Business Wrong Doing Practices. Ethical issues are at the heart of Supply Chain, and it is important to know about them in

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1 Virguez 1 Maria Virguez Dr. Benander English 2089 October 20, 2014 Business Wrong Doing Practices A business that makes nothing but money is poor kind of business Henry Ford Ethical issues are at the heart of Supply Chain, and it is important to know about them in order to correct them. For instance, is it ethical to outsource jobs without benefits? Is it ethical to impact the environment negatively while manufacturing? Or is it ethical not to develop Corporate Social Responsibility in foreign communities? It is not ethical to provide jobs with no benefits, to contaminate the environment, or to be careless about the local communities overseas (supplychainbrain.com). Sadly, companies have practiced Outsourcing, Supply Chain Management (SCM), and Corporate Social Responsibility (CSR) in a deplorable way only to obtain competitive advantage in the market (Conboy; Motlagh; Clott). The poor practices of SCM, Outsourcing, and CSR have generated a debate about their ethical implications, and the need of community groups to demand the creation of sustainable business practices,

2 Virguez 2 improvement of job conditions, and a higher performance on corporate social responsibility (supplychainbrain.com). In order to describe this topic, this paper is divided in three sections: Green Supply Chain Management, Outsourcing, and Corporate Social Responsibility. Each section defines the main terms, presents the positive and negative aspects of these practices, and presents examples and suggestions to improve them. I. Green Supply Chain Management (GSCM) In the last years, due to the increase of people awareness about the importance of protecting the environment, there has been the need of improving Supply Chain Management practices in order to reduce companies negative impact on the environment. This change has resulted in the creation of GSCM which goal is to reduce the use of natural resources, to eliminate the production of toxic gases, and to create products that can be recyclable (Testa 954). Despite GSCM positive aspects few companies have adopted it, and the ones who have done it did it for two reasons: external factors (environmental regulations and community groups) and internal factors (increasing brand reputation and gaining market share) (Testa 954). As a result of adopting GSCM some companies have been able to increase their profits (Murray; Testa) as a result of reducing waste, turning it into a new product, or using friendlier environmental production techniques. For instance, Murray mentions that General Motors reduced disposal costs by $12 million by establishing a reusable container program with their suppliers, and Wal-Mart saved million gallons of water, 20.7 million gallons of diesel fuel

3 Virguez 3 and millions of pounds of solid waste. Murray presents two excellent examples to support that it is worthy to change SCM practices in order to protect the environment. However, some companies haven t adopted GSCM for different reasons. Murray states, many executives are still unaware that improved environmental performance means lower waste-disposal and training costs, fewer environmental-permitting fees, and, often, reduced materials costs. In other words, Murray is saying that the benefits of adopting GSCM are not perceived by all managers. However, this is not the only reason for managers not implementing green strategies. Fournier claims that in some business sectors there is the fear that for following green practices their merchandise is going to be more expensive, because the investment of money and time, than their competitors putting them at a disadvantage in the market. For this reason as Testa emphasizes implementing GSCM should be considered a long term process (962). It is important that companies understand that they need to use green practices, and that it is unethical to produce using processes that have a negative impact on the environment. They need to realize that there is no reason that justifies companies benefits over the community s benefits. In conclusion, GSCM is a new trend that is still and will continue growing in importance and acceptance. As Furnier claims companies are going to continue implementing green supply chain practices. In addition, as Browan assures there has been an internal change in companies structure organization that has resulted in the creation of the Sustainability Manager position who works in a direct channel with the CEO. Which translates in companies grow awareness about the importance of adopting green supply chain techniques.

4 Virguez 4 II. Outsourcing Another new trend implementing by companies in the recent decades is outsourcing. Researchers have not been able to agree on the meaning of outsourcing. Some see it just like the evidence of businesses irresponsible seeking for profit maximization (and others like) an economic mechanism of sharing the global welfare (Zhu 1221). Even thought, outsourcing has been considered one of the greatest organizational and industry structure shifts of the century with the potential to transform the way businesses operate" (qtd. in Clott 153). Outsourcing change the internal way companies and global business operate by opening new horizons to expand. This trend can bring positive changes in the whole world if it is applied following ethical standards. Outsourcing suggests companies to dedicate their resources to what they do best, and outsource processes they do not do well in order to reduce costs and increase quality (Clott 154). Outsourcing has been applied by companies in the local market since 1950; however, in recent decades it has become global due to information technology (IT) advances that eliminate time and space barriers as well as market globalization that makes it possible to outsource overseas. Shamefully, global outsourcing has been conducted by some companies in unethical ways. Corporations have failed in choosing the right providers because managers choose to cut costs over product quality resulting in customer s dissatisfaction and loss in market share (Conboy). In addition, poor labor conditions have been created by the lack of vigilance over outsourcing contractors. These unacceptable situations have been uncovered by human right

