Ethical Consumption and CSR in Global Supply Chains

Ethical Consumption

The fashion industry, just like any other, has a potential for unethical practices across its supply chain. Since textile manufacturing is labor extensive and not too high-tech at the same time, it is especially attractive for developing countries, therefore creating opportunities for unethical forms of labor or adverse environmental impact. Still, some fashion companies make ethical production their priority. Both Good on You and Shop Ethical rank Etiko clothing as “Great” and “A,” respectively, but while the latter focuses mostly on labor aspects, the former pays close attention to environmental factors as well.

Good on You ranks Etiko clothing – as well as the brand in general – as “Great,” corresponding to the website’s highest possible score of 5. This rating consists of three elements, namely, the impact on the planet, people, and animals (“Etiko”). It measures the brand’s environmental impact for textile products via GOTS certification, and, as Etiko clothing is certified, this fact provides for a high rating (“Etiko”).

The website also assesses the brand’s impact on fauna by noting whether and how any of its products use materials obtained from animals. Since the entire range of Etiko products, including clothing, is 100 percent vegan, the company scores well in this respect too (“Etiko”). Finally, Good on You scrutinizes the brand from the labor perspective and gives Etiko a high rating in this regard as well, based on its supply chain management and worker empowerment initiatives (“Etiko”). Based on these three criteria, Good on You assigns Etiko clothing the highest possible rating.

Shop Ethical ranks Etiko products highly as well, although with a slightly different emphasis. Most of the criteria the website uses in its evaluation pertain to the labor sphere. For instance, it points out that Etiko remains committed to its decision not to use Uzbekistan cotton due to the practice of child labor involved in its production (“Etiko Fair Trade”). Another labor-related criterion is the Australian Human Rights Award granted for the ethical management of the supply chain and close monitoring of potentially unethical labor practices involved (“Etiko Fair Trade”).

Only one criterion used – namely, the 2019 Ethical Fashion Report – pertains to environmental aspects, but even it puts the labor concerns first (“Etiko Fair Trade”). Thus, while Shop Ethical also gives Etiko clothing the highest possible rating of A, it focuses extensively on the labor aspects of the ethical supply chain and does not pay as much attention to the environmental ones.

When compared, the ranking provided by Good on You looks more defensible due to its comprehensive nature. Both websites pay close attention to labor aspects of supply chain management in the brands they evaluate, and Shop Ethical even goes into greater detail. However, Good on You assigns just as much importance to the environmental impact of any given brand or product. Shop Ethical, on the other hand, concentrates on labor practices almost exclusively, which means that other concerns only remain secondary. With this in mind, one may conclude that the rating offered by Good on You is more thorough and, as such, more conducive to its purpose of promoting ethical consumption.

Law and CSR Codes in Global Supply Chains

As of now, ethical consumption remains mainly a matter of personal preferences, and the ratings offered by the agencies assigning corresponding ratings are still mere recommendations rather than anything else. However, apart from these attempts to promote conscious consumption and discourage unethical or environmentally irresponsible practices across the companies’ supply chain, there are also initiatives to enforce more stringent regulations of the same kind. Laws stressing corporate social responsibility and requiring transparency and ethical approach throughout the firms’ supply chain are being drafted and sometimes even adopted in different nations and regions.

California, the United Kingdom, Australia, and France all have their regulations against practices designated as slave labor (Gilbert and Wray). Canada constitutes no exception to this tendency – although it has no law against modern slavery so far, several bills, such as C-378 and C-423, have been proposed to address this issue in the country’s jurisdiction. Still, while undoubtedly well-intentioned, none of these bills would serve its purpose effectively, as they are both hard to implement and would not improve the conditions of the labor force in developing countries positively.

One Canadian legislative initiative to oppose modern forms of forced labor was Bill C-378, also known as the Act to prohibit sweatshop labor goods. As follows from the name, the bill, first introduced in 2009, intended to enact governmental prohibitions against the goods manufactured with violations of labor rights across the supply chain. The bill gave the government rights to prohibit import if “the good was produced, manufactured or assembled, in whole or in part, in contravention of the labor standards of the International Labor Organization” (“C-378”).

These rights include the right of association, the right to collective bargaining, the minimum age for children’s employment, the abolition of any forms of compulsory labor, and “acceptable conditions” for work (“C-378”). To implement this measure, the government would have to be reasonably sure whether the supply chain of a given company producing a given product did or did not include violations of labor rights. Thus, the implementation of this bill as a law would require extensive accounting effort.

Another legislative attempt to counter unethical labor practices rests on the same premise but elaborates it in more detail. Bill C-423, also known as the Act respecting the fight against certain forms of modern slavery through the imposition of certain measures and amending the Customs Tariff, was introduced in 2018. Its primary provision requires the companies willing to sell their goods in Canada have to ensure full logistical transparency across the supply chain with regards to forced and child labor. It should be achieved using annual reports on the company’s structure, range of products, the current state of the supply chain, and the efforts taken to minimize risks of child and forced labor (“C-423”).

This measure should only apply to larger companies in terms of market value, revenue, and employee number, and involve fines of up to $250,000 (“C-423”). Hence, C-423 relies on the same premise that C-378 but provides more detail on the entities the measure should apply to and elaborates more on the companies’ responsibility with regards to accounting.

