Primark and its Business Ethics
Primark and its Business Ethics
1. Introduction
This written case study is being prepared from the point of view of an ethical or sustainability auditor for Primark Company. Thus, this would narrate in detail what Primarks ethical situations are and why its management needs to address ethical issues for company. The paper would also identify by reference to some theoretical frameworks from the course a range of stakeholders that are affected these issues or how they would affect the operations of the company. Two or three salient ethical or sustainable of these issues that the company faces in conducting its business would also indentified and analyzed with reference to three carefully chosen ethical theories with justification of the choices made. The last part would critically reflect on how this situation might be seen as risk for the reputation of the organization and suggest ways in which the situations might be improved, including this researchers own moral frame of reference in the discussion.
2.0 Analysis and Discussion
2.1 Narrative detail about Primark or context chosen making it clear why it is of interest and keeping it relevant.
Primark Company claims to be a subsidiary company within the Associated British Foods (ABF) group and thus declares to share the latters core values such as taking care of its people, being good neighbours and fostering ethical business relationships. The same may be true also in sharing the groups overriding principles as to employment conditions, human rights, business practices, suppliers and other stakeholders (Primark, 2010).
By claiming too as an international business with a global supply chain, the Primark accepts the responsibility to trade ethically which includes ensuring that its suppliers live up to its values and behave as well towards its employees and management. With about not less half a thousand suppliers in more than fifteen countries, it is an enormous challenge for Primark to fulfil its declarations for its ethical responsibilities in the lights of reported of reported shortcomings in its work practices and employment of child labour by its suppliers (McDougall, 2009 BBC News, 2008). A keen observer may see these reported shortcomings or violations as a way to reduce cost or to sustain profitability in competitive world thus, the company may be resorting to strategies that may not be consistent with its ethical beliefs or declarations. Primark also declares to purchase in large volumes which may be interpreted as a way to attain economies of scale in relation to the need to remain financial feasible. On the other hands, it declares as well to be aiming also to build long-term relationship with suppliers that it can trust while adhering to its ethical responsibilities. Thus the company also claims its business to be directly contributing to the employment of less than a million of workers across three continents which may mean delivering societal and economic expectations, from another perspective (Primark, 2010).
2.2. Identify by reference to some theoretical framework from the course a range of stakeholders that are affected by or affect the operations of the company.
The range of stockholders that are affected or affect the operations of the company include the following The stockholders, the customers, the management, the employees, the customers, the government and the rest of the community including the non-governmental organizations (NGOs).
These stakeholders could be classified into core, strategic, and environmental. Cores stakeholders may include the customers, shareholders, employees and suppliers as they are essential to the survival of the firm. Without the core shareholders there is no way the company could even exist. Strategic stakeholders may include the suppliers or creditors are vital to the financial health of the organization. These stakeholders could help the company leveraging any threats of the industry by establishing a continuous supply and may be taken advantage from the opportunities that Primark faces by acquiring competitive advantage compared with the other industry players which could not avail the same.
Environmental stakeholders may include the government, the non-government organizations that may be exerting some influence on citing possible violation or shortcoming on news of child labour and some working practices of the company. They are considered as such since they could not be part of the core and strategic stakeholders.
There is also a need to prioritize these stakeholders in terms of legitimacy, power and urgency. Legitimacy refers to the perceived validity of the stakeholders claim to the stake and this may be true to almost all the stakeholders in Appendix A. Power refers to the ability or capacity of stakeholder to produce an effect and they may include the same core stakeholders and in addition, the government. On other hand, urgency which refers to the degree to which the stakeholders claim demands immediate action, may apply to NGOs and other cause oriented groups, suppliers and shareholders (Mitchell, Agle, and Wood, 1997). See Appendix A. As found the company must give priority those that are legitimate, urgent and powerful at the same time so that it can take advantage of industry opportunities and protect itself from industry threat.
The issue of determining the most important or core stakeholders to the company is a matter of value since every stakeholder is important to the company. For the purpose of this paper, most important stakeholders include the customers, whose need will have to be satisfied and such demand created a business opportunity for shareholders to earn a reasonable return from their investments. But stockholders need to act through management whom they have elected into response positions.
Management needs people who are called employees to deliver goods and service to customers. Thus both management and employees are core stakeholders. But since goods and services must be supplied to by suppliers or creditors, the latter are also considered core stakeholders.
