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A Walmart spokesperson claimed: “While unions may be appropriate for some companies, they have no place at Walmart.” This thesis calls into question giant retailers’ business models and raises the question if outside factors such as government and consumers can influence them to become less socially responsible. In our context, the key concept of corporate social responsibility (CSR) is defined as “whereby companies integrate social and environmental concerns into their operations and interactions with their stakeholders on a voluntary basis” (EU Commission, 2002). Furthermore, their current business models present notable strengths that often come at the price of a trade-off with other aspects. The following examines the setup of different agreements by institutions and the outcome. Furthermore, we will analyze how outside factors impact a firm’s current operations and actions. To conclude, the analysis will attempt to explain the thesis which states that Walmart failed to ensure that labor rights are upheld in supply chain factories.
Non-governmental organizations (NGOs) and various institutions have contributed to a wealth of reform with the main objective to push large garment retailers to take corporate responsibility in their operations and human rights practices within them. In fact, large corporations benefit from transnationalization of production, which is simply the process by which firms decentralized their factories in developing countries like Bangladesh, Indonesia or India where labor cost is cheaper, which often led to the bad habit of neglecting human rights. Even if they outsource their production they should be responsible for the practices of the suppliers, but to what extent? According to the UN Guiding Principles, companies have the responsibility “to respect human rights wherever they operate and whatever their size or industry” (United Nations, 2011). Many different agreements such as the Global Framework Agreement and Code of Conduct have been redacted and signed by hundreds of giant retailers but this has not been sufficient in terms of changes as seen with Rana Plaza building accident in 2013. Before that, no information was publicly available and thus we could not check if labor rights were upheld in supply chain factories even if they have to.
After Bangladesh’s factory accident, responsible for the death of over 1,100 workers, governments thought it would be a turning point for garment industry workers. As supply chains reached a critical point, “human rights due diligence” has been set up, convinced this would have a positive impact on retailers’ actions. We thought that this accident will permit those big retailers, in charge of their suppliers, to contribute more to the improvement of wages and working hours made by institutions and NGOs. In opposite, some retailers, like Walmart, involved in the accident and thus responsible for what happened decided to shy away from taking any responsibility. In fact, Walmart did not hesitate to claim that the supplier is responsible for anything happened in factories as facility audit results are passed to him. Moreover, following the accident more than 200 brands except Walmart have signed an agreement, redacted by Europe IndustriALL and UNI global union, to prevent any future catastrophes in Bangladesh’s garment industry by improving factories’ safety. In fact, Walmart has decided to develop its own code of conduct instead of signing the Bangladesh Accord on Fire and Building Safety convinced it is more effective and will provide faster results. Any clear initiatives regarding living wages and poor safety standards have been stated, clearly showing a lack of involvement in this process. Even though, many companies have stated that labor rights are upheld in their supply chain but that they simply did not manage to take necessary measures to ensure this was respected. From this analysis, we assume that more effective actions from the government would have changed firms’ ways of working.
Two mains outside factors are impacting directly on the ways large garment retailers act and operate. Retailers are truly aware of the controversial issue mainly regarding the respect of their employees’ human rights in their supply chains and the responsibility they have towards it. As analyzed previously, corporations’ actions are not sufficient, while supported by NGOs agreements and frequent prevention, as they often failed to improve wages, working hours and workers’ rights. Governments are willing to bring fundamental change in supply chains as large retailers are not acting as they should be. They are aware that the economy is suffering from an accountability gap in this industry and consequently did not hesitate to take measures. They have decided to dedicate, for the first time, the 2016 International Labour Conference on the work in the supply chains. Governments have the primary responsibility to ensure human rights are respected within those supply chains because “Persons who live under a democratic government need not worry about human rights at all, because it is the duty of that government alone to fulfill human rights” (The Journal of ethics, Vol.4, Nos. 1-2, 2000). Corporations are taking advantages of the absence of legally binding standards and this is what governments are aiming to change. We can take the example of Quickset and Canteran Apparel, two suppliers for Walmart, that are abusing the law. Governments play a vital role in labor regulation and try to regulate company behavior at domestic level but they have often failed to oversee factories’ working standards as they do it with varying degrees of seriousness and effectiveness. This has been the case because host countries like Bangladesh, India, and Cambodia are willing to attract foreign investments in order to increase their global economy. But how? Those countries are offering flexible labor markets but this should not automatically imply mistreatment of employees in factories. A more effective application of the ILO convention, ratified by a majority of countries, would prevent another disaster like Rana Plaza and help garment retailers to realize how urgent and important is the current situation. Unfortunately, this has not been successful within Walmart supply chains as Asia Floor Wage Alliance reports “persistent rights violations”. This led to the misunderstanding of why large garment retailers are not always upholding human rights in their supply chains?
