Trying to Break the Sweatshop Business Model

In addition to Thomas his article about Monsoon, I picked out an article about Knights Apparel. This company runs the factory where college-logo apparel for American universities is made.

Knights Apparel is, unfortunately, one of few clothing producers that pay a “living wage” to its workers in South-America. This “living wage” isn’t more than $500 a month, but it’s still way more than its competitors pay, using sweatshops.

You might expect very pricy clothes, but nothing is less true. Paying 120 workers the “living wage” only elevates the price of a T-shirt by 80 cents!

This proves that the excuses made in the past by customers, who kept on buying Nike stuff after learning about it’s poor working conditions in Vietnam, are rubbish.

I believe that it was not a possible mark-up that kept customers from abandoning Nike, but the fact that we are just too heavily attached to these big brands like Nike, Adidas, Ralph Lauren etc.

I can’t stop but wonder how many people would return their clothes to the shelves after learning about the poor working conditions, in which their pieces of clothing were made… Or wouldn't they at all?

Baptiste De Vleeschauwer

Article: http://business-ethics.com/2010/07/18/1515-trying-to-break-the-sweatshop-business-model/

BP makes case for socially responsible investing

This article, written by Maya Fisher-French, enlightens us with another way of linking ethical commitment to financial performance.

Instead of thinking as a customer, who wants to purchase goods and services from a company with good commitment to ethics, we should think as an investor, who cares more about his portfolio than his conscience.

Most people immediately suggest that the stock gains of companies with their eyes on the profits will exceed those with their eyes on the environment. But now it seems that an eye on the environment might save a company a lot of money in the future.

E.g. BP’s lack of maintenance, after building up their stock prices by saving money on important safety issues, BP might face a billion-dollar claim for polluting the entire Gulf of Mexico. In the future oil companies will even have to pay environmental tax towards a fund for future oil spills.

Another example concerns companies that aren’t energy efficient. Those companies will face enormous costs due to the risings energy prices. Again it doesn’t seem too bad to have an eye on the environment.

We can conclude that socially responsible investing doesn’t have to be part of your portfolio to make you feel good, but to be safe from companies with enormous law suits and tax burdens.

Baptiste De Vleeschauwer

Article: http://www.mg.co.za/article/2010-06-18-bp-makes-the-case-for-socially-responsible-investing

Uk’s well know fashion retailer, Monsoon has been accused of unethical behaviour.

I found today in a British newspaper (The Guardian) a very interesting article about a company who stands for ethical behaviour. But instead of being rewarded for their policy there are accused of child labor and wages below the minimum wage.  

So I think this article fits as a example about unethical behaviour.

Monsoon is a British clothing giant with over 1000 stores in 54 countries. It has been founded in 1973 and since then they are proud to show there well-known slogan “Living our values and ethics since 1973” and on their website you can find another delicate sentence: "We know our responsibility extends beyond your wardrobe." Last year it was even rewarded as the best ethical company in the UK.

Now the Observe (a British critical magazine) has discovered that in Indian and in Chinese Monsoons clothing factories, there was child labor, women were underpaid and the working-conditions were unacceptable.  

The spokesman from Monsoon told the press that they are acquainted with this problem and that they try to prevent it. Peter Simon (the owner and CEO from Monsoon) even told the Observer that it is the only company that publishes their own ethical investigation and that the company deals with subcontractors that don’t follow the ethical rules of Monsoon.

The only remaining question is: Will this turn against clothing giant Monsoon?

Thomas Deryckere

Source: http://www.guardian.co.uk/business/2010/nov/21/monsoon-child-labour-india

Does Business Ethics Pay?

Mr Webley and Mrs. Elise More examined 86 companies taken from the FTSE 350 between 1997 and 2001. They tried to find out if there was a link between business ethics and financial performance.

The article states that we must first investigate if the presence of an ethical code actually goes along with true ethical performance. Using the company rating for risk management and a peer evaluation about financial soundness, quality of goods and services etc., the test resulted in a positive correlation.

The further research was based on the same methodology as C. Verschoor (A Study of The Link Between a Corporation’s Financial Performance and Its Commitment to Ethics) and inquired the companies’ numbers about Market Value Added, Economic Value Added, Price Earnings Ratio, Return on Capital Employed and three indicators for corporate responsibility.

Findings (1):

- On Economic Value Added, the sample of companies with codes outperformed those without over a four year period.

- On Market Value Added, the performance gap was even more marked.

- On Price/Earning Ratio, the more demonstrable ethical companies showed far less volatility than the remainder

- On Return on Capital Employed companies with codes underperformed those without between 1997 and 1999. Between 1999 and 2001, however, the trend was reversed, and ethical companies were clearly superior performers.

