ABSTRACT

The report contain the main issues related to Textile

industry and its ethical issues globally and in
developing county like Pakistan. Examples of how the
ethics are not followed and what were the
consequences happened and what should be the ethics
of the fashion industry.

BUSINESS ETHICS Muhammad Mehdi Rizvi

ACZLAJ

OF TEXTILE
INDUSTRY
Business Ethic Report
Introduction on the Clothing Sector

Clothing sector is still a labour extensive sector which allows unskilled workers an easy
access to join at an entry level. There is little need for any qualification in order to join
the labour workforce in this sector. This skill has been established as means of income
for mankind centuries ago and since then we have seen variety of clothes provided for
and by them. At the end of eighteenth century, proper rules and regulations were
introduced on the functioning of this sector, giving it a status of an industry. This majorly
included laws pertaining to the import and export of goods. At the start of twenty first
century, under the guidance of World trade organization laws, we have seen the
liberalization of laws as per the agreements on tariffs and trade. This change affected
most of the industries in a big way. Clothing industry banks heavily on the textile
industry. Both of them work very closely to manufacture the finished products. All in all,
the agreements and the laws on Textile and Clothing helps regulates the businesses in
both industries. Every country around the globe has the resources to manufacture the
clothes for their respective population. Clothes with comparatively better quality are
generally exported to other countries.

Overview of Textile industry in the world:

As technology is evolving the different industries of the world is also innovating

and evolving every year as well. Textile and industry and fashion industry is also
evolving and changing rapidly. Textile industry is using new innovation to produce
garments and use different new ways to distribute the goods to shorten the time
and thus make the fashion fast. From making to final customer, the time period is
shorten from months to weeks because of these new ways and innovation. These
all changes cause the fashion fast and now a days number of fashion seasons
has increased to 50-100 micro seasons. The consumption or purchasing of the
apparels also increased greatly as well according to stats;
This 60 percent increase is making the industry more attractive, demanding and more
competition which result in conducting the business unethically and try to reduce the
cost and increase the price and result in the establishing factories in developing
countries such as India, Pakistan and Bangladesh.

Companies for last few decades implement the CSR as a part of the company policy
and try to make the industry and its workers healthy but because of few black sheep the
industry is still struggling and having major ethical issues Corporate Social Resonsibility
can be explained as the management technique which integrate and connect the social
and environmental concerns with the current business operation of the
organization(including stakeholders). CSR is generally understood as being the way
through which a company achieves a balance of economic, environmental and social
imperatives (“Triple-BottomLine- Approach”)

Strategies in 1970’s

Major companies were established which implemented better and new strategies
involving the better management of textiles and clothing simultaneously. This included
retailers who were involved in supply chain management. Wal Mart (which is now
world’s No.1 shopping mall) has successfully implemented these techniques in
expanding their services. Because of this development, the need for more workers
increased tremendously. This ultimately helped reduced the production costs. With the
help of cohesive supply chain, the businesses expanded into many different countries
and captured international markets.

Structure of the Clothing Industry

This industry is famous for its innovative, creative and adaptive aspects. With the
advancement in science and technology, the industry is also updating itself by adapting
modern technologies which helps in producing cheaper and better quality products. The
overall structure of the industry in older days was very simple and straight forward, but
with all the changes with respect to technology, labour, supply management and fashion
in the recent years, it has become a lot more complex yet very precise to understand.
Fashion and design sector of this industry is also playing an important role in its
outreach in different markets. With the emergence of retailers, the clothing industry is
divided into two major segments based on the pricing models of the final products.

One of these two major segments in the clothing industry is fashion industry. This
involves producing clothes designed by professional designers with highly skilled
workers and latest technologies being used for their development. Designers gain
competitive advantage in this market via their ability to produce new & innovative
designs for the fashion lovers. Initially these markets exist in developed countries but
now with the availability of higher spending power of middle/higher class, outlets of
these fashion designers can be seen flourishing in the developing countries as well.

