Archive for the ‘supply chain’ Category
It’s easy to villainize a company like Walmart for being unwilling to sign an agreement seeking to improve safety for workers in Bangladesh. What’s harder is to assess the company’s actual motives, and its obligations.
Headlines recently blared that Walmart has refused to sign the new “Accord on Fire and Building Safety in Bangladesh”, despite the fact that 24 other companies (including Europe’s two largest clothing retailers, as well as American brand Tommy Hilfiger and Canada’s Loblaw) had signed.
Other news sources avoided the Walmart-centric hysteria and pointed out that lots of retail chains have in fact opted not to sign. For its part, Walmart says says it plans to undertake its own plan to verify and improve conditions at its suppliers’ factories in Bangladesh. Supporters of the accord, however, are skeptical about the effectiveness of company’s proposed independent effort.
From the point of view of ethical responsibilities, could a well-intentioned company conscientiously decline to sign the pact?
It’s worth looking at a few reasons why a company might choose not to sign a pact designed to improve, and even save, lives. Walmart presumably believes that its own effort will be sufficient, and perhaps even superior. The company’s famous efficiency and notorious influence over suppliers lend some credibility to such a notion. Other companies have worried that signing the pact would bring new legal liabilities, which of course is precisely the point of a legally-binding document. (Gap, for instance, has said that it will sign only if language regarding arbitration is removed, a stance that effectively amounts to refusal.)
There may also be worries about governance: the accord provides for the appointment of a steering committee “with equal representation chosen by the trade union signatories and company signatories” — equal, but to be chaired by a seventh member selected by the International Labour Organization (ILO). Perhaps some worry that the ILO-appointed chair won’t really be neutral, giving unions an effective majority.
Other companies — including ones like Walmart, which is famous for its efficiency — may worry about the extra administrative burden implied by weaving this accord’s regulatory apparatus into its own systems of supply-chain oversight.
Another worry might be the fact that the accord applies only to Bangladesh, and makes that country the subject of a separate set of procedures. The accord also commits signatories to expenditures specifically on safety in Bangladesh, when from a particular company’s point of view Bangladesh might not be a priority. In the wake of the April factory collapse, it’s worth pointing out that there are other places in the world with unsafe factories and crummy working conditions. It’s not unreasonable for at least some companies to focus their efforts on places where conditions are equally bad, and that host even more of their suppliers.
None of this goes any distance toward excusing inaction. None of it condones apathy. The point is simply that while failure to sign a particular accord makes great headlines, we need to look carefully at reasons, as well as at a company’s full range of obligations, if we are to make sense of such a decision.
In Bangladesh, on Wednesday, a building collapsed, killing at least 260 people. The factories in the building made garments for a number of global retailers, including Canada’s Joe Fresh. This weekend, I’m very likely going shopping at Joe Fresh, and with a clear conscience. People threatening to boycott the brand are woefully misguided. Their sorrow is justified; a change in their shopping habits is not.
The events in Bangladesh represent an utterly horrible loss of life. Anyone unmoved by such a tragedy is less than human. But to see this as an indictment of Joe Fresh, or of Western consumers, is a serious mistake.
So, just what happened in Bangladesh? The 8-story building that collapsed on Wednesday housed a number of garment factories, a shopping mall, and a bank. The people who died did so partly due to the fact that someone in Bangladesh made a very, very bad decision: police had ordered the building evacuated the day before, due to structural defects, but factory managers ignored that order. That was an immoral decision, and perhaps a criminal one. I hope those managers are brought to justice.
Now, yes, it’s true that the purchasing decisions of Canadian consumers are also part of the causal chain that led to those deaths. But causal connection is not the same as moral responsibility. Every event, tragic or not, is the culmination of countless contributing factors. To be part of a causal chain is not the same as causing something to happen. There is no reasonable sense in which Canadians shopping at Joe Fresh are responsible for Wednesday’s deaths.
