Bath Business and Society

Research, analysis and comment on the role of business in society from Bath's School of Management

Topic: Supply chains

Tackling child labour in the fashion industry - why the best firms have the most to lose

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📥  Business and society, Consumers, Human rights, Modern slavery, Policy, Supply chains

child-labour

 

New research suggests that firms with a good reputation for ethical sourcing in the fashion industry are judged more harshly than their peers when child labour is discovered in their supply chainMeggan Caddey, a final year PhD student, and Johanne Grosvold and Stephen Pavelin, all from the Centre for Business, Organisations and Society at the University of Bath, explain their findings.

Child labour remains a major societal challenge. The International Labour Organization (ILO) estimates that 168 million children are involved in child labour today, which the United Nations (UN) defines as “work for which the child is either too young – work done below the required minimum age – or work which, because of its detrimental nature or conditions, is altogether considered unacceptable for children and is prohibited”. Many of these children work in the garment and fashion apparel industry.

The drive for child labour

According to the organisation Stop Child Labour, fast fashion has resulted in high demand for children who are willing to work for very low pay and in dangerous conditions. Some have suggested that their employment is tantamount to modern day slavery. Some of our best known high street brands including Adidas, H&M and Nike have relied on manufacturers who have subsequently been exposed as using children to work in unsafe conditions.

Increasingly, global firms are recognising that failure to address the challenge of child labour can seriously impact on their corporate reputation. However fashion supply chains are complex, relying on numerous suppliers, sub suppliers and manufacturers. According to H&M’s Head of Sustainability Helena Helmersson, these supply chain networks are so complex that “it is impossible to be in full control”.

Corporate responsibility and corporate reputation

Prior research indicates that, by going above and beyond the basic requirements for fulfilling their corporate social responsibilities, proactive firms can engender goodwill that acts as an insurance against potential damage to their reputation.  The theory goes that if news of wrongdoing emerges from the supply chain of such a proactive firm, its reputation will suffer less because people will give it the benefit of the doubt - 'surely, this good firm must not be to blame'. Other firms that have no such record of exemplary behaviour would be more readily blamed and, as a result, their reputations would suffer more. According to this theory, H&M would suffer less of a reputational impact if child labour was uncovered in its supply chain, as it is now working strategically to become the most ethical fashion chain on the high street. We set out to test this theory in relation to supply chains in the apparel industry.

Research findings

Our study used an experimental vignette method. This involved presenting study participants with carefully constructed, lifelike scenarios, to evaluate their attitudes, opinions and views of a firm’s actions regarding child labour in the fashion supply chain. Over 800 participants took part in our study, and our initial results are surprising. We found that a firm that had taken steps to address child labour and unsafe working conditions in its supply chain enjoyed a better reputation than a firm that had not. However, when something went wrong, people judged these firms more harshly than they did the firms that had previously behaved less responsibly. So, while firms that are more socially responsible tend to benefit from an improved reputation, such goodwill is accompanied by greater reputational risks - specifically, such a firm experiences greater harm to its reputation if unsafe labour practices are subsequently discovered in its supply chain.

Our findings imply that it is in firms’ interests to address unsafe practices in their supply chains, as doing so results in a better corporate reputation. However, our results also suggest that steps taken to stamp out child labour and poor working conditions tend to strengthen the imperative for a firm to maintain a consistent commitment to responsible sourcing. If they don’t, they risk particularly stringent reputational punishment. In effect, this can create something of a virtuous cycle, which gives momentum to firm's steps towards stamping out child labour and unsafe working conditions. Careful reputation management implies that firms setting high standards must continue to live up to them.

The business case for doing good

There is an increased policy emphasis from both governments and NGOs to reduce the use of child labour and unsafe working conditions in the supply chain. There is also evidence that firms are increasingly taking the problem of child labour seriously, with some estimates suggesting that reliance on child labour was reduced by 30% from 2002-2012. As our research shows, tackling this issue can bring benefits for both children and firms.