The government is also important in ensuring peace and compliance with other laws for the efficient and effective operation of the company but this paper considers them as environmental along with the NGO and other cause-oriented groups.
2.3 Identify two or three salient ethical or sustainable issues the company faces in conducting its business. Analyze these issues by reference to three carefully chosen ethical theories, justifying the choices you make. Focus on applying theory rather than describing theory.
Two salient ethical or sustainable issues the company faces in conducting its business include its working practices like employing illegal immigrants, its having suppliers, which are employing child labour and other allegedly reported problems in relation to trade unions and labour rights.
In 2006, Primark was reported to have joined the Ethical Trading Initiative (ETI), which is a mutual organization combining businesses, trade unions and NGOs for labour rights in their supply chains. Since ETI members are committed code of conduct implementation using as basis the International Labour Organizations core conventions (Ethical Trading Initiative, 2010), it can be argued that a prior issue that may have involved Primark to necessitate in joining ETI. The company was also reported to have committed alleged use of illegal immigrant labour which was alleged to have paid less than the UK legal minimum wage (McDougall, 2009).
As to child labour issue, the BBC had broadcasted about manufacturing practices sometime in 2008 where it considered Primarks supply chain practice to be unethical. In said report three of Indias garment factories appeared to have sub-contracted by Primark (BBC News, 2008). The BBC alerted Primark to their findings and this have caused the company to halt business with the mentioned suppliers (BBC News, 2008).
To apply Kantianism and utilitarianism in the case of Primark Co, there is need to know first what these terms are. Kantianism argues that ethical acts that are carried for dutys sake where duty is defined as obedience to the Moral Law. The theory appears to argue for universality of ethical acts as long as they are in accordance with moral law. Taking from this definition in judging whether it is ethical for Primark to possibly have maintained its declared corporate value of delivering value customer and yet may have tolerated wrongful working practices and allowed its suppliers to employ child labour, it is important to determine whether duties are indeed carried out. It may be asserted that the companys management may be just doing its duty to provide the shareholders their needed return. However, the company appears to be duty bound also to respect human rights, where violation may be noted in relation to allegedly reported violations in terms of some of its working practices and allowing child labour in its supply chain. Since the company considers its stockholders as part first priority and therefore part of its core stakeholders, it must make the business profitable by operating above cost of capital to compensate for the risks faced by stockholders. The decision however may conflict with the other duty to other core stakeholders since allowing such practices could violate human rights of child and some employees. This poses a conflict in applying Kantian ethics and to address its limitations this paper will integrate utilitarianism as additional ethical theory.
Under this latter theory, morality can be attained by making the world a better place such as by setting aside self-interest. Thus an ethical may have to adhere to utility or usefulness on generating something of intrinsic value such as happiness to number of people in order to justify its business practice.
Primark can therefore justify its ethical acts the consequences of its decisions when stakeholders are made happier even if the same may have to violate some of the requirements of Kantian ethics. Since it would benefit many people by giving them employment, despite some criticism of some possible violations on working practices and child labour, the company may have indeed provided better alternatives to these people against massive unemployment because of the need to comply with some legal requirements. Since what is ethical is not necessarily legal, the company may have indeed more good than bad if it has kept more people employed that would give the latter to achieve satisfaction for some economic need.
It is clear that the most ethical under this theory is that which maximized the benefit to all humanity. It can be argued that employing people will provide them employment and giving such employment to children may just be way to help people by giving them employment which is a better alternative than no employment. At the same time, the company will benefit the customers since they could be acquiring the companys product at less price compared with competitors.
How ethics of care can be applied in the case of Primark Primark can further find ethical justification in its ethical situations using ethics of care where the roles of mutual interdependence and emotional response are emphasized instead of the traditional generalized application as in the case of Kantian ethics. Ethics of care sees more the need of vulnerable, dependent and frail people desiring an deserving moral response. It is therefore a case to case method and may not find complete agreement with Kantian but may be a little close to utilitarianism because of the need to judge the acts by the consequences of the acts (Beauchamp and Childress, 2001).