5 Virguez 5 organizations. They have proved conditions of excessive or unpaid overtime, the use of child labor, dangerous working environments, and generally poor living conditions. For instance, as result of poor safety job conditions in April of 2013 the building Rana Plaza in Bangladesh collapsed causing the death of 1,129 people, and between November of 2012 and October of 2013 three different fires resulted in 127 more deaths. It is unbelievable that thousands of people die because of the unethical behavior of greedy companies and providers. These sadly accidents, have raised awareness, among Wal-Mart, Sears and other 26 American companies, to commit to invest in safety upgrades, and monitoring the factories they source from (Motlagh). Even though, there are many ways to outsource poorly the worst practice done by some companies is to source from illegitimate providers. According to Moglath, it is an open secret that there s a vast underworld of off-the-books operations that backstop the export industry. Sandwiched inside apartment buildings, in basements and on rooftops, underpaid and overworked employees finish orders from larger companies under fierce pressure to stay apace with fast fashion. Hidden from view, bosses are free to abuse workers and cut corners on safety. Motlagh claims that it is common to find clandestine factories that represent a high risk to employees lives, and that it is a practice well known by governments and industries. The fact that big companies source from clandestine factories is unforgivable. Another implication of global outsourcing is that it has put an enormous pressure on companies to cut cost and remain competitive which has contributed to the incr ease in jobs with lower wages and without benefits (Clott 154). Clott compares global outsourcing to the Machiavellian ends justify the means model, in which reducing cost as an end is used to

6 Virguez 6 justify corporate strategy, violates ethical norms and comes at a high human cost (qtd. in Clott 163). Clott s point is that companies philosophy is to do whatever they need to increase profits, even if it means to lower job conditions. However, companies shouldn t operate under this parameter. People have more value that companies; it is thanks to people that companies can operate. Outsourcers and providers wrong doing has gained the attention of governments and community groups. Government of different countries have created laws, such as the European Union and North American Free Trade Agreement (supplychainbrain.com) to regulate outsourcing standards and establishing minimal job and safety conditions. In addition, the Rana Plaza catastrophe and community groups, such as Greenpeace, have grown consumers awareness resulting in the agreement for zero-tolerance policies on global supply-chain abuses (Browman). As a result of that agreement there have been significant improvements in safety and job conditions. However, factories are too far way of being completely safe as has been showed by independent factory inspections that have raised concerns about the lack of constant application of safety conditions (Maltogh). For, instance they report that exit routes are block or not lead outside, that basic fire equipment is not in place, and that evacuation maps are cover with fliers. However, some nonprofit organizations and countries have used outsourcing as a tool to help poor people. In one hand, Samasource (nonprofit organization) have used outsourcing as a way to provided jobs with living wage rates in the IT field, where employees have to upload photos and matching them with information (Kandasamy). In the other hand, countries in Africa, South America, and Asia have used it as a method to combat poverty (Puritt). It would

7 Virguez 7 be great if garment industry could learn from IT example and stopped using outsourcing as a way to take advantage of people in need. In conclusion, outsourcing can have positive or negative implications depending on how it is adopted. In order to accomplish positive results, it is imperative that managers understand the importance of choosing decent service providers and outsourcing partners who are competent, provide a quality service and are professional and ethical in the way they conduct their business (Conboy). Basically, Conboy is saying that companies need to be wise and choose providers that would perform jobs under safety labor conditions, provide jobs with benefits, and produce high quality products. Choosing the right partner will have a positive effect on brand reputation, customer-company relationship, and market share (Conboy). In addition, as Clott analyzes outsourcing is an inevitable function of globalization and it is expected to continue growing (166), making imperative to evaluate its practices and improve them. III. Corporate Social Responsibility (CSR) Finally, the last new trend to be discussed is CSR which is a business practice that argues that profitability, customer satisfaction, and social welfare have the same value in the assessment of performance in a company. In other words, a company not only should look for ways to increase profits but also ways to help the community and satisfy costumers demands. As Zhu specifies, CRS not only (affects) the local community (but) even the whole world in terms of ensuring sustainable development, protecting environment and contributing to nonbusiness sectors. Zhu s argument is that CSR is a local practice with a global impact. This characteristic of CSR has been embraced by companies new compromise of taking social and