We provide distinctive new evidence that guides us towards a more detailed understanding of the business case for being good and doing good. By illustrating the reputational benefits of sustainable supply chain practices, our research findings can help motivate firms not already on board, and inspire those who have already taken action to sustain and expand their efforts. This may in turn encourage them to sign up to independent initiatives such as  GoodWeave, which awards companies the right to carry the GoodWeave label if they can show that no child labour or bonded labour was used in the production of their goods. With 11% of the world’s children still sacrificing school in order to work, this is no time for business to be complacent.

Image by Zoriah

 

 

Brexit likely to increase modern slavery in the UK

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📥  Brexit, Modern slavery, Policy, Supply chains

Migrant Workers by Bread for the World

 

Theresa May’s historic signing of Article 50 looks set to be her lasting legacy as Prime Minister. Unfortunately, it is also likely to derail her other signature policy on modern slavery. Our research suggests Brexit could increase modern slavery in the UK.

The signing of Article 50 marks the point of no return for the UK’s exit from the European Union. Although she inherited the Brexit decision, Theresa May’s political legacy will stand and fall on how successfully she manages to steer the country through the turmoil.

Without a doubt, Article 50 will bring untold changes to the political, economic and cultural landscape of the country. One change that will certainly be high on May’s radar is its effect on modern slavery in the UK.

Modern slavery has been May’s signature policy since she was Home Secretary. She introduced the landmark Modern Slavery Act in 2015 prior to becoming PM, and has since continued to champion the cause. In announcing a ramping up of Government efforts to improve enforcement last year, she identified modern slavery as “the great human rights issue of our time” and heralded the UK as leading the way in defeating it.

While the Act is far from perfect, it has certainly focused increased attention and resources on modern slavery. Prosecution levels also appear to be improving. This was most recently illustrated by the sentencing of the Markowski brothers to six years in prison for trafficking and then exploiting 18 people from Poland, who they brought to the UK to work in a Sports Direct warehouse.

The problem is, despite the advances gradually being made in addressing modern slavery in the UK, the signing of Article 50 is likely to worsen the problem. As May is probably acutely aware (but is so far not saying), Brexit may well undermine the progress she has made to date. It is a case of two steps forward, one step back.

According to research I conducted with an international team of colleagues looking at forced labour in the UK (initially funded by the Joseph Rowntree Foundation), four main problems are evident.

1.      Brexit will increase the demand for modern slavery

The Brexit vote has already created uncertainty among the legions of poorly paid, but legal migrant workers from Eastern Europe that are employed in the UK’s low wage economy. Signing Article 50 may ultimately help stem the flow of workers into the country as intended. But who is going to replace them? Domestic workers will fill some of the gaps but companies are unlikely to be willing to improve wages and conditions to attract them in sufficient numbers. So there will be greater opportunities for unscrupulous middlemen to traffic in workers from overseas or prey on vulnerable UK citizens to force them into exploitative situations. Forced labour flourishes where local, low skilled labour is in short supply.

2.      Brexit will facilitate exploitation

Modern slavery often occurs when workers do not fully understand their legal rights and status. Our research uncovered various examples of migrant workers being exploited because those exploiting them misled them into the belief that they were working illegally. Perpetrators would also wait for or deliberately engineer changes in workers’ immigration status in order to exploit them. The point is that Brexit will create a period of increased uncertainty around legal status that will be a significant boon to exploiters.

3.      Brexit will increase the supply of modern slavery

Modern slavery occurs when people are vulnerable, either because of legal status, poverty, mental health, or drug and alcohol problems. In our research, the most common victims were those from countries such as Romania and Bulgaria who, at the time, were able to enter the country but were unable to work legally. This vulnerability was exploited by perpetrators who were able to coerce them into working in highly exploitative situations. The more the UK puts up barriers to people entering the country legally, the higher the risk of traffickers bringing them in illegally and pushing them into debt. Once workers are in debt, perpetrators are adept at escalating their indebtedness and creating situations of debt bondage.

4.      Brexit will turn victims into criminals

Our research found that many victims of forced labour in the UK were prosecuted under immigration offences rather than being identified as victims. The Modern Slavery Act has improved this situation but as the UK moves towards Brexit, the chances of this happening will increase because policing around immigration status is likely to intensify far more than around modern slavery.

May claims that under her leadership, “Britain will once again lead the way in defeating modern slavery”. But the bottom line is that by triggering Brexit, May will be left trying to solve a problem that she is helping create.