To apply the theory in the case of Primark, it can be argued that providing the most immediate need of people in the poor countries where getting employment is matter of survival, the reality of providing below standard working conditions or giving the illegal immigrants wages below UK living standard may just be lesser evils in the point of view of those who will need the employment. Although it may be viewed by some that such is violation of human rights from the strict sense of the word, making employment on temporary arrangement to ensure survival may still be viewed as ethical using ethics of care if such practice would be done in the spirit of mutual assistance and as an emotional response to an otherwise would-be hungry people without the employment as provided directly or indirectly by Primark.
2.4 Critically reflect on how this situation might be seen as risk for the reputation of the organization.
The situation of not completely avoiding doubtful working practices and child labour in its supply chain may be seen as risk for the reputation of the organization because of the increased globalization with increased need to comply with need to requirement of international human rights. Over the long-run the incapability to sustain the primacy of human rights which have become universal may eventually affect the profitability of the company since the effects could be worse if they will be made accountable under international law as a result of increasing globalization (Crane and Matten, 2007).
2.5 Suggest ways in which the situation might be improved, including your own moral frame of reference in your discussion.
To improve the situation, the company can do the following It should attend to its most salient stakeholders as evaluated in terms of power, legitimacy and urgency. These stakeholders include it stockholders, it customer, its suppliers and employees. The company is however advised to consider the other stakeholders which are also important in the context of other areas. Since the urgency varies on the extent of damage that may be caused to the company at particular point in time, it is necessary that there must be a continuing reappraisal of stakeholder priorities in terms of the long-term and short-term impact, financially and economically Primark. This may take the form of continuing dialogues with all stakeholders groups.
3. Conclusion
It can be concluded that Primark needed to do something if the company is to promote its sustainability. This paper narrated in detail situation of the company on its working practices including the issues or questionable working practices and child labour in its supply chain, which may have move the company to join the ETI to achieve its need to practice business ethically as way to respond with demands stakeholders pressure. This paper has referred to the ethical theories of Kantianism and utilitarianism to address the issues and has applied the ethics of care in deciding, what the most ethical thing to do for company given its ethical situation. The paper has also justified the use of the use of the ethical theory in relation to addressing the issues that must face with priority under the given criteria in the paper in the order of which is most compelling to the least compelling. The paper has also further critically reflected on how this situation might be seen as risk for the reputation of the organization and suggested ways in which the situation might be improved, including this researchers own moral frame of reference in the discussion.
This written case study is being prepared from the point of view of an ethical or sustainability auditor for Primark Company. Thus, this would narrate in detail what Primarks ethical situations are and why its management needs to address ethical issues for company. The paper would also identify by reference to some theoretical frameworks from the course a range of stakeholders that are affected these issues or how they would affect the operations of the company. Two or three salient ethical or sustainable of these issues that the company faces in conducting its business would also indentified and analyzed with reference to three carefully chosen ethical theories with justification of the choices made. The last part would critically reflect on how this situation might be seen as risk for the reputation of the organization and suggest ways in which the situations might be improved, including this researchers own moral frame of reference in the discussion.
2.0 Analysis and Discussion
2.1 Narrative detail about Primark or context chosen making it clear why it is of interest and keeping it relevant.
Primark Company claims to be a subsidiary company within the Associated British Foods (ABF) group and thus declares to share the latters core values such as taking care of its people, being good neighbours and fostering ethical business relationships. The same may be true also in sharing the groups overriding principles as to employment conditions, human rights, business practices, suppliers and other stakeholders (Primark, 2010).
By claiming too as an international business with a global supply chain, the Primark accepts the responsibility to trade ethically which includes ensuring that its suppliers live up to its values and behave as well towards its employees and management. With about not less half a thousand suppliers in more than fifteen countries, it is an enormous challenge for Primark to fulfil its declarations for its ethical responsibilities in the lights of reported of reported shortcomings in its work practices and employment of child labour by its suppliers (McDougall, 2009 BBC News, 2008). A keen observer may see these reported shortcomings or violations as a way to reduce cost or to sustain profitability in competitive world thus, the company may be resorting to strategies that may not be consistent with its ethical beliefs or declarations. Primark also declares to purchase in large volumes which may be interpreted as a way to attain economies of scale in relation to the need to remain financial feasible. On the other hands, it declares as well to be aiming also to build long-term relationship with suppliers that it can trust while adhering to its ethical responsibilities. Thus the company also claims its business to be directly contributing to the employment of less than a million of workers across three continents which may mean delivering societal and economic expectations, from another perspective (Primark, 2010).