As mentioned above, both bills would require extensive accounting efforts on the companies’ part to ensure that the measures proposed would only affect those entities that condone unethical labor practices. As a result, their implementation should any of them ever be adopted, would inevitably encounter significant challenges. The experience of other jurisdictions that have implemented similar legislation up to date suggests that it proves to be costly in financial terms and, perhaps even more importantly, is hard from the organizational standpoint. California provides a telling example: four years after the implementation of its Transparency in Supply Chains Act, only 14 percent of companies are fully compliant with it, and less than two-thirds even attempted compliance (Lau).

An obvious reason behind this is the costs of thorough auditing – which is likely why C-423 limits its provisions to the companies with assets of at least &20 million and/or revenue of &40 million (“C-423”). However, even for wealthier companies that can afford it, tracing supply chains of the modern globalized economy remains an organizational challenge due to the immense complexity of the task.

A part of both bills that requires special attention is their provisions against the use of child labor. Admittedly, the first bill is rather cautious in this respect and only requires setting the “minimum age for employment of children” (“C-378”). Its later counterpart, however, takes a much more uncompromising position and unequivocally declares any use of child labor to be a “form of modern slavery” (“C-423”). From a certain perspective, it is a reasonable, if not entirely rhetorically sound, claim. Almost half of the child workers are from 5 to 11 years old, meaning that their time would be better spent in schools and other institutions, allowing them to uncover their potential (McKay).

Additionally, as much as 91 percent of Canadians express their preferences in favor of ethical consumption and would like to know whether supply chains of the products they buy involve unethical labor practices (McKay). With this in mind, legislative initiatives against modern slavery – even if one interprets it broadly enough to include child labor – are a way to promote conscious consumption and satisfy the constituent’s demand.

However, the effect of the proposed measures against child labor on the underage workers from the developing countries themselves is not as positive as one could assume at first sight. While a job in a sweatshop is detrimental to the children’s education and development as compared to school, it is still a preferable alternative to most of the other options they have in their countries. An example of Pakistan, where 50,000 child workers found themselves out of their jobs in sweatshops due to the enforcement of anti-child-labor policies, suggests that the effects of such initiatives are not necessarily positive.

Many of the displaced underage workers were forced to take worse jobs or were even forced into prostitution (Lau). Thus, the attempts to discourage child labor directly do not necessarily improve the lot of the children they are supposed to benefit.

Additionally, even if the desire to eventually eliminate the exploitation of child labor is laudable, the approach taken in the bills proposed is quite unrealistic. It is especially evident in the requirement to ban goods the production of which, “if provided or offered in Canada, would be contrary to the laws applicable in Canada” (“C-423”). As a well-developed industrialized first-world country, Canada may afford strict regulations that would not undermine the competitiveness of the goods and services provided by the country’s companies. However, it is entirely unreasonable to expect the developing countries to uphold the same high standards while having little or none of the advantages enjoyed by the first-world countries.

The requirement to follow the standards applicable in Canada would make most goods too costly in production to maintain competitiveness with those made by well-developed industrialized countries. Thus, the provision of C-423 would effectively prevent the industrialization of the developing countries and, as such, impede, not aid the gradual improvement of their population’s standard of living.

If enacted, these laws would mainly impact the brand reputation concerns of the firms. As mentioned above, the vast majority of Canadians would prefer products not associated with forced or child labor (McKay). Thus, the companies aiming to capitalize on a beneficial public image would make corresponding efforts to comply with the new regulation or, at least, appear as doing so. The implementation of these laws would also reflect positively n the MPs who suggested them, as they would come out as satisfying their constituent’s demands. Yet, as shown above, the bill’s impact on the actual victims, such as child laborers in the developing countries, is anything but assuredly positive.

As one can see, neither C-378 nor C-423 merit implementation as, in their current state, they are unlikely to make a positive impact on improving labor conduction across the world. Both bills rest on the premise that the companies should ensure transparency across their supply chains. Under the contemporary conditions of the globalized economy, this would prove costly and immensely complicated at the same time.

The provisions against child labor are particularly dubious, as industrial jobs often turn out to be better options for underage workers than the available alternatives. Requiring the developing countries to adhere to the same strict standards of production as the developed ones will render their goods uncompetitive and effectively stall their industrialization. Considering this, the implementation of any of these bills would reflect beneficially on some economic entities and political actors within Canada but would do little to improve the situation of the actual workers.

Works Cited

“Bill C-378.” Parliament of Canada. Web.

Bill C-423”. Parliament of Canada. Web.

“Etiko Fair Trade.” Shop Ethical. Web.

“Etiko.” Good on You. Web.

Gilbert, Carole, and Benedict Wray. “Modern Slavery Legislation – Canada May Follow the Global Trend”. Norton Rose Fulbright. 2018. Web.

Lau, Matthew. “MPs Want to Help Stop ‘Slavery.’ They’ll End up Hurting People Instead.” Financial Post. 2018. Web.

McKay, John. “Creating Canada’s Modern Slavery Bill.” Delta 87. 2019. Web.

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