Primark and Ethical Business.Doc

Primark and Ethical Business Introduction Primark the leading clothing retailer Rapid changes in media, transport and communications technology have made the world economy more interconnected now than in any previous period of history. Nowhere is this more evident than in the world of textile manufacture and clothing distribution. Consumers want fashionable clothes at affordable prices. Much of high street fashion is produced in various countries across the world. Businesses source clothes from countries like India, China, Bangladesh and Turkey because of lower material and labour costs in these countries.

In order to meet consumer demand, Primark works with manufacturers around the world. Primark is part of Associated British Foods (ABF), a diversified international food, ingredients and retail group. Primark has almost 200 stores across Ireland, the UK, Spain, Netherlands, Germany, Belgium and Portugal. Primark’s annual turnover accounts for a significant proportion of ABF”s revenues and profit. Primark’s target customer is fashion-conscious and wants value for money. Primark can offer value for money by: •Sourcing products efficiently •Making clothes with simpler designs •Using local fabrics and trims Focusing on the most popular sizes •Buying in volume •Not spending heavily on advertising.

The largest Primark store is located on Market Street, Manchester, England. Some 100,000 sq ft (9,300 m2) of retail space is spread across its three floors. It took over from Liverpool in 2008 after TK Maxx moved from the basement floor to the Arndale Centre, allowing Primark to further expand Corporate Social Responsibility Every business has the corporate social responsibility (CSR) to be Ethical in its business environment and CSR is about responsibility to all stakeholders and not just shareholders.

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What is Stakeholder? A person, group or organisation, has direct or indirect stake in an organisation because it can affect or be affected by the organisation’s actions, objectives and policies. Key stakeholders in a business organisation include its creditors, customers, directors, employees, government agencies, owners, suppliers, unions and the community from which the business draws its resources. What are Business Ethics? Ethics are moral guidelines which govern good behaviour so behaving ethically is doing what is morally right Behaving ethically in business is widely regarded as good business practice. Being good is good business” (D. Anita Roddick) “A business that makes nothing but money is a poor kind of business” (Henry Ford) Code of Practice A common approach is to implement a code of practice. Ethical codes are increasingly popular – particularly with larger businesses and cover areas such as: Corporate social responsibility Dealings with customers and supply chain Environmental policy & actions Rules for personal and corporate integrity Primark from Ethical to Unethical Business

Let’s take one of the above stakeholders the suppliers to analyse how the suppliers and supply chain can affect the business ethics and can make a business unethical business. A business cannot claim to be ethical firm if it ignores unethical practices by its suppliers. Use of child labour and forced labour, Production in sweatshops, Violation of the basic rights of workers, Ignoring health, safety and environmental standards. An ethical business has to be concerned with the behaviour of all businesses that operate in the supply chain i. e.

Suppliers, Contractors, Distributors, Sales agents. So the Primark could not consider and concentrate on the supply chain of its suppliers who were hiring the child labour in the factories in various states of India and Bangladesh. Those suppliers were the main source of Primark retail clothing products in UK and. This issue was exposed by The Observer, The Independent News and the BBC panorama. Primark declared as least ethical business Primark, the discount clothing chain beloved of bargain hunters, has been rated the least ethical place to buy clothes in Britain.

Primark scores just 2. 5 out of 20 on an ethical index that ranks the leading clothing chains on criteria such as workers’ rights and whether they do business with oppressive regimes. Mk One and Marks & Spencer were ranked second and third worst for ethics by Ethical Consumer magazine (By Martin Hickman Consumer Affairs Correspondent Thursday, 8 December 2005, The Independent news) The Ethical Trading Initiative (ETI) The Ethical Trading Initiative (ETI), of which Primark is a member, has undertaken an investigation in to the reports.