In fact, Canadians shopping at Joe Fresh are doing a lot of good. Places like Bangladesh — people in places like Bangladesh — absolutely rely on the jobs provided by the international garment industry. That is, there are people in developing countries who only have jobs because people in the industrialized West buy clothes from retailers who subcontract to manufacturers in places like Bangladesh.
None the less, some people are expressing outrage at the fact that Bangladeshis are dying so that Canadians can have cheap clothes. Is this situation really so unique? In North America, the deadliest trade is commercial fishing, followed closely by mining and logging. Does anyone imagine that no corners are cut in those industries, no safety standards violated? So Canadians, too, are dying…dying so that Canadians can have cheap crab and haddock, cheap oil and aluminum, and cheap wood and paper products. Actually, a lot of that stuff goes for export, so Canadians are dying so that people from other countries can have those things cheaply. Such is globalization: millions of people world-wide take risks that they think are worth taking, in order to make a living, and they can do so because people on the other side of the world are willing to pay them to.
But of course, companies like Joe Fresh still have some obligation to make sure that their subcontractors are treating employees decently. And the company certainly acknowledges as much. According to a statement on the brand’s Facebook page, their parent company, Loblaws Inc. has…
“robust vendor standards designed to ensure that products are manufactured in a socially responsible way, ensuring a safe and sustainable work environment. We engage international auditing firms to inspect against these standards. We will not work with vendors who do not meet our standards.”
In other words, the company makes exactly the promise it ought to make. Of course, there’s only so much it can do to guarantee that its subcontractors won’t break the law, on the other side of the planet. But then again, there’s notoriously little any company can do to guarantee that its subcontractors won’t break the law, whether it operates on the other side of the planet or just down the street.
Has Joe Fresh done enough in this regard? It’s impossible to say from the outside. But what’s crucial, here, is to see that even an event as tragic as Wednesday’s building collapse in Bangladesh does nothing to impugn the company’s integrity. Should we ask questions? Of course we should. But these events shouldn’t make us jump to conclusions. Nor will they deter me, at least, from going shopping this weekend.
A technology that adds value to our lives is an ethically good thing. A technology that enables a whole range of services that add value to our lives is even better. Smartphones are the obvious example: Apple’s iPhone has spawned an entire industry of app-makers. Even more important, ethically, would be a technology that could make a real change in grass-roots manufacturing, one that would allow innovation to be democratized, and that would allow local entrepreneurs to solve all kinds of problems, both big and small.
So, what if a single technology could do all of the following?
What if it allowed a surgeon in an isolated northern Canadian town to manufacture custom-made surgical implants, right in the clinic, to allow reconstructive surgery to be done locally, rather than sending her patient hundreds of kilometres to a larger city? What if it allowed a self-employed courier with an electric bike in a rural African community to have replacement parts for the bike made, cheaply and quickly, in the nearest town with electricity? What if it allowed every potential entrepreneur with a great idea, and some basic computer skills, to click “Print” and have those ideas turned into physical realities? What if this technology meant you didn’t have to drive anywhere to replace the plastic bolt that was missing when you opened the box for that Ikea desk, but instead just printed it out, yourself?
All of those things — life-enhancing things, big and small — are part of the promise of 3D printing.
If you haven’t yet heard of 3D printing, now is the time. 3D printing is exactly what it sounds like — printing 3-dimensional objects much the way current desktop printers print 2-dimensional text and images. Although technologies vary, the most common method of 3D printing uses “molten polymer deposition,” basically laying down micro-thin layer after micro-thin layer of melted plastic to build things. Such printers operate much like standard desktop inkjet printers, but with an extra axis of motion and a “print” head that squirts molten plastic rather than ink.
To learn more about this technology, I paid a visit to Toronto’s own Panda Robotics, a startup in the final phases of finishing its prototype PandaBot printer. Unlike many existing 3D printers, which are aimed at industrial applications, the PandaBot is intended as a consumer gadget, priced at about $1000 and expected to ship in spring of 2013. The PandaBot plugs into a computer via standard USB cable.