Even if some retailers are taking initiatives and becoming more socially responsible, supply chains are still suffering from consumers’ actions. Consumers are playing a key role in supply chains, they are the reason for Walmart’s domination in the global supply chains of nearly every consumer product. As analyzed previously, large garment retailers are aware of what they have caused, terrible accidents, but the fact that people are still consuming their products does not make them realized that changes are required. In fact, people have been consuming Walmart’s products since years and are still continuing to do so. Since 2013, Walmart’s net sales have increased from 465.6bn$ to 481.32bn$ in 2017 (Walmart annual report, 2017). This analysis highlights the fact that consumers’ attitude did not change even though over 1,100 workers died during the Rana Plaza accident. Consumers’ actions have a drastic impact on supply chains as they are contradictory with NGOs work to the extent that they are not showing dissatisfied behavior. In this situation, consumers had responsibilities to fulfill and should have claimed for changes in supply chains factories. This lack of actions is one of the reasons why retailers are behaving this way. Large garment retailers do not feel enough concerned about the situation. Thus, consumers are more or less responsible for not ensuring that labor rights are upheld in supply chain factories.
As seen previously, governments and consumers actions over years have been playing a key role in the supply chain. However, a deeper analysis clearly reveals that garment retailers’ culture and fundamental principles are responsible for this lack of involvement. Walmart has been able to dominate this sector mainly because they have adopted a “growth at any cost strategy” implying an exploitation of people throughout the supply chain. In fact, Walmart’s main goal is to maximize profit and this raises the questions of why would garment retailers operate in socially responsible ways, even at the minimum level? Corporations like Walmart do whatever they can to achieve this objective and this often comes at the cost of acting in socially irresponsible ways. The fundamental of large garment retailers’ business model is to have low costs and selling with low-profit margins. Consequently, suppliers are facing a high pressure regarding cut costs. In most cases, we observe a non-respect of workers’ rights mainly because they are not enforcing regulations at third-party facilities as they don’t own them. The imperative of profit maximization is thus influencing how workers are treated in supply chains and this also led to a blatant disregard for factories safety. Enforcing compliance would avoid factories owner to stop treating “workers like slaves”. (Human Rights Watch phone interview with a factory owner in Dhaka, March 21, 2015). We are aware that firms like Walmart are able to require very specific production demands from their suppliers over which color, what material to use for example. This clearly shows that those firms are valuing profit above all else as they are acting as they can’t control third-party facilities.
Over years, firms’ reputation became more and more important to them. For instance, Walmart’s reputation is built on the principles of keeping costs at a minimum. Consumers are truly mindful of the consequences implied by Walmart’s strategy and workers exploitation have engendered negative feelings from consumers. They are playing a critical role over a firm success as they have gained a considerable voice power over time. Consequently, managers are becoming more and more concerned regarding the firm’s reputation as it could prevent success or lead to bankruptcy. After Rana Plaza accident in 2013 most companies involved in it decided to introduce CSR to reach both customers and stakeholders objectives as it has hacked on their reputation. But why? According to Bayoud & Kavanagh (2012), CSR increases corporate reputation and financial performance as they are positively correlated. Walmart does not rely on this correlation as they have freely expressed to the court that its code of conduct was only present to protect them from a bad standing and not to benefit their workers. This shows that Walmart is clearly acting against Lamberti & Lettieri (2009) work stating that a company will improve its reputation when customers become aware of its operations. In this particular case, Walmart is responsible for not ensuring workers’ rights in their supply chain as they deliberately decided to act like that: reputation over human rights. This led to various consequences as Walmart is playing the role of a trendsetter for corporates actions in this industry as they are the leader.
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