LECTURE 7: CAN RETAILING BE ETHICAL

Retail Marketing C10RS

WHAT’S HAPPENING
IN RETAIL THIS
WEEK?
What’s Happening in Retail?
• Changing Consumer?
• Retailer Response?
• Retail Structural Change?
• Impact of economic changes on retail?
• The next big retail trends?
Today’s Session
A. What’s Happening?

1. Ethical business
2. CSR
3. Benefits of CSR
4. CSR in practice
5. CSR in fashion
6. Summary
Lecture Seven - Objectives
These are the key learning objectives for this weeks lecture:

1. Identify and 2. Define why 3. Be Aware of 4. Explore Green

define ethical retailers are ethical Specific CSR Issues Marketing
retailing • Identify the four
in Fashion Supply • Definition
reasons
Chains: • Identify the
• Social
• Define the Responsibility green marketing
stakeholders. • Denim Sandblasting mix.
In Turkey
• Cotton Harvesting In
Uzbekistan
• Environmental
Responsibility
• Eco-manufacturing
Garment Factories In
Sri Lanka
PART A: ETHICAL RETAILING
WHAT IS ETHICAL
RETAILING?
Ethical trading is here defined as trading in which the relationship between
the interested parties is influenced by concern for some or all of:
• Workers' pay and a range of rights and conditions, including health and
safety, non-exploitative and non-discriminatory labour practices for men,
women and children, and effective monitoring and auditing procedures.
• Producer livelihoods including fair prices and a commitment to social
development.
• Sustainable production methods which engender sustainable
environmental and developmental practices.
• Animal welfare including non-exploitative practices and humane
treatment.
WHY RETAILERS
ARE ETHICAL?
1. Appearing ethical was
fashionable
2. External pressures
encourage companies
to be more ethical
3. Appearing ethical
would prove profitable
4. Right thing.
WHO IS
AFFECTED?
 CUSTOMERS
• Power Imbalance between individual consumer and
large retail corporations
• Price, merchandise quality, fitness for described
purpose, conditions attaching to sales, after-sales
support, misrepresentation, and retailers might
unfairly use their greater marketplace power
• Fundamental is what constitutes a fair price and
how that is determined (Michel, 1999).
• Beyond price, retail transactions increasingly
involve exchanges of personal information,
raising privacy concerns (Bosworth, 2005).
• Returns policy and ease are also an ethical
consideration.
• Retailers impact on diet and health… easier and
cheaper to buy unhealthy options.
Suppliers
• Marketplace power has shifted from
manufacturers to retailers, implying that
suppliers of goods have become less
powerful compared to their retail clients
• A controversial aspect of retailer-supplier
relationships is “slotting fees”, whereby
suppliers pay retailers to get their
products onto retailers” shelves and/or
for advantageous positioning on those
shelves
• Global Manufacturing - prominent
concern is “sweatshop” production.
• There are also positive initiatives with
companies embracing “greening” supply
chains raise issues about the morality of
using retailer power for beneficial
outcomes.
Employees
• Employee relations are crucial
in service industries like
retailing.
• While retail employment
creation is generally
welcomed, concerns remain
that resulting jobs are
relatively low-paid and often
part-time
• Evidence of dangerous
working conditions in retailing
also exists
Community Interests
• Retailing has become an important
element of economic regeneration
strategies (Dixon, 2005).
• Local opposition from residents and
established traders to retail
developments is not uncommon
(Whysall, 1999
• Certain retail activities are considered
essential local services - small post
offices, and community pharmacies
(Schmidt and Pioch, 2004).
• Retailers can also provide community
support. British supermarkets have
promoted projects whereby customers’
purchases fund equipment for schools,
although these have been challenged
in terms of the actual returns to
schools compared to the public
relations gains for retailers
So what is ethical
retailing?
Ethical Retail Principals
1. Ethical retailing should not just focus solely on buyer-seller relationships, but
also reflect wider social, economic and environmental impacts, of the complex
multi-stakeholder relationships.
2. It should positively address the welfare of the disadvantaged, both locally and
throughout potentially global supply chains.
3. The profits of retail trading would be shared fairly across stakeholders.
4. It should embrace all aspects of exchanges, not simply goods and money but
also information, responsibilities, loyalty and so forth.
5. It should focus on longer- term impacts and benefits, aiming to be sustainable,
socially and environmentally.
33% of consumers
prefer a sustainable
brands.
47% of millennials
prefer a purchase
sustainable products.
Corporate Social Responsibly (CSR)
So what is CSR?
W H AT I S C S R
• Ethical Behaviour of a
Company Towards Society
• Avoiding Exploitation of
Workers & Destructive
Environmental Practices
• Consideration of
Stakeholders (as well as
Shareholders)

• “Actions that appear to

further some social good,
beyond the interests of the
firm and that which is
required by law”.
• (McWilliams and Siegel,
2001)
 Economic

Social Stakeholder

Environmenta Dimensions
Voluntariness
l of CSR

Dahlsrud’s (2008) 5 Dimensions of CSR

CSR DIMENSIONS
Dimension Definition
The environmental The natural environment ‘a cleaner environment’ - ‘environmental stewardship’ -
dimension ‘environmental concerns in business operations’