The ETI confirmed to Drapers this week that the investigation was ongoing and no conclusion had yet been reached. Primark refutes the claims stating it can offer “good value and good quality because of low mark-ups and big volumes. We use simple designs, our overhead costs are extremely low and we don’t run expensive advertising campaigns. ” ‘Lapse in standards’ “The information provided by the BBC enabled us to identify that illegal sub-contracting had been taking place and to take action accordingly,” Primark explained. According to Primark, the garments affected accounted for 0. 4% of the retailers’ worldwide sourcing. It added that “the sub-contracting involved home working and in some instances children were also found to be working at home” “We take this lapse in standards very seriously indeed,” said Primark, which is owned by Associated British Foods “Under no circumstances would Primark ever knowingly permit such activities, whether directly through its suppliers or through third party sub-contractors. ” The Primark supplier in question, a major Indian exporter called Fab n Fabric, had employed a subcontractor who had discovered the ultimate disposable workforce: child refugees.

Primark’s Code of conduct and Initiatives taken Under the terms of its code of practice for suppliers, Primark prohibits the use of child labour in its manufacturing chain. Primark says it will terminate relations with suppliers guilty of certain “transgressions” and those unwilling to make the “necessary changes” to their employment practices when breaches of its code are uncovered. Primark and Stakeholders Engagement Primark sacked the three suppliers before being hit by a wave of negative publicity inevitably coming its way from the documentary.

The firm, owned by Associated British Foods, said it had made the statement to fulfil a responsibility to shareholders, not – as cynics suggested – to lessen the shock of an international expose. The retailer said that, as soon as it was alerted to the practices over a month ago by The Observer and the BBC it cancelled new orders with the factories concerned and withdrew thousands of garments from its stores. A statement from Primark Stores on Bangladesh 19/11/2010 A Primark spokesman said: “Primark shares and recognises many of the concerns raised by No Sweat.

We acknowledge that conditions for workers in some factories do not always meet them high standards that we and other brands sourcing from these factories, expect. Primark believes ethical business practices are of the highest importance and that is why we work tirelessly with our supplies and other stakeholders, including those in Bangladesh, to raise standards and the welfare of the workers that depend on the orders placed at these factories. Primark is working in several ways to continually improve ethical standards and working conditions among suppliers.

Primark’s Initiatives and Working with stakeholders Working closely with external partners featured strongly in much of what Primark achieved during 2010. Highlights include the following: Primark in Bangladesh In Bangladesh, 16 of the factories from which we buy have been working with Nari Uddug Kendra (NUK), an NGO that focuses on women’s rights. Together, Primark and NUK have provided training for factories on how to manage workers more fairly, and educate them about their rights. In 2009, 974 workers received training through this programme.

Furthermore, Primark has created a new Ethical Trade Manager position in Bangladesh. One of the first initiatives to be launched by the Ethical Trade Manager will be tailored ethical training for suppliers in Bangladesh. Further plans are underway to recruit a female Ethical Trade Executive with a specific remit to focus on women’s issues in factories, which we know are particularly important I this context. Primark in China In China and Bangladesh, Primark began projects that aim to create long-term, sustainable improvements in labour standards and provide living wages for people.

Several visits had been undertaken to both countries in 2009, to identify suppliers, factories and local implementation partners including NGOs, worker organisations, employer associations, and technical experts. Primark in India In southern India we are working at grassroots level with an NGO to understand and address the challenges faced by workers in communities where Primark’s products are made. The programme includes surveys to identify workers, families and children at risk, as well as providing a counselling service and helpline for people.

A core part of this initiative is worker education and we have established groups that look at issues from hygiene and personal development to gender equality and workplace rights. Primark with International Organisations Through Primark’s membership of the ILO and International Finance Corporation (IFC) Better Work programme, we engage and collaborate with retailers and labour experts within countries to provide localised supplier training, remediation and worker engagement.

Primark’s supplier factories in Vietnam are part of the initiative, and we support the efforts and plans of the ILO to implement the programme in other countries from which we source. Primark and BSR This year Primark joined Business for Social Responsibility (BSR), a CR organisation with over 250 corporate members. Primark is an active member of the BSR Mills and Sundries working group, a coalition of clothing retailers which looks at ethical and environmental performance within spinning mills, dye-houses and sundry manufacturers.