The other side of the industry caters for the general market with mass production of
clothes like t-shirts, undergarments and daily use clothes worn by general public. The
quality of these clothes is generally low when compared with the other segment of
market. The mass production market has a lot of scope due to the fact that their
products are cheap and are a necessity for the living of human beings. This type of
market is generally found in the all developing countries of the world but also in the
developed countries catering to the needs to lower and middle income population.
To keep the production cost low for both segments of the industry, unethical working
conditions are prevailing in this industry. Every now and then this gets highlighted in the
media, both national and international.

Business Ethics in the Clothing Industry

For any business to work, code of conduct has to be followed in letter and spirit. Code
of conduct are a set of rules, which ensures the business follows ethical values and
restrict unethical practices at the same time. Recently, the clothing industry has revised
to a standardised code of conduct to be followed worldwide. These codes/rules are in
accordance to the standards of the International Labour Organisation regarding the
human rights at work, external trade partners, and labour legislation.

One of the important laws being debated is the “ethical ranks”. This will help enterprises
function properly in both developing as well as developed countries. These codes are
discussed with both the employers and the workers’ association in each country so that
the concept of ethical ranks can be implemented. This is required as many clothing
industries exists in developed countries with their production and supply chains in
developing countries. Their trade partners in the developing countries are seen as the
suppliers who must follow the code of conduct for the delivery of orders.

Standard code of conduct is required for all the parties involved rather than just one
party as all should be held accountable to same standards of ethics and work
environment. Governments in the developing countries are also encouraging the
employers to promote ethical values and human rights at work places. They are also
trying to spread awareness on the economic importance of providing decent working
conditions. All these efforts have seen mixed results so far due to inherent inertia and
initial cost impacts that the industry has to bear to remove some barriers. Success rate
in formal sector in adopting human rights at work is higher than the informal side, as it
constitutes of people who are mostly illiterate and unskilled. Hopefully with the
implementation of proper laws, the working and living conditions of the workers would
change for the better for all the workers in the industry.
Employment in the Clothing Industry

Most of the companies working in clothing industry are in US or Europe. Initially they
had their production facilities within their own countries but with introduction of new laws
and better supply change management, most of the labour in the developed countries
has reduced and the production facilities have either moved to developing countries or
production being done by third party suppliers in those developing countries. These
developing countries include China, India, Bangladesh, Pakistan, Vietnam &
Philippines.

The reason of moving production facilities to these developing countries is, cheaper
unskilled labour and availability of raw materials. This resulted in millions of low level
jobs getting transferred to the developing countries from the developed ones.

Textile industry in Pakistan:

The Textile industry in Pakistan is the one of the largest industry in
manufacturing sector in Pakistan. In general Pakistan is the 8th largest exporter of
textile goods in Asia and compete with the big players such as China and India. In
terms the spinning capacity of the country contribute more than 5 percent globally.
In 2014-2015 country owns 442 spinning units and 124 large spinning units.
Textile sector provide with almost 10 percent of the total GDP of Pakistan which
show the size of the industry. Because it is one of the leading industry in
manufacturing sector of Pakistan it also provide 45 percent of the labor force jobs
in the country (and 38% of the manufacturing workers works in this sector
alone).Other aspect of this industry in Pakistan is that the country comes 4th when
it comes to the production of the cotton. 

Ethical issues in Pakistan textile industry with examples:

Major ethical issues in the industry was mention in the IBE research published in 2009
mentioned that there are three main issues in the textile industry which are;
 1. Executive pay (42%)
2. Sweatshop (25%)
3. Environmental Responsibility (24%)

There other ethics related issues which are in this this industry including both large and
small companies, comprised of; corruption, health and safety and political lobbying and
interference

Environmental concern issues majorly involving this industry impact hugely to our
environment and is the second most after the oil industry in term of causing the
pollution. The textile and fast fashion industry is the reason of the huge disposals of
waste including the chemicals which is the result of large production because of the
consumption or production of textile products.

Other than that this industry is also causing the shortage of raw materials because of
the fast fashion. This large production also causes high competition which results in low
quality fabrics and more harmful chemicals which cause skin issues and environmental
waste. This waste is dumped in the rivers eventually and effect all the people who
consume the river water. Government took many initiatives and made authorities for
years to imply the rules to mitigate the problem but country is in state of capture by the
elites and do the corruption by giving bribes to the authorities and get away from the
compliances.
Corruption model example:
Nishat textile factory is the prime example and was recently charged with the huge fines
because they were not following the rules and dumping waste in the river near the
factory. They formed the factory in 1990 near the bank of Ravi River. They have to get
the NOC (non-objection certificate) from the government to build the factory. They went
to the respective authorities which deals with the NOC and who monitor the
compliances they have to follow. They paid heavy bribes to the individuals of the
authorities and get the NOC. According to model the corruption this is what happened.