I asked Pandabot co-founder Kelly John Rose why he thinks 3D printing is so exciting. “It opens up a whole new economy,” said Rose, “in customization for clients, in how designers can interact with their customers directly by creating designs and sending them cheaply over the internet to be printed out, and in how companies can provide better customer service by providing replacement parts at no cost to themselves.” To provide a replacement part, all a company needs to do is create a printable CAD file for the replacement part and make it accessible on its website. All the consumer has to do is download the file and hit “Print.”
It’s clear that the technology has significant implications for manufacturing and for supply chains. “As 3D printing continues to evolve at an incredibly rapid rate, it won’t be long before we will simply purchase designs and print them out as needed at home rather than go to a store every time we need a new part, new mug, or new tool,” Rose enthuses. “It essentially democratizes manufacturing.”
Entry-level 3D printers like the Pandabot are the all-important thin edge of the wedge, in terms of understanding the significance of this technology. Industrial-quality 3D printers are now being used for rapid prototyping and for architectural modelling. There are also reports that the US military has deployed one or more 3D printers to the front lines in Afghanistan, where engineers can use them to make replacement parts for vehicles and weapons right on the spot. Advanced 3D printers can print objects out of metals, too, so the possibilities are endless.
But cheaper, smaller-scale printers like the Pandabot are going to play a crucial role in weaving 3D printers into our lives, and into the way we think about manufacturing. According to Pandabot’s Rose, “the more 3D printers are out in people’s homes, the more companies will want to provide [printable] goods for them. The more companies provide goods for them, the more people will want these printers in their homes. It’s a positive feedback cycle that, once it starts, will change how we all purchase goods.”
Technologies like this help us see that ethics isn’t just about rules. It’s about creating value, and finding fairer distributions of value. Our interest in business ethics should include an interest in the ways in which markets and businesses create value, and the rules, principles, and innovations that help them do that.
Samsung and Apple recently shared the spotlight as the parties to a billion dollar intellectual property lawsuit. Now, Samsung has replaced Apple as the tech company in a different spotlight — the spotlight, that is, consisting of accusations of mistreating Chinese workers. A report by the New York-based NGO China Labor Watch says that Chinese factories making devices and components for Samsung are guilty of a range of abuses. Employees working more than 100 hours of overtime in a month. Children under 16 working in factories. Failure to provide safety clothing where appropriate. And on and on.
A few key points are worth noting.
First, a note about overtime. It’s worth pointing out that China Labor Watch criticizes overtime — voluntary overtime — as if overtime were a bad thing. But at the Foxconn factories supplying Apple, at least, the biggest complaint of workers was that they wanted more overtime. If anything similar is the case at the Samsung factories, this implies that stricter limits on overtime would indeed be a bad thing, at least from the workers’ point of view.
Of course, wanting more overtime doesn’t prove that things are great at the factories; it just proves that workers want more money than they make during a regular workday. After all, if you pay people poorly enough, everyone will literally beg you for more overtime.
But then, it’s also worth remembering that “overtime” is a social construct. The amount of hours someone should work in a week is a matter of convention, and in North America and Europe we established the conventional 35 or 40 hour work week once we could afford to do so. Not everyone is yet so lucky.
Second, it is a mistake to lump all the accusations in together, as if they were all of a kind. They aren’t. Some of the complaints have to do with things that are susceptible to tradeoffs. Long hours, for example, may be acceptable if workers believe the loss of leisure time is justified by the extra income. It’s arguably a matter of rational calculations for each worker.
Other complaints, in comparison, have to do with rights, and rights are traditionally regarded as not being readily subjected to such calculations. We don’t allow voters in a democracy to literally sell their votes, for example. We put such a high value on the right to democratic participation that we forbid voters from making tradeoffs of this kind, from weighing how much they value their ability to vote against how much they value some quantity of money. Now, back to Samsung. One of the issues raised by China Labor Watch is that workers in the factories lacked a mechanism by which to lodge complaints. The existence of such a mechanism in the workplace might arguably be said to be a right. Such being the case, Samsung cannot simply argue that its workers are making a rational tradeoff here. Rights, as the saying goes, are trumps.