BSR also worked with Primark on identifying key trends in labour migration in China, and how Primark suppliers could mitigate potential labour shortages through good human resource management. Finally, we are proud that Primark is BSR’s partner in Bangladesh for the health enabled returns programme, a groundbreaking initiative that provides healthcare and education for women in factories. Primark and ETI

As a member of the Ethical Trading Initiative (ETI), Primark continued to be actively involved in a number of ETI groups in 2010 relating to the following: General Merchandise, Home working Principles of Implementation, Annual Report, Purchasing Practices, and China. Primark also increased its collaborative efforts with other brands, via membership of cross-brand forums in a number of countries as well as more informal joint efforts on supplier remediation. As 95% of the factories that supply Primark also supply other retailers, this joined-up approach is one of the best ways to achieve progress

Primark altered internal system Primark has brought many changes in its internal system to meet the requirements of Ethical Trading Initiative and to over come the issue of least ethical business. Appointment of Ethical trade Director Team The Primark has employed Katharine Kirk, from Gap Inc, as Ethical Trade Director. No new supplier can be appointed without being audited, and then Cleared by her. Primark has been steadily expanding the size of its own ethical trade staff over the last 2 years. In-house there is currently an 8 person team (including the Director).

Recent additions to the team include a new Ethical Trade Manager in Bangladesh and plans are underway to recruit a female Ethical Trade Executive for Bangladesh with a specific remit to focus on women’s issues in factories. Primark also has a new Ethical Trade Manager in Turkey, and a new Ethical Trade Executive to add to the strength of the existing team in India. The aim is to have in place a team of 15 by the end of 2010. Monitoring and Auditing In 2009 Primark had conducted over 1080 audits, which is almost double the number in 2008 (533 audits).

The growing in-house ethical team, new third party auditor partners, and the online audit database are helping to support this growth. Audits are accompanied by a remediation programme for each supplier as required. This is the accepted way the industry seeks to raise standards. Primark uses a mix of our own in-house and third party auditors. Third party auditors performed around 70% of our audits last year. So the Primark is increasing the number of them. Most of their visits are unannounced or semi-announced.

They are paid for by Primark, to reduce the burden on suppliers and factories. The focus of Primark’s auditing programme is the top 250 suppliers which represent 87. 6% of the selling value of the business. Primark had audited all suppliers ranked in the top 250 by the end of 2009. Primark audit according to: Level of turnover with a supplier, proportion of a supplier’s production that is dedicated to our business, country of manufacture, risk of production process, any other information about a particular supplier or factory that identifies risk.

However, Primark recognised that audits are a necessary, but not sufficient, part of the solution to raising standards in the supply chain. Much is dependent on remediation and training. Remediation plan with Factories Primark has third party auditors and staff works out a remediation plan with each factory after an audit, and then a follow-up is conducted, mainly by our own team members. More than half the audits we do are follow-ups (55% of Audit in 2009) 18 months ago Primark began work on a new, cutting-edge, online audit management system.

BSI Entropy’s management system helps us to keep track of non-compliances at the individual production site, as well as at country and buying department levels. The system helps us to follow up non compliances in a timely manner and identify root causes of problems and where additional training is required. Primark has established a dedicated living wages projects in China and Bangladesh. The lessons learned and models developed will be rolled out more widely within Primark’s supply base. The project entails using local experts in each country – NGOs, trade unions and productivity experts – to improve the systems within the factories.

Primark buyers will also be involved in encouraging factories to make the necessary changes, sharing knowledge and experience with the factory management, as well as looking at how they can improve the way they buy – for example by paying close attention to the timing and volume of orders so as not to overstrain the factory. Training programmes
• All Primark buyers and key personnel have been trained in ethical trade. In total this has covered 209 staff equating to over 1,672 hours worth of dedicated ethical trade training.
• New staff members are also given training on ethical trade during their induction.