The conclusion is that larger UK companies perform better than companies without an ethical code, as the ethical proved to have its results on ethical behavior.

Baptiste De Vleeschauwer

Article: http://www.s145828053.websitehome.co.uk/DBEPsumm.htm

(1): source: http://www.s145828053.websitehome.co.uk/DBEPpr.htm

The ethical advantage

This article handles a case study on the managerial duty to combine short term goals as well as long term achievements, while working by a certain code of conduct and following the ethical rules. Just like my previous post, i'll summarise just the most interesting part of the article. I believe the other parts could be usefull in the debate or the presentation, but it doesn't add much value on this blog.

Article


Summary

Even though companies post excellent short term results, the lack of ethical behavior could lead to a breakdown in the long run. This was illustrated in the past by companies such as Enron, Arthur Andersen, etc. Today’s leaders are facing the hard challenge of combining both short term results for investors and long term results for the multiple stakeholders. But does building an ethical culture really pay off?

There are two major arguments used to substantiate the use of ethics. The first one is the fact that you have to act right, because it is the right thing to do. Second one is that when you don’t act right, that you’ll get fined or sued. In this article, a third reason is described.

What does the ethical advantage actually mean?

-          Balancing the interests of various stakeholders

-          Leadership effectiveness

-          Process integrity

Balancing the interests of various stakeholders means that companies should think more in the long term, rather than the short term goals.

Leadership effectiveness means that managers and executives of a firm have to give the right example, they have to introduce the code of conduct throughout the whole company.

Process integrity refers to how well ethical behavior is incorporated in the firm. Whether or not all employees feel the same about doing the right thing.

Regards,

Olivier Goossens

EBEN

The European Business Ethics Network is a non-profit association founded in 1987. It is an international network that promotes the ethical standards in companies. The welcome page on their site clarifies their most important objectives, namely:

-to promote ethics and excellence in businesses;
-to increase awareness about ethical challenges in the global marketplace;
-to enable dialogue on the role of business in society.


The EBEN tries to reach as many people as possible by organizing conferences, fora, etc.
In over 40 countries, the members of EBEN come together to exchange views on different aspects of ethical behavior in a company. You can join a national network and an international network. But either way the members meet plenty of academics, practitioners or representatives from companies in order to discuss the ethics required in a business.


I think it is interesting to know that there are organizations that try to keep up the current growth of ethical behavior and help out companies that are struggling with their ethical policy.


Here is a list of affiliated networks around the world:

• Cercle d’Éthique des Affaires: www.cercle-ethique.net
• Institute of Business Ethics: www.ibe.org.uk
• Ethics & Compliance Officer Association: www.theecoa.org
• International Society for Business Economics and Ethics: www.isbee.org
• Business Ethics Network of Africa (BEN-Africa): www.benafrica.org
• Héraclite: www.heraclite.be
• Globethics.net Library: www.globethics.net
• EFMD (European Foundation for Management Development): www.efmd.org

Benoit Germonpré


http://www.eben-net.org/index.php

The World's Most Ethical Companies

Every year, the Ethisphere Institute does research to find the most ethical companies in the world. The Ethisphere Institute is an organization that tries to promote business ethics.


This year, a list of 100 companies has been made, and 79 of those are American companies. There is no winner because the companies are listed alphabetically. 


The winning companies are chosen trough various rounds. In the first round a committee of leading attorneys, professors, government officials and organization leaders chose the categories on which Ethisphere  should pay attention. Semi finalists are decided on the business strategy of the investigated companies. Finally, the companies have to reply to a survey questionnaire. The companies get points for their answers in seven marked categories, which are :

1. Corporate Citizenship and Responsibility

2. Corporate Governance;

3. Innovation that Contributes to the Public Well Being

4. Industry Leadership

5. Executive Leadership and Tone from the Top

6. Legal, Regulatory and Reputation Track Record

7. Internal Systems and Ethics/Compliance Program.

In the Healthcare Industry there are five winners, including Cleveland Clinic and John Hopkins. Google was one of the winners for Internet Services. Ford Motor Company gets the title of an ethical company as well. And France's L'Oreal and Japan's Kao are examples of not american based winners.

As we already know, the consumers attach great importance to the ethics of a company. So if you are listed in this list of the most ethical companies in the world, it is clearly an advantage. But this list is an example for the other companies as well. They must now try to improve their business ethics in order to be listed among the winners next year.

Benoit Germonpré

http://www.suite101.com/content/the-worlds-most-ethical-companies-a220217