Principal STATE

Agent Authority Personals (government employee)

Bribe (cash
and non cash
rewards)

Client Nishat Textile factory

In this case the main actors involved in the corruption were the:
1. Factory owner
2. Government employee
3. State itself
Nishat factory owner was and is still very influential person in Pakistan and when he
wanted to open his factory in 1990s he has to get the licence of building and starting the
textile manufacturing factory which required long list of requirements. These
requirements include working conditions and safety measures and proper waste
disposal plants as well. The company went to the authorities and bribed the government
officer name Fawad Chaudary who was the acting officer who give the NOC to the
textile factory owners. This government personal talked with his higher officers and the
ministry of textile, Pakistan. The Government Issue relaxation for 6 month period so
Nishat textile factory can establish there factory near River Ravi without the waste
disposal plant. They keep doing business till from 1992 to 2012 on the old agreement
which was done on the bases of old contract and NOC. In 2012 some investigative
journalist did a story on the tail of corruption which took place in 1992. When the story
get some recognition the government in changed and officers who were not influenced
by that factory owner started taking action against the factory and there shareholders
and eventually they have to pay heavy fines.
This is only one case which gets famous in 2012 of the corruption regarding textile
industry and bad (unethical) practices are done due to cut throat competition other
issues with the environments are of low quality artificial fabric because of shortage of
raw material and cut cost. It produces more carbon footprint which is also one of the
reason of Global warming.
Another ethical issue is Sweatshops: the big multinational companies move there
production to developing countries to cut cost to increase profitability. These developing
countries provide cheap labour to give the companies an edge in the competition.
These companies give contract to subcontractors who provide them with the cheap
labour at cost of human right and employee right violation. These workers of the
subcontractors worked under unacceptable conditions. Many issues are there for
instance; Lower wages than the minimum wages and not just that the subcontractors
pay the workers on item not the working hours. They make the workers extra and don’t
pay as the other part of the world.

Pakistan textile industry which is the back bone of its country economy are the one
which provide the subcontractors to those multinational companies. Those
subcontractors are no different than the rest. They exploit the employees and tear every
rules and ethics to win the contracts. Extra (forced) hours, no health insurance, less the
minimum wage is common practice. Question is arise how this is done because those
subcontractors and big factory owners already captured the state.

The state of Pakistan is in the state of capture. State capture occurs “when the ruling
elite and or powerful businessmen manipulate policy formation and influence the
emerging rules of the game – including laws and economic regulations – to their own
advantage.” This is the case of public money vs the private sector greed and
sophisticated form of corruption. There are in total of more than 30mil families living in
Pakistan and only one thousand of the families manoeuvre to capture the whole state.

Pakistan economy is in strict captured by these few families the economy. An article
recently written on one of the most read newspaper as capital suggestion State capture
write that the country is “trapped in a vicious circle in which the policy and institutional
reform necessary to improve governance are undermine by collusion between powerful
firms and state officials who extract substantial private gains …”

Ghakar Plaza and Rana Plaza Accident

These companies get away from most of the international standards of safety and
health because the government protect them. Few years back not more than eight there
was a major accident and more than 700 people lost their life because of the fire and
faulty infrastructure of the building. In most developing nations like Pakistan, India and
Bangladesh most of the manufacturing operations are done in the buildings which do
not comply the proper standards and these buildings are for the commercial purposes.
This result in major accidents and workers lose their lives. The major issues of those
working factories are;

a) Bad electric wiring

b) Defective and Broken machinery for example old and faulty generators

c) Bad Architecture (which do not withhold the weight of heavy machines of the factory)

d) Too many workers in a small floor (so one get viral infection everyone gets it)