Image: Migrant Workers by Bread for the World

Is this the beginning of the end for Fairtrade?

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📥  Business and society, Supply chains

iain-daviesAfter decades of fast growth, a reversal in the fortunes of Fairtrade is apparent. This is particularly so for the Alternative Trading Organisations (ATOs) that spearheaded the movement, but which have become its first casualties. Dr Iain Davies asks what the future holds for Fairtrade.  

I remember cold, wet February mornings standing outside supermarkets and handing out free cups of coffee in an attempt to get the supermarket to stock Fairtrade products from ATOs. I remember walking into classrooms to eager faces waiting to hear how we can change the world through trade. It is now 20 years since those first Fairtrade Fortnights, and this week it is rolling around again with the brash claim that “the Fairtrade movement is made up of ordinary people doing extraordinary things in their communities”. The energy and vigour of this early social movement has however noticeably waned in recent years. This year, it is not just the British weather which is casting a dark shadow over proceedings. The question is being asked – is Fairtrade finished?

Fairtrade’s growth for much of those 20 years was meteoric. The Fairtrade mark not only became almost universally recognised, but inadvertently paved the way for the sustainability certifications that proliferate across fast moving consumables today. The UK led the way in the mass-marketization of Fairtrade, and still represents over 25% of all Fairtrade sales globally. But the future outlook has taken a noticeable turn for the worse.

Fairtrade-dave-crosby

Fairtrade by Dave Crosby

Fairtrade sales in the UK fell for the first time in 2015/16 by 5%. There is one growth area: bananas, a market dominated by one global supplier, Fyffes. Banana sales volumes are equivalent to that of cane sugar, coffee, cocoa, tea and cotton combined - all of which have seen volumes stagnate since 2011. Banana producers also benefit far more from Fairtrade membership, while smallholder-dominated categories like coffee and tea need to rely on other certification marks like Organic or Utz Certified to improve income.

Figure 1

Figure 1: Fairtrade benefits to producers (data from Fairtrade.net 2015 Monitoring and Impact report)

In the shops, growth has been in supermarket own-label products, often produced with reduced standards and limited producer support and development. The casualties are the pioneering ATOs, such as Traidcraft, Cafédirect, Divine and Liberation, who operate to much higher levels of producer support and development, but due to price competition and reduced shelf space, have seen like-for-like sales slump in the last five years. There have also been notable failures as new Fairtrade product categories such as gold, rice and quinoa have struggled to gain traction.

To further compound the issue, one of the biggest Fairtrade brands, Cadbury, has announced its intention to withdraw from the independent certification system in 2017, following others such as Starbucks into predominantly self-verified ethical certification. McDonald's and John Lewis Café have jumped to simpler verification systems such as Rainforest Alliance. 2017 certainly does not look rosy for Fairtrade.

There is also the issue of the consumer. Still largely unable to differentiate Fairtrade from other certification systems, our research suggests that frequent Fairtrade consumption is motivated by habit, self-gratification and peer influence, not a deep affinity with Fairtrade or its producers. These consumers are unlikely to switch brands purely because of a change in certification system.

So is the end of Fairtrade nigh? The idealistic social movement I joined, which believed it could subvert the market system, died some years ago. The Fairtrade which works within the existing market system to highlight issues of social injustice, however, and provides a framework for alternative trading, has nudged many commodity companies to confront their supply chain ethics. Indeed for people of this persuasion it could be argued the job is done. The more advisory role negotiated with Cadbury could offer a future to the certification bodies as they attempt to stay relevant to a corporatized, self-accredited system of supply chain governance.

But there remains a nagging feeling in my mind that the absorption of Fairtrade ideals into mainstream rhetoric has come at a cost. Not only has there been a reduction in the number of Fairtrade standards; one voice which may be noticeably absent this Fairtrade Fortnight is that of the pioneer ATOs that spearheaded this social movement. Increasingly delisted from supermarket shelves and priced out of the market by cheaper alternatives, they are struggling to break even whilst maintaining beyond Fairtrade commitments to producers. Ultimately, with an apathetic consumer and so many rhetorically similar marketing messages, it is these farmer owned, co-operative, or social enterprise pioneers that are likely to be the first casualty of Fairtrade’s demise.