Assignment Requirements

The aim of the research report is to develop skills required to investigate different sources of information about one specific issue, and to critically select and analyse primary and secondary data to support your arguments in response to a research question.
The research report uses primary data/information (collected by you from web pages and newspapers), secondary research data/information (interpretations from others on the case or
the issue) and refereed papers to answer one of the assigned research questions. In the course of your investigation, you will source and use (create) one specific case example (i.e. one corporation and issue) to illustrate the interaction between the B, S and G sectors, in relation to the issue selected.

QUESTION: Why do companies use sweatshops and what are the impacts of that for business and for society?

The above question has a vast array of opposing arguments, depending on which side of the spectrum it is viewed from. Businesses will be quick to claim that they are not exploiting individuals in third world countries (where most cases of sweatshops stem), arguing that they are a mainstay of the economy in these developing countries Lehmann (2010). They (the businesses) will also argue that whilst they are enabled to make substantial profits as a direct result of such endeavours, the individuals who work at such facilities are extremely happy to have the opportunity to earn a regular and lucrative source of income and that through these opportunities have a way of improving their lives and providing a better life for their families.

“According to a working definition developed by the US General Accounting

Office, a sweatshop is ‘an employer that violates more than one federal or state labour,

industrial housework, occupational safety and health, workers’ compensation, or

industry regulation” (Hemphill, 1999, p.21; Encyclopedia, 2001).

Based on the above definition, it immediately becomes apparent that the term “sweatshop” is extremely sensitive to a number of aspects within the global environment. It has become particularly apparent over the last decade that sweatshop use has become somewhat of a global phenomena, with the problem being most prevalent in the apparel industry (Ammaturo et al. 2002). Companies of great significance within the global economy, e.g. K-Mart, Phillips – Van Heusen, the Gap, Reebok and Nike, have each come under scrutiny over the years as a direct result of their unethical activities of producing products in factories utilising sweatshop labour practices. In and amongst and as a direct result of all of these disturbing headlines, there have been a number of activist groups which have taken form in order to put a voice to their outcry regarding such unethical practices, and in the process end any such public acceptance. One particular group to voice their anger towards manufacturers who employ the use of such practices is the International Labor Rights Forum. This particular group has employed an innovative measure to attract attention to the wrongdoings of organisations, putting together a document which highlights apparel and textile companies that use sweatshops in their global production International Labor Rights Forum (2009). The document, appropriately named 2010 Sweatshop Hall of Shame, features companies including Abercrombie and Fitch, IKEA, and Wal-Mart. Much of today’s discussion of sweatshops stems from a simple question: “What’s wrong with sweatshops?” (Calkins et al. 2006). The most common argument against sweatshops upon evaluating a number of written works regarding the topic is that sweatshops perpetuate basic human rights as individuals are exploited for their labour. However, when looked upon from a Businesses perspective, one can be quick to gather a different point of view on what is often a very deep seeded issue. It can be said that Business most commonly adopts the view of Cultural Relativism, whereby the definition is centred around a principle that a person’s beliefs and activities make sense in terms of their particular culture, adding that what may be deemed unethical and immoral in one country may not be in another (Low Cost Foreign Labor Practices: Good Business or Unethical Practice? n.d.). From an outsider’s perspective, I cannot help but agree with the above philosophy. Whilst in no way am I subscribing my allegiance to the allegations of abuse and inhumane working conditions that often surround the term Sweatshop, I do understand that a Businesses main objective is to make profit and if that means moving jobs off shore to less fortunate locations in the world where labour is significantly cheaper, then by all means I understand that thought process. What draws me further toward the use of so called “sweatshops” within the developing world is the fact that in most cases, the average income of those working in such factories is significantly higher (by up to three times in the case of Indonesian sweatshops) than national averages (Walker 2006). With the vast majority of today’s sweatshops complying with International Labour Organization standards of work and safety, it has become apparent that the sweatshops of today are worlds apart from the horrors of the past whereby Neo-liberalism (Golob et al. 2009), at least from a capitalist perspective, meant no government imposed restrictions, which in my opinion led to the demise of justice in relation to distribution of wealth as well as production.

CASE: ‘Why sweatshops won’t go away’

The above case concerns a company now infamous for the exploitation of workers’ rights via the use of sweatshops. As a direct result of their continual breach of ethical business practices, Nike has come under heavy scrutiny from global social movements which have staged protests condemning their actions. In this particular case, the concern is that not enough has been done to attack the fundamental problems since the exploitation of human rights via sweatshops first became news.