Ethical trade training was provided to Primark’s China-based staff.
• The supplier training programme has been extended and dedicated events took place in China, the UK and India last year. In November Primark hosted 3 days of ET training for the top 50 Chinese suppliers and their factories in Shanghai. 192 individuals attended these sessions. In July 40 Irish and UK suppliers and factories attended one of the ethical trade workshops held in Reading and Birmingham Primark is about to launch a new Suppliers’ Extranet, an online information resource centre for suppliers which will include helpful training tools and guides for factories. Primark has also developed an online compliance training tool for suppliers with a specialist provider, so we can reach more factories, more quickly. Recommendations to improve Ethical Practices The ethical climate of a business organization can make the difference between a successful venture and an unsuccessful one, that there may be a connection between how a business is perceived and its internal ethical climate. Improving the ethical climate of your own business “enhances and preserves its reputation, inspires loyalty and advertises that it has its ethics message right.

It also fosters an ethical culture within the organization. ” Evaluating Ethical Behaviour I would like to recommend and suggest that companies should undergo internal ethics audits on a regular basis because that “the regular internal audit of the business organization’s ethics and compliance program adds great value to the organization. ” A business organization should take a “top-down” approach to ethics. By communicating and modelling behavioural standards from the highest levels of your business down to the entry-level positions.

So we can ensure that there is no “gap” between ethical standards and the actual behaviour of employees. By regularly evaluating these standards and the behaviour of your company’s leadership, you can effectively promote compliance to ethical behavioural norms for your organization. Educating Employees A business organisation should Increased focus in the business community regarding ethics-based issues has led to increased funding and research to increase ethical awareness.

One strategy to improve the ethical climate of your business organization is to offer or even require classes in business ethics. Business ethics classes at the local community college or even classes offered directly through the human resources department can be a practical and cost-effective way to offer ongoing ethics training and motivation. Protecting Employees One problem that might arise in the promotion of ethical guidelines to your orkforce is the fear employees may have regarding their role in reporting unethical or questionable behaviour by another employee or even a supervisor. Employees must be assured that they will be safe from retaliation from other employees or supervisors who might be turned in for engaging in questionable activities. The best way to make this assurance is to offer employees a confidential channel through which they can report bad behaviour. A company ethics hot line is one way to increase employee willingness to speak out.

Another might be a suggestion box kept in a secure location where other employees are not likely to see one of their fellow employees turning them in. Employees must be confidently assured that reporting bad behaviour is expected and safe. Supply chain sources Every business organisation should choose its supply chain sources with carefully and make sure that all your suppliers are taking care of human rights in their factories by visiting the factories of your business suppliers. Conclusion

For companies with plans to establish a more formal code of conduct and ethics program or to improve existing ones, the tone must be set at the top. Effective standards for ethical conduct must be initiated, supported, encouraged, and practiced by top management. Furthermore, a code of conduct cannot be effective if it is not adequately communicated and explained. Today’s technology provides various cost-effective methods for communicating an ethics code. These communication efforts should be provided in a steady stream even after the initial awareness campaign.

The advantages that are to be gained from formally practicing in ways that adhere to ethical principles include, the development of company documentation that guides and informs staff members on their proper conduct both during normal business interactions and during ethically-challenging situations; A better understanding by staff members of their responsibilities, and an ability to align their values with those of the organisation; The assumption of an appropriate level of accountability by staff members in identifying and anaging business risks; The facilitation of fairness and moral management in business activities; Increased trust from, and between, internal and external stakeholders.

Increased employee satisfaction; A more open-minded organisational culture in which the interests of the employer, employees, customers, suppliers, and other stakeholders are protected; An enhanced reputation within the community that helps attract new staff and customers, increases both public and community relations, and the potential for improved financial performance; and an enhanced reputation with competitors, governmental agencies and financial institutions by working with external agencies such as the International Labour Organization, the ETI and independent auditors, Primark helps to set and maintain standards.

Its auditors work with suppliers over a period of time to help them meet the exacting standards set out by the Ethical Trading Initiative. This enables the supplier to become approved. So the PRIMARK has proved it wrong that its business operations are unethical, by taking the key measures and introducing many changes in its internal and external operations. Now Primark’s operations are based on Based on international Labour code and this is Translated into 26 Languages and published on Primark website.

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