7 August 2013
Making Products Ethical

Global Competition • As global competition increases, many international companies have transferred their production to developing countries. • Consumers demand for quality products at lower prices. • Consumer awareness and concern for ethics has grown. Thus, they seek for products that are made ethically.

Products made in Sweatshops • This concern exploded in the late 1990s. • Activists embarrassed famous brands with exposés of working conditions abroad. • Nike and Wal-mart are two of the key targets of these activists.

White House Task Force • Consumer activists and industry representatives collaborated to form the White House task force. • This task force suggests that codes of conduct must be established for overseas production. • Firms are to label their products “not made in sweatshops” • Mattel and Disney are two of the companies who adopted and attempted to enforce the codes of conduct. • Mattel hired an independent panel to monitor its factories; Social auditors visit Mattel factories three times a year • Disney conducted overseas inspections and cut off subcontractors who failed to make improvements.

Social Accountability 8000 • Involves nongovernmental agencies operating in developing countries and major international auditing firms to oversee firms that comply with this standard.

High Profile Culprits: • Nike o Formed a labor practices department and supplied Global Alliance with a $7.9 million grant to study social problems in its contracted factories. o Major concerns: ▪ Limited medical care ▪ Long hours of work ▪ Sexual molestation ▪ Physical abuse

• Walmart o Known for selling low-priced products o Low wages for employees

• Gap o Ten to 25 percent of factories in China and Taiwan were found to use psychological coercion or verbal abuse. o More than 50 percent of factories in sub-Saharan Africa violated safety procedures. o 90% of factories applying for contracts failed the initial evaluation. o One of its 200 Indian suppliers was found practicing child labor and had miserable working conditions for the employees.

Discussion Questions:

1. What can global firms do to make their products more socially acceptable? • Invest in R&D - We think that this is an important factor in order to identify what the market is looking for and what they consider socially acceptable. The team can research on what factors people consider ethical about products.

• Consider Global and National Standards - These standards are created in accordance to what consumers need. these are made to protect the consumers which may be considered as a way of determining whether a product is socially acceptable.

• Understand the culture and behavior of the market - It is vital for any firm to understand the culture and behavior of the market because it is one of the driving factors towards consumption. Also, firms must not forget that culture and behavior vary from one market to the other. What can be socially acceptable to a certain culture may not be embraced by another. So, it is important to understand the market you serve to be able to deliver the products and services they find acceptable not only to their personal preferences and to their culture and behavior.

2. What do you think they should do? Why?

Firms have to make sure that their products are from a humane environment so that they need not to have legal issues & such that would make customers shy away from them

3. What are the costs to global firms of keeping their products sweatshop-free?

Companies may have experienced a lot of change in their workforce, and some might have spent a lot just to comply with the rules, but these lead to a good outcome. Whereas companies have proved and gained it reliability that their products are not made in sweatshops.

4. What are the possible costs of not complying with SA 8000?

Workers would be physically and mentally abused. If this happens, the employees of the company will not be happy with their work and may choose to leave the work place. If the employees leave, the company will be undertaking a recruitment process, which is costly. Also, the productivity will be low which will result to a lower profit margin and this lower profit margin may create a bad image for the company in which there will be a low chance in reaching other companies to invest in the company, as well with the consumers. Not complying with SA 8000 will have a low level of social peace of mind for the owners of a company and its management.