Finally, a note about accountability. As law professor Stan Abrams points out, one of the key factors differentiating the Apple and Samsung cases is that Samsung owns or controls many of the factories in question. Apple, on the other hand, was (and is) criticized for conditions at factories owned by its subcontractor. But since it didn’t run those factories it could plausibly deny knowledge and perhaps responsibility. Samsung, on the other hand, has no such refuge. When you own or control a factory, you can’t plausible, ethically, deny that you know how workers are being treated.
That’s not to say that the Apple and Samsung cases are categorically different. In both cases, the companies in question need to take a hard look at how their products are being made. But consumers and investors need to take a hard look, too. And that means not just casting a spotlight, but doing the hard mental work of thinking through some complicated questions of right and wrong.
A couple of weeks ago, I spent 5 days contributing to the economic wellbeing of a developing nation. To be more specific, I spent 5 days in Mexico, at an all-inclusive resort on the Mayan Riviera. I’m a lucky, lucky man, no doubt. So in what sense does my vacation count as “contributing to the economic wellbeing of a developing nation”?
Now, to be clear, this is a personal example, and so there’s reason for me to worry about the clarity of my own thinking (even now that the margaritas have long-since worn off.) Am I just congratulating myself in order to get past the uncomfortable feeling that many people from affluent nations feel at enjoying luxury while visiting a nation rife with poverty? After all, the tourism industry is often portrayed as one that helps mostly-white Northerners visit places where they pay mostly-brown inhabitants of southern climes to call them “sir” or “ma’am” — with the profits going largely to the mostly-wealthy shareholders of the cruise-line or resort chain.
But is that portrayal of the industry accurate? Let’s take a very rough look at the economics, here.
Let’s say a vacation package — flight plus accommodations at an all-inclusive resort — costs something like $1500 per person, just to pick a round number. Where does the money actually go? Who does it help? By vacationing in Mexico, am I helping Mexicans, or just the shareholders of some American or Canadian corporation?
A big chunk of that $1500, maybe a little less than half, goes to the airline. Aha! Profits for the airlines!
But wait a minute. Profit margins in that industry are razor-thin — in some years, negative! So most of the airline’s half of that $1500 isn’t actually going to shareholders in the form of profits, but is instead going to cover the airline’s costs, including fuel, salaries, etc.
The other half ($750) of the total price goes to the resort. How much of that is profit? One source (a few years old) puts profit margins in the resort industry at about 8%. Let’s be generous and round up to 10%. That means $75 profit, which leaves $675 for various costs — including the cost of food, labour, alcohol, maintenance of buildings, and so on. And it’s a truism of economics that $675 in costs for them is $675 in income for someone else.
And so, overall, only a tiny sliver of the money paid for such a vacation goes to the shareholders of the airline and of the company that owns the resort. Most goes to employees, and suppliers, and employees of suppliers, and so on. About half of that stays in Canada (home of the airline) and almost half stays in Mexico (where the employees and key suppliers of the resort are). By my very rough math, I contributed nearly $700 to the Mexican economy, and more specifically to the income of low-wage Mexicans. And it’s a kind of help I’m very happy to give.
So the questions for discussion: “Is my math at least roughly right?” and “Is this the sort of math those of us who aspire to ethical tourism ought to be doing?” Of course, I’m setting aside for now the environmental impact of such a trip. I’ll leave that for a future blog entry. But at very least, it seems to me that a rough assessment of the economic impact of a vacation is a pretty good starting point.
One of my shoe laces gave out today, on the way out the door heading to the airport. Luckily the shoe-shine guy, in addition to giving an excellent shine at a good price, also had reasonably-priced laces which he happily threaded and tied for me.