2.2. Identify by reference to some theoretical framework from the course a range of stakeholders that are affected by or affect the operations of the company.
The range of stockholders that are affected or affect the operations of the company include the following The stockholders, the customers, the management, the employees, the customers, the government and the rest of the community including the non-governmental organizations (NGOs).
These stakeholders could be classified into core, strategic, and environmental. Cores stakeholders may include the customers, shareholders, employees and suppliers as they are essential to the survival of the firm. Without the core shareholders there is no way the company could even exist. Strategic stakeholders may include the suppliers or creditors are vital to the financial health of the organization. These stakeholders could help the company leveraging any threats of the industry by establishing a continuous supply and may be taken advantage from the opportunities that Primark faces by acquiring competitive advantage compared with the other industry players which could not avail the same.
Environmental stakeholders may include the government, the non-government organizations that may be exerting some influence on citing possible violation or shortcoming on news of child labour and some working practices of the company. They are considered as such since they could not be part of the core and strategic stakeholders.
There is also a need to prioritize these stakeholders in terms of legitimacy, power and urgency. Legitimacy refers to the perceived validity of the stakeholders claim to the stake and this may be true to almost all the stakeholders in Appendix A. Power refers to the ability or capacity of stakeholder to produce an effect and they may include the same core stakeholders and in addition, the government. On other hand, urgency which refers to the degree to which the stakeholders claim demands immediate action, may apply to NGOs and other cause oriented groups, suppliers and shareholders (Mitchell, Agle, and Wood, 1997). See Appendix A. As found the company must give priority those that are legitimate, urgent and powerful at the same time so that it can take advantage of industry opportunities and protect itself from industry threat.
The issue of determining the most important or core stakeholders to the company is a matter of value since every stakeholder is important to the company. For the purpose of this paper, most important stakeholders include the customers, whose need will have to be satisfied and such demand created a business opportunity for shareholders to earn a reasonable return from their investments. But stockholders need to act through management whom they have elected into response positions.
Management needs people who are called employees to deliver goods and service to customers. Thus both management and employees are core stakeholders. But since goods and services must be supplied to by suppliers or creditors, the latter are also considered core stakeholders.
The government is also important in ensuring peace and compliance with other laws for the efficient and effective operation of the company but this paper considers them as environmental along with the NGO and other cause-oriented groups.
2.3 Identify two or three salient ethical or sustainable issues the company faces in conducting its business. Analyze these issues by reference to three carefully chosen ethical theories, justifying the choices you make. Focus on applying theory rather than describing theory.
Two salient ethical or sustainable issues the company faces in conducting its business include its working practices like employing illegal immigrants, its having suppliers, which are employing child labour and other allegedly reported problems in relation to trade unions and labour rights.
In 2006, Primark was reported to have joined the Ethical Trading Initiative (ETI), which is a mutual organization combining businesses, trade unions and NGOs for labour rights in their supply chains. Since ETI members are committed code of conduct implementation using as basis the International Labour Organizations core conventions (Ethical Trading Initiative, 2010), it can be argued that a prior issue that may have involved Primark to necessitate in joining ETI. The company was also reported to have committed alleged use of illegal immigrant labour which was alleged to have paid less than the UK legal minimum wage (McDougall, 2009).
As to child labour issue, the BBC had broadcasted about manufacturing practices sometime in 2008 where it considered Primarks supply chain practice to be unethical. In said report three of Indias garment factories appeared to have sub-contracted by Primark (BBC News, 2008). The BBC alerted Primark to their findings and this have caused the company to halt business with the mentioned suppliers (BBC News, 2008).
To apply Kantianism and utilitarianism in the case of Primark Co, there is need to know first what these terms are. Kantianism argues that ethical acts that are carried for dutys sake where duty is defined as obedience to the Moral Law. The theory appears to argue for universality of ethical acts as long as they are in accordance with moral law. Taking from this definition in judging whether it is ethical for Primark to possibly have maintained its declared corporate value of delivering value customer and yet may have tolerated wrongful working practices and allowed its suppliers to employ child labour, it is important to determine whether duties are indeed carried out. It may be asserted that the companys management may be just doing its duty to provide the shareholders their needed return. However, the company appears to be duty bound also to respect human rights, where violation may be noted in relation to allegedly reported violations in terms of some of its working practices and allowing child labour in its supply chain. Since the company considers its stockholders as part first priority and therefore part of its core stakeholders, it must make the business profitable by operating above cost of capital to compensate for the risks faced by stockholders. The decision however may conflict with the other duty to other core stakeholders since allowing such practices could violate human rights of child and some employees. This poses a conflict in applying Kantian ethics and to address its limitations this paper will integrate utilitarianism as additional ethical theory.
