Supply chain issues and unethical business practices have become increasingly propelled into the public forum; with major fashion brands being implicated in the global issue of unsustainable and unethical sourcing, including modern slavery.
Business and Modern Slavery
Slavery has historically been associated with physical restraints but increasingly, people are being forced into slave like conditions with the use of coercion or threats. Modern day slavery takes many forms including forced labour, debt bondage, sexual exploitation and human trafficking. When it comes to business, what many people don’t realise is that paying workers below the minimum wage, forcing them to work or exposing them to unsafe working conditions could also leave them vulnerable to prosecution under today’s slavery legislation.
Unethical business practices in the fashion industry
In 2010, Channel 4’s Dispatches sent an undercover reporter into Leicester’s garment factories, they unearthed high street garments that were being produced by workers being paid only £2.50 per hour.
Only last year Dispatches again uncovered similar issues; they revealed that large fashion entities had underpaid workers within their supply chain. In another undercover operation they discovered that multiple garment factories based in Leicester, were paying their workers as little as £3 per hour – below half the National Minimum wage of £7.50. These factories were again producing clothes to be sold by both high street retailers and online brands.
Both fashion brands identified in 2017 responded to the investigation stating that the factories in question had been subcontracted and were not one of their authorised suppliers.
The link between unethical business practices and brand image
A brand’s image is collated from all aspects of the business, from its beliefs and goals to its logo and colour scheme. Consumers make associations with the brand - but what happens when those associations are negative?
Nike fell victim to the potentially detrimental effects of negative brand image in the 1990’s. Currently worth $28 billion, Nike is undoubtedly a global leader in the world of sports footwear and clothing. Nonetheless, during the 1990s it was alleged that the company had major human rights abuses within its oversea supply chains. Once this information was revealed to the public, Nike’s brand reputation rapidly declined, leading customers to boycott stores.
This resulted in momentous consequences for the retailer including a direct decline in sales. The brand’s apparent deterioration lasted until 1998 when CEO Phil Knight recognised the need to improve public image in order to regain customers.
Occurrences below levels of visibility
One thing is clear: consumers are no longer satisfied to be purchasing products from retailers who could be viewed as being complacent in modern slavery. Branding expert Jeetendr Sehedv described Nike’s negative brand image as “one of the biggest challenges” that the company has faced as it seemed “impossible they could ever shake the perception”. Then Nike CEO Phil Knight acknowledged that the Nike product became “synonymous with slave wages, forced overtime and arbitrary abuse” and the effect that this was having on the brand.
Consumers do not differentiate between the ethical practices of a retailer and its suppliers, they do associate a brand with the unethical practices of those further down its supply chain.
A recent study found that unsustainable behaviour can cause consumers to engage in behaviour such as boycotting, with three quarters of participants indicating that they would not purchase from the offending business again.
Companies need to ask whether they are really managing the situation and in control, or just hoping they are not the ones who get caught.
Roy Williams, managing director of Vendigital
Ensuring ethical business practices
The financial implications of brand damage can be colossal.
Car maker VW are expected to have lost $10 billion in brand value since the emissions scandal in 2015. Businesses that practice unethically and unsustainably could see a negative impact on their own success. shareholders and investors need to feel they can trust a business and have confidence in them. By not tackling these areas shareholders and investors might lose trust, lose interest and in turn, decide not to invest.
This can be the same with employee engagement and retention. If an employee feels that it’s employer isn’t pushing to do the right thing, by ensuring their supply chain treats the people and the planet with respect or fairness, they may feel a lack of motivation that could result in them deciding to leave.
When employees see, hear or experience negative behaviour or practices misaligned with their principles, their trust and loyalty to the company erode. Hence ethics = higher engagement + retention.
Deborah Webster, business culture specialist
Transparency is key
It is important to recognise that there are examples of how positive behaviour and an openness to address potential issues can have a highly positive impact.
If a business has a good sense of social responsibility and is helping contribute towards a better world, the customers are going to be happy, the business will gain trust and loyalty not only with its customers, but with staff and investors. Potentially leading to an improved brand reputation and potentially leading to extra investment or funding.
One thing is clear; to ensure a reputable brand image is maintained, retailers must obtain visibility of their entire supply chain and all of those within it.