6Role of MNE’s that Outsource to developing/emerging economies in ensuring that the workers employed by the contractors get fair treatment PAGEREF _Toc42781590 \h 7The role of governmental agencies and other global institutions in ensuring the protection and equitable treatment of vulnerable workers PAGEREF _Toc42781591 \h 8Conclusion PAGEREF _Toc42781592 \h 9References PAGEREF _Toc42781593 \h 10Appendix PAGEREF _Toc42781594 \h 12
Introduction
Despite the success that apparel companies have witnessed in the past, increased cost of living and rising costs of raw materials have made a majority of these organizations to change their strategies including the adoption of cost-cutting measures. One notable strategy in this regard has seen apparel companies particularly established organizations outsource manufacturing to developing and emerging economies. These regions have been identified as low cost destinations and apparel companies benefit from an abundance of cheap raw materials and labor, and these multinational corporations operating in developing economies are not heavily impacted by stringent employment laws. As such, unethical practices including poor working conditions, worker exploitation and lack of fair wages are a norm among the international apparel companies operating in the emerging nations. Based on these concerns, it is imperative that governmental agencies and global institutions step to protect and ensure equitable treatment of vulnerable workers in emerging nations by multinational apparel companies.
Factors that facilitate the outsourcing of production to Developing Economies by International Apparel Companies
To begin with, the move has been necessitated because of the increased costs of business operations in America. These companies incurred high costs when purchasing raw materials and also in the payment of labor expenses. Secondly, clothing companies such as Adidas and Nike have opted to outsource their production departments to developing nations because of the abundance of cheap raw materials in these regions (Stapf, 2002). Through having the production done in the regions they source for raw materials they manage to cut some costs that is eventually reflected in increased profits. Thirdly, apparel companies outsource to developing economies to take advantage of the low wages in those regions. For instance, the minimum wage in Bangladesh is 8000 taka which is approximately $95 monthly. Fourthly, outsourcing is also done in emerging nations because such areas usually have less-stringent employment laws and regulations (Stapf, 2002). The fifth factor is the ability to contract a 3rd party to oversee the hiring and management of the casual laborers. Through having 3rd parties who in most cases are locals in the developing nations take charge in recruitment and payment of employees, the companies can afford to turn a blind eye on worker exploitation. The sixth factor is technological enhancements have also promoted the outsourcing of important functions such as production. Developments in ICT ensure that the owners can control the manufacturing and smooth-running of the operations all the way from America. Lastly, attraction of consumers to cheap products has also forced many brands to cut their costs by outsourcing the production and manufacturing to regions where they can exploit laborers.
Examination of the Nature of Corporate and Employment Practices in Apparel Manufacturing in Developing Economies
It has been identified that clothing companies operating in emerging nations in regions such as Asia are still using sweatshops and child labor to manufacturer their products. These organizations are putting workers in small rooms for several hours and with tight deadlines. They have also been accused of employing children. According to Heintz (2004), “In many developing economies, men, women, and children working as long as 18 hours a day, for a pittance of a wage, with one example being 55 cents an hour”. Families have also been forced to send their children to seek employment in the sweatshops to gain more income to sustain themselves. Reports indicate that more than 170 million children between 5 and 14 years are usually forced to work in sweatshops in developing nations such as Bangladesh and Indonesia (Chaudhuri, 2011). This is quite a high statistic which indicates that a significant percentage of the young population in emerging regions is denied the opportunity not only enjoy their youth but also have the chance to acquire some education.
Over the years, there are several reputable clothing brands that have been implicated in the use and running of sweatshops in developing nations to manufacture their products. It came to the public limelight that Adidas was overseas sweatshops during the London Olympics when it was announced as the official sports-wear partner for the global sporting event. ASOS has also been accused of employing children as young as 15 years in sweatshops and factories in Turkey. Despite its promotion of ethical clothing, GAP has faced serious criticism for operating sweatshops in Cambodia (Hodal, 2020). H&M also operates sweatshops in Bangladesh where it is believed that it pays it workers approximately $87 monthly. Zara’s use of sweatshops situated in Istanbul came to be known when “help notes” were found sewn in some of the clothing (Hodal, 2020). Victoria Secret has also been accused of smuggling illegals from Bangladesh and Sri Lanka, locking them in their factories in America and giving them unreasonable targets. It is reported that workers are expected to sew one bikini for not more than 3 minutes for peanuts. These examples shared above of notable apparel brands using sweatshops and child labor reflects the employment situations in the developing nations.
Additionally, it is essential to note that workers in apparel manufacturing companies situated in developing nations are usually subjected to deplorable working conditions. The buildings that workers in the developing nations are housed and operate from are prone to collapses and fires. Over the years there have been several catastrophic events where workers in sweatshops in the developing nations have been injured and countless others lost their lives. It is estimated that more than 10 million people have lost their lives in sweatshops around the globe (D.Sivasubramaniam & Dr.A.Mahadevan, 2011). Figure 2 of the Appendix is the Rana Plaza accident that occurred in Bangladesh in 2013. The building housed several garment and apparel factories. It is reported that the owners of the factories defied employment regulations and had many employees working in the tiny rooms. It has also been highlighted that some of the floors were built without the requisite permits and proper construction procedures and as such, started developing cracks that eventually led to its collapse (Doorey, 2018). The devastating collapse of the Rana Plaza left over 1134 people dead and about 2500 individuals were rescued with a significant number suffering life-threatening injuries.
Moreover, the apparel manufacturing factories in developing nations are usu...