The social The relationship between ‘contribute to a better society’ - business and society
dimension ‘integrate social concerns in their business operations’ - ‘consider the full scope of
their impact on communities
The economic Socio-economic or financial ‘contribute to economic development’ - aspects,
dimension - including describing ‘preserving the profitability’ - CSR in terms of a business
‘business operations’ operation
The stakeholder Stakeholders or stakeholder ‘interaction with their stakeholders’ - groups ‘how
dimension organizations interact with their employees, - suppliers, customers and
communities’ - ‘treating the stakeholders of the firm’ -
The voluntariness Actions not prescribed by law ‘based on ethical values’ - ‘beyond legal obligations’
dimension - ‘voluntary
Wi d e r I s s u e s A d d r e s s e d
by CSR
• Human Rights (Universal Declaration of
Human Rights, ILO Core Conventions)
• Workplace & Employee Issues Including
Occupational Health & Safety
• Unfair Business Practices Including Bribery
Corruption & Anti-competitive Practices
• Organisational Governance
• Environmental Aspects
• Marketplace & Consumer Issues
• Stakeholder Involvement
• Social Development
The Case for Involvement
1.Business should operate in such a way as to fulfil society’s needs or expectations.
2.A social responsibility role should be undertaken in order to prevent some public criticism and discourage
further government involvement or regulation.
3.Business must realize that society is a “system” of which corporations are a part, and that the system is
interdependent.
4.Corporate virtue is good for profits.
5.A poor social responsibility role on the part of the corporation means poor management to some investors.
6.Business must realize that social problems can become opportunities, or can lead to profits.
7.With regard to social responsibility matters, business should take a long-run as opposed to a short-run
view.
8.Corporations must be concerned with the public image and the goodwill generated by responsible social
actions.
9.Business should be given an opportunity to solve some social problems.
10.Preventing is better than curing.
11.Businesspeople are also concerned citizens and humans who are interested in social matters. It is not
appropriate for them to ignore social matters.
The Counterargument
1.Profit maximization is the primary purpose of business, and to have any other purpose is not socially
responsible.
2.Business corporations are responsible to the shareholders and, in effect, have no authority to operate in the
social area.
3.Social policy is the jurisdiction of governments, not business.
4.Business lacks training in social issues, and lacks social skills necessary to carry out social programs.
5.Social responsibility is viewed by some as another excuse to let big business increase its power.
6.Business involvement in social matters increases costs—not only costs to the organization, but also
possibly even social costs—instead of decreasing them. This in turn may lead to business failures.
7.Social responsibility is an elusive concept for which few standards are available to evaluate and control
the actions of corporations.
8.As institutions in society, business corporations cannot be held accountable for their actions in a way
sufficient to satisfy demands for social involvement.
9.There is divided support in the business community for social involvement, and as a result there is
unlikely to be a very satisfactory treatment of social issues by business.
BENEFITS OF CSR
Business Benefits of CSR
• Employee Recruitment, Motivation &
Retention
• Reputation Management – Brand Value
• Potential For Ethical/Eco-marketing
• Investor Relations & Access to Capital
• Competitiveness & Market Positioning
• License to Operate
• Social Contract Between Business &
Society
• Operational Efficiency
• Less Waste, Higher Productivity
• http://tinyurl.com/9uhfwjj - New Look
• Effect of CSR on Firm Profitability is
Undecided
• Strategic CSR
• Competitive Advantage – Added Value
Social Issues =
Labour Issues
• Wages
• Working Hours
• Working Conditions
• Freedom Of Association
• Discrimination
• Forced Labour
• Child Labour
The Shift From Economic Philanthropy to Value Creation

See; Zadek, 2004

The Reality
KEY TRENDS THAT ARE IMPACTING

• Rise of Fast Fashion & Discount Retailing

e.g. Primark
• Largest British Clothing Retailer by
Volume in 2010 (10.9% Market Share)
• Global Supply Chains - Outsourcing of
Production to Lesser Developed Countries
e.g. Bangladesh, Cambodia
• Consumer Awareness of CSR Issues –
Media Spotlight – Demand for Ethical
Fashion
• Backlash Against Negative Impacts of
Globalisation
• Shareholder Pressure for Accountability in
Terms of Ethical as well as Financial
Performance
Ethical Impact
Look at the Impact

Social Impact Ecological Impact

• Labour Exploiation • Overexploitation of raw
materials
• Toxicity
• Use of Fuel
Social Impact?
Apple Example: Foxconn Suicides
in 2010
• Global Scandal Led to Doubling
of Basic Wage in China
• The World’s Largest OEM
Electronics Manufacturer (1
Million Workers in China)
• Stressful Working Environment
for Migrant Workers
Contributed to Suicides?
• Foxconn’s Reaction: Increase
Salaries by One-third, Employ
Trained Counsellors, Install
More Leisure Facilities
Silicosis in Denim Finishing Industry

• Blue Jeans Industry Transformed in 1990s

• Demand For Bleached/Whitened/Vintage
Denim Surpassed Demand For Plain Blue
• Sandblasting: An Abrasive Process Applied
to Jeans to Give a Worn Look, Achieved
By Blowing Out Sand Under Pressure
• Banned In UK In 1951 And In EU In 1966
• Little Difference in Unit Cost but 2 or 3
Times Greater Profit for Fashion Brands -
as No Skilled Labour or Technology
Required
 Sand Blasting and
Silicosis

• Silicosis is One of the Oldest Known

Occupational Health Diseases:
• Coal/Metal Mining, Iron/Steel
Foundries, Construction
• Discovered for the First Time in
Turkey’s Denim Industry in 2005
Silicosis in Denim Finishing Industry

• Labour Behind the Label, 2011:

• “The Use Of Complex And Hidden Supply
Chains, Which Characterises The Garment
Industry Worldwide, Is Largely Responsible For
The Severe Impact This Manufacturing Process
Is Having On The Health Of Sandblasting
Workers