Under this latter theory, morality can be attained by making the world a better place such as by setting aside self-interest. Thus an ethical may have to adhere to utility or usefulness on generating something of intrinsic value such as happiness to number of people in order to justify its business practice.
Primark can therefore justify its ethical acts the consequences of its decisions when stakeholders are made happier even if the same may have to violate some of the requirements of Kantian ethics. Since it would benefit many people by giving them employment, despite some criticism of some possible violations on working practices and child labour, the company may have indeed provided better alternatives to these people against massive unemployment because of the need to comply with some legal requirements. Since what is ethical is not necessarily legal, the company may have indeed more good than bad if it has kept more people employed that would give the latter to achieve satisfaction for some economic need.
It is clear that the most ethical under this theory is that which maximized the benefit to all humanity. It can be argued that employing people will provide them employment and giving such employment to children may just be way to help people by giving them employment which is a better alternative than no employment. At the same time, the company will benefit the customers since they could be acquiring the companys product at less price compared with competitors.
How ethics of care can be applied in the case of Primark Primark can further find ethical justification in its ethical situations using ethics of care where the roles of mutual interdependence and emotional response are emphasized instead of the traditional generalized application as in the case of Kantian ethics. Ethics of care sees more the need of vulnerable, dependent and frail people desiring an deserving moral response. It is therefore a case to case method and may not find complete agreement with Kantian but may be a little close to utilitarianism because of the need to judge the acts by the consequences of the acts (Beauchamp and Childress, 2001).
To apply the theory in the case of Primark, it can be argued that providing the most immediate need of people in the poor countries where getting employment is matter of survival, the reality of providing below standard working conditions or giving the illegal immigrants wages below UK living standard may just be lesser evils in the point of view of those who will need the employment. Although it may be viewed by some that such is violation of human rights from the strict sense of the word, making employment on temporary arrangement to ensure survival may still be viewed as ethical using ethics of care if such practice would be done in the spirit of mutual assistance and as an emotional response to an otherwise would-be hungry people without the employment as provided directly or indirectly by Primark.
2.4 Critically reflect on how this situation might be seen as risk for the reputation of the organization.
The situation of not completely avoiding doubtful working practices and child labour in its supply chain may be seen as risk for the reputation of the organization because of the increased globalization with increased need to comply with need to requirement of international human rights. Over the long-run the incapability to sustain the primacy of human rights which have become universal may eventually affect the profitability of the company since the effects could be worse if they will be made accountable under international law as a result of increasing globalization (Crane and Matten, 2007).
2.5 Suggest ways in which the situation might be improved, including your own moral frame of reference in your discussion.
To improve the situation, the company can do the following It should attend to its most salient stakeholders as evaluated in terms of power, legitimacy and urgency. These stakeholders include it stockholders, it customer, its suppliers and employees. The company is however advised to consider the other stakeholders which are also important in the context of other areas. Since the urgency varies on the extent of damage that may be caused to the company at particular point in time, it is necessary that there must be a continuing reappraisal of stakeholder priorities in terms of the long-term and short-term impact, financially and economically Primark. This may take the form of continuing dialogues with all stakeholders groups.
3. Conclusion
It can be concluded that Primark needed to do something if the company is to promote its sustainability. This paper narrated in detail situation of the company on its working practices including the issues or questionable working practices and child labour in its supply chain, which may have move the company to join the ETI to achieve its need to practice business ethically as way to respond with demands stakeholders pressure. This paper has referred to the ethical theories of Kantianism and utilitarianism to address the issues and has applied the ethics of care in deciding, what the most ethical thing to do for company given its ethical situation. The paper has also justified the use of the use of the ethical theory in relation to addressing the issues that must face with priority under the given criteria in the paper in the order of which is most compelling to the least compelling. The paper has also further critically reflected on how this situation might be seen as risk for the reputation of the organization and suggested ways in which the situation might be improved, including this researchers own moral frame of reference in the discussion.
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