Discuss how important is it for companies, such as Nike and Wal-Mart that source

Question

Discuss how important is it for companies, such as Nike and Wal-Mart that source extensively from foreign suppliers located in countries where wages are low and substandard working conditions are common to institute supplier codes of conduct and undertake programs to monitor and ensure supplier compliance with these codes of conduct? Would you recommend that a company join the Fair Labor Association and use FLA's standards and program of factory audits instead of trying to set up its own supplier monitoring and compliance effort? What can a company do to detect and combat the efforts of unscrupulous foreign suppliers to deceive inspection/compliance teams?

Explanation / Answer

Discuss how important is it for companies such as Nike and Wal-Mart that source extensively from foreign suppliers located in countries where wages are low and substandard working conditions are common to institute supplier codes of conduct and undertake programs to monitor and ensure supplier compliance with these codes of conduct?

Nike, in the mid-1990s, caught in the crisis of using sweatshops in Asian countries. Protests went throughout the USA and this led to a dramatic decline in sales. Nike took years to recoup from the damage caused to its profits, reputation and brand image. Yes, using bad suppliers affects the profit margin and Sustainability Company directly

In countries where there are low working standards, it becomes acceptable for the suppliers to sue such standards. Sweatshops engage in low wages, unsafe working conditions, long working hours, child labor etc. and they do not give even a thought about such poor standards. But a company has to look at its ethical responsibilities towards its employees. Even though the employees of a supplier are only distantly related, a company still has moral responsibility.

A company should take care of its entire supply chain standards not only for ethical reasons but also for sustainability. Surveys show that people in developed countries are ready to pay more and are more loyal towards companies with ethical standards and sustainable business practices. Poor working standards lead to employee ill health and a lot of attrition. Disruptions and mishap in a supplier may affect the entire supply chain and delivery capacity

Would you recommend that a company join the Fair Labor Association and use FLA’s standards and program of factory audits instead of trying to set up its own supplier monitoring and compliance effort?

I would recommend joining FLA

FLA is a leading organisation promoting labour standards multi-stakeholder initiative. It includes participants including companies, suppliers, civil society organizations, universities, manufacturers, retailers etc

FLA has established methodologies that have been tested through times and their collaboration with numerous partners in different industries provides unparalleled expertise and experience. They know the entire gamut of risks, labour conditions and compliance gaps. They know which strategy works best for each situation

FLA has also partnered with suppliers throughout the world who have committed to the standards and obligations. Many of them have been already following the standards and have the capacity and systems established to ensure standards. Joining with FLA would help to reduce the costs of a company in terms of conducting audits and ensuring standards

FLA has a big network that keeps in tab the unscrupulous suppliers. If the company wants to set up its own supplier monitoring and compliance effort, then it has to start from a scratch with little expertise. It has to spend more in capacity building and training.

Hence I find it is better to join the Fair Labour Association and use FLA’s standards

What can a company do to detect and combat the efforts of unscrupulous foreign suppliers to deceive inspection/compliance teams?

The activities of suppliers affect the reputation and sustainability of a company. Hence it is essential to make sure suppliers comply with standards. But several suppliers may try to deceive auditing. We can sue the following methods to combat them

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