8 Virguez 8 environmental responsibility more seriously than ever before. Which is a sign of hope that companies are finally realizing the impact they have on communities and the environment. This change in CSR perception has had a repercussion in outsourcers companies resulting in the implementation and development of social programs in their overseas factories (Browman). For instance, some companies offer on-site college and secondary courses. For instance, Starbucks has a program that allows its employees to take free online courses at Arizona State University. In addition, companies are also motivating employees to participate in volunteer organizations in their communities generating the feeling that they are doing something meaningful for themselves and their community. For instance, P&G has a website where their employees can look for volunteer opportunities. However, employees are not the only ones who benefit from CSR; as Puritt acknowledges companies also benefit because investing in people and communities actually improves the quality of the firm s products and the effectiveness of its services as their employees reward their employers with a higher degree of loyalty, engagement and productivity. Basically, Puritt is saying that CSR practices benefit companies because employees appreciated by the company, and for that reason they would perform their tasks in a better way. In conclusion, CSR is a business practices with positive results for companies and employees. For that reason, companies need to continue adopting CSR practices in local and overseas locations.

9 Virguez 9 iv. Conclusion In the transparent age in which we are living, it is really important for companies to be careful about the social and environmental practices they follow because consumers are paying attention to them, affecting the purchase process. It is important for companies to act ethically all the time, and follow consumers demands about protecting the environment and outsourcing with social responsibility. Green Supply Chain is a good practice that benefits consumers and companies. Corporations are starting to realize that it is important to preserve the environment and be smart at the moment of using natural resources. The application of GSCM practice by some companies has had a positive impact on their profits margin even though some companies are still afraid of the negative implications that GSCM could have on them. Global outsourcing is a great opportunity to increase profits and to help other communities around the world by providing jobs. However, to outsource overseas is difficult because companies have to depend on other companies business practices. This fact makes imperative for companies to choose wisely their strategic partners overseas. However, the majority of companies only have applied outsourcing in terms of increasing profits, resulting in the creation of job without benefits and poor job conditions. Meanwhile, the companies that use outsourcing as a way to help other communities have been successful in the reach of their goal. Corporate Social Responsibility is a practice that is intended to help consumers and employees. It hasn t been applied overseas by all the companies that have overseas facilities.

10 Virguez 10 Companies who have implemented have perceived an increase in job quality and employees loyalty. In their quest for increasing profits a company should consider implementing GSCM in order to reduce cost and increase market share; outsourcing with the right partners in order to reduce costs, avoid penalties, and lawsuits; applying CSR practices in order to have a product made better by happy employees. However, a good company will see GSCM as a practice to protect the environment; outsourcing as an opportunity to share the global welfare and combat poverty; and CSR as an opportunity to help the community and give back to those who make it possible to be in business.

11 Virguez 11 Works Cited Bowman, Robert. Is This The Year When Supply Chains Become Socially Responsible? Forbes. Forbes, 11 Mar Web. 18 Sep Clott, Christopher B. "Perspectives on Global Outsourcing and the Changing Nature of Work." Business and Society Review (2004): Print. Conboy, Martin. Outsourcing An Ethical Perspective. Contact Center World. Contact Center World. 19 Mar Web. 18 Sep Ethics Issues Are at the Heart of Supply-Chain Management SupplyChainBrain. SupplyChainBrain. u.d. Web. 18 Sep Fournier, Michael, A Brief Introduction to the Problems Facing Green Supply Chain Management. Business 2 Community. Business 2 Community. 25 Feb Web. 18 Sep Hochman, Steve. Green Supply Chains. Forbes. Forbes, 4 Apr Web. 18 Sep Kandasamy, Ambika. Socially responsible outsourcing takes tech jobs to developing world. SF Public Press. SF Public Press, 12 Aug Web. 18 Sep Motlagh, Jason. A year after Rana Plaza: What hasn t changed since the Bangladesh factory Collapse. Opinions. The Washington Post, 18 Apr Web. 16 Oct Murray, Martin. Introduction to the Green Supply Chain. Logistics.about. About.com. u.d. Web. 18 Sep

12 Virguez 12 Puritt, Jeffrey. Impact Outsourcing: Outsourcing for Social Good? Corporate Social Responsibility Newswire. Csrwire,7 Nov Web. 18 Sep Testa, Francesco, and Fabio Iraldo. "Shadows and Lights of GSCM (Green Supply Chain Management): Determinants and Effects of these Practices Based on a Multi-National Study." Journal of Cleaner Production (2010): Print. Wenzhong, Zhu. "Research on Offshore Service Outsourcing and the Related Issue of Corporate Social Responsibility." Journal of Applied Sciences 13.8 (2013): Print.