For some strange reason, it always comes as a shock to me when a shoe lace gives out. The odd thing is that I usually cannot remember how old the disappointing lace actually is. I honestly cannot tell you whether the lace that gave out today is 3 months old or a year old or three years old. Nor do I know what brand it was, or where I bought it. So — setting aside, for a moment, its trivial price — I have no idea who I would complain to if I thought the lace had given out sooner than it ought to have.
Given this lack of accountability, one has to wonder just what it is that motivates makers of shoe laces (or other small, cheap, anonymous products) to rise above the bare minimum in terms of quality. Shoe laces are not, presumably, a highly-regulated industry. So they could presumably get away with using cheap raw materials, keeping costs down and profits high.
One obvious answer is “ethics.” The people who make shoe laces presumably have some pride in their work, and want people to be satisfied with their laces, and feel that it’s their responsibility to produce a decent product.
Another answer might have something to do with supply chains. Maybe I can’t easily hold the maker of my laces accountable, but the store I bought them at can. Maybe the purchasing agents for the store I bought them at asks lots of tough questions and demands access to technical specifications for laces before buying. I hope that’s the case. But that just pushes the question one link higher up the supply chain. Why does the purchasing agent care, given how likely consumers are to express their disappointment, in the event that they are dissatisfied? Again, the likely answer here is “ethics,” a big part of which is the simple motivation to do a good job and treat people fairly.
OK, so this is a trivial little example. But it seems to me that it points to an important lesson. People too often think of the word “business ethics” as implying an attempt to define and achieve saintly behaviour in business. And that’s a mistake. What we’re really talking about are reasonable constraints, and reasonable standards of achievement, in the world of commerce. We’re all out there, trying to make a living, and there are better and worse ways to do that. And whether you’re manufacturing shoe laces or complex financial instruments, the starting point has to be basic pride in a job well, and fairly, done.
Canadian Business recently reported that two major companies — McDonald’s and Target — have dropped egg supplier, Sparboe Farms, after concerns arose regarding animal welfare at the company’s egg-production facilities. It’s a small PR hassle for titans like McDonald’s and Target. But it’s clearly a huge hit for a company like Sparboe.
This case raises two important points, ones that go far beyond the relationships between mega-chains and their suppliers:
The first has to do with supply-chain responsibility. Notice that McDonald’s, for its part, doesn’t deal directly with Sparboe: it gets Sparboe eggs via Cargill Inc., the agricultural giant that supplies all of McDonalds’ eggs. This raises an interesting question about supply-chain ethics. Any company is clearly responsible for, and should be accountable for, its own behaviour. And a company is pretty clearly also partly responsible for, and should be accountable for, the behaviour of its suppliers, at least to the extent that it knows, or should have known, about those suppliers’ behaviour. But what about the behaviour of their suppliers’ suppliers? The modern trend is toward nearly infinite responsibility, up and down the supply chain. That much is clear. But the moral principle behind such responsibility is less clear.
Sensible thinking about supply-chain accountability has to differentiate, I think, between retrospective culpability, on one hand, and responsibility to make changes going forward, on the other. Is McDonald’s responsible for brutal behaviour by employees of a supplier’s supplier? No. But do they have a responsibility to take action, now that they know about it? Yes.
The other point has to do with the blurry boundary between practices that are unethical, on one hand, and practices that are in some more vague way unacceptable to the public, on the other. Animal welfare issues are a great example of this. Philosophers continue to debate the moral significance of animals and their suffering. Some will tell you that all suffering, human or not, is of moral significance. Others will tell you that ethics is a human device for making social living more congenial and sustainable. On the latter point of view, animal suffering might be ugly, but it’s not unethical, except to the extent that we have an obligation not to tread upon other people’s sensibilities. But this distinction matters little, in many cases: a company’s suffering can result from either — either from behaviour that is actually unethical, or from behaviour that is simply seen as being so.