e) No proper fire exits for emergency

In the case of Ghakar Plaza accident the government let the factory owner establish
the factories in the plaza and malfunction of the electric lines caused huge accident
which caused 700 deaths in the factory and shops near the factory. The factory owner
get the NOC from the government to open a factory in a building which was for the
commercial use not for the manufacturing textile. The structure of the building was not
for the heavy machines such as boilers and generators etc. The electric lines was for
the appliances not as heavy as what is required for the manufacturing. The outcome of
the activity pictured like this;
This factory was of a subcontractor of a multination brands. The factory make textile
products for mainly for renowned brands like ZARA and Primark. These big multi
national brands because of competition and fast fashion shifted its manufacturing in
developing countries. It is healthy for the developing country economy but at big cost of
human misery and slave labour in sweatshops. The companies and brands who were
getting the products from those subcontractors were fined and singed up to Pakistan
government to make all the subcontractors to be bind by the agreement that the
improvement of factory safety. The subcontractors which were small and not able to
produce the document were fired and cancel the contract with them. Interestingly these
brand did increase the price of product they are buying from the subcontractors. They
blamed only the subcontractors but not themselves as well because they are also the
reason of subcontractors acting like that.

This is not the first time and not the only incident where these discounted multinational
brands are caught doing unethical business activities there was another incident in
which they were exposed even companies like levis also get caught doing the same act
and was fined heavily. But after the fine they corrected the activities and introduce new
measure to ensure that the brand image don’t get bad stigma of slave labour. Next
incident we will discuss the Primark business activity not in just Pakistan but in
neighbouring country India which indicate and validate that the its not the developing
country policies fault but the multinational companies are also involved in the practice.

Primark in other developing country (India):

Primark is famous and known brand of United Kingdom with 138 stores running
throughout the country. The reason of its popularity is cheap items with innovative
designs. The business model and its enormous production key of PRIARK is
outsourcing its clothing and other products to various other countries. The outsourcing
by PRIMARK is mainly to developing countries with cheap labour like India.

In 2008 journalist name Dan MacDougal visited one of the production supplier of
Primark in India (Bhavansigar refugee camp) and found that Tamil children below 9
years are working for Primark in inhuman conditions so devastating that without even
light and air and without proper wages and security. Those human slave children are
working for various suppliers of Primark. Upon revealing the situation by Dan
MacDougal, Primark refused to be part of this scandal and showed its unawareness and
actions of suppliers. However it is sole responsibility of Primark to investigate the code
of conduct of the suppliers, despite of that Primark is to be blamed for the child labour.
The ethical system in under developed country is so poor that organisation like “ The
Tirpur exporters association (TEA) ‘’supported Primark by justifying that there is no child
labour and children are working on their will to support their parents. However it was
denied by NGO named SAVE (Social awareness and voluntary education) of India.
SAVE organisation is raiding all over India to various factories in order to eradicate child
labour from the country.

The scandal above rotates on the suppliers but it is prudent to highlight that it
was responsibility of the Primark to investigate the suppliers, as suppliers are also
responsibility of Primark. The head of external affairs of Primark Mr Geoff Lancaster
stated it is impossible to track so many suppliers. His claim can not make Primark
feckless or unaccountable from scandal. It is sole responsibility of Primark to look into
affairs of suppliers.

It is observed that retailer supply bulk orders to the contractors and contractor sub
awarded those contracts to sub-contractors. In India the towns and cities are formed on
industrial activities and large number of population, extending from 5000 to 10000
workers , working for the contractors. As suppliers in order to meet the bulk contracts
use the dirty tactics or inhuman conditions to meet the order of retailer.
It is noteworthy to highlight that to reduce production cost and labour costs, big
organisations like Primark also intent to approach suppliers in developing countries and
give out their mass order. The suppliers will have no choice rather than to process this
orders as they are economical poor background. Ultimately, the suppliers tend to put
pressure on their employees as there are no rules and regulations over the working
conditions of the employees. Unlike in western countries, Employees in India are not
paid either on hourly bases or a minimum wage. Same was latterly admitted by Primark
that it is their responsibility to look into affairs of subcontractors, latterly Primark
changed its contractors

It is concluded that in business ethical values and laws to be adhered at all

levels. In order to enhance business and meet targets unethical actions are to be
avoided and condemned on national and international level.