Nike’s journey via this particular topic has been a rather extensive one. From 1997, when the original case was made against Nike (Quinn 2007), many different scenarios have taken place. First, Nike denied sweatshop conditions existed throughout their factories, then they went on to deny responsibility, followed by an eventual admittance into the issue in 1998 whereby they accepted responsibility. From that moment onwards, Nike began taking measures to restore their public image and improve the company’s Corporate Responsibility objectives. This included expanding its Corporate Responsibility (CR) department to approximately 100 staff, participating in third party factory monitoring schemes such as the Fair Labor Association, and being the first major company in the world to release the names of its 700+ supplier factories, worldwide. But over 10 years on, has enough been done to address the underlying issues? Yes and no. Although Nike is one of the largest perpetrators when it comes to the exploitation of sweatshops, they are also leading one of the largest efforts in the corporate world to implement fairer work practices throughout their factories.

Nike in recent years has been very open to the public in regards to its offshore business activities. This is most evident in the issuing of CR Reports whereby frank descriptions of conditions within their supply chain are given. In one such report, published in 2005, Nike outlined key figures that would act as eyebrow raisers to many of the general population. Such figures included: 50-100% of supplier factories exceed work hour limits outlined in the Nike Code of Conduct (with 25-50% exceeding the legal limit in their country), 25-50% experience incidents of physical and sexual abuse or harassment, and 10-25% of factories are located in countries where freedom of association, e.g. forming a union, is prohibited by law. Based on these figures alone, one can quickly draw the conclusion that Nike is doing nowhere near enough to address their problems. However, if these figures were to be compared to the 1990’s when Nike had protests staged against them and in the process became the first poster child for corporate ethical dormancy (Zadek 2004), then it would become apparent that Nike has made significant progress in their venture to be a socially responsible corporate organisation.

“Our vision is clear: to help NIKE, Inc. and our consumers thrive in a sustainable economy where people, profit and planet are in balance. To get there, we’re integrating sustainability principles and practices into everything we do: design; developing sustainable materials; rethinking processes; advocating for change in industry. To measure our progress, we set ambitious long-term targets and report on our performance.” (Corporate Responsibility Report –NIKE, Inc.). Based on this statement, it would seem that Nike is pledging that it is committed to the environment via sustainable development, as well as ethical trade via principles of fair trade. It is of my opinion that although businesses have every right to seek legitimate practices that will enable them to increase their profits; they must also contribute in a beneficial manner to the elements that enable them to do so. Judging by Nike’s efforts, it seems that they are well toward doing just that. However, according to this report, there are still many obstacles standing in the way of true support for a better managed corporate responsibility structure. Perhaps the most significant obstacle outlined is the fact that governments of developing countries with weak economies are desperate for development, thus they turn a blind eye to sweatshop conditions, in order to keep Transnational corporations on side. Because these countries are so far in debt, they rely on foreign investment to help repay such debts. Of course, transnational companies are well aware of this, and as a result abuse such power by adding further fuel to the fire via their demands, e.g. tax breaks and economic incentives. If these needs are not met accordingly, such companies threaten to relocate to other developing countries that will be more accommodating. In my view, it is such abuse of power and greed that has lead to the demise of social conditions on a global scale, leaving many impoverished.

Based on the above, I believe there is definitely not a quick fix in respect to solving this ethical dilemma that has consumed the developing world; almost 15 years have proved that. However, I do believe there are instrumental steps upon which can be introduced, in order to make a determined move toward a better outcome. First and foremost of these steps should include a level of transparency whereby TNC’s are no longer given the opportunity to hide behind a veil of trade secrets. Nike has been one of the few Multinationals to employ this measure, granting public access to the names of its suppliers. This measure should in turn help hold TNC’s accountable for their actions. Another such measure comes by way of worker empowerment. At the end of the day, employees are the major stakeholders here, and as such will be the most determined to put an end to unfair labour practices as they are the ones who have to experience such exploitations on a daily basis. By employing a Consequentialist driven ethics approach and supplementing it with Deontological elements (Koch 2010) employees will be given a voice on day to day issues such as training, inspections, accident reporting and maintenance of correct procedures in relation to safe work practices. This, in turn, will empower employees and award them with the opportunity to help drastically improve their morale whilst also improving brand image for that particular organisation. Finally, companies must ensure they do not “use and abuse” so to speak, rather they make a more substantial contribution toward the developing countries they pursue business interests in. Through combining philanthropy by way of debt relief with the introduction of resources and technical assistance for all parties involved, barriers will be brought down and large strides will have been taken in ensuring that sweatshops really do become phenomena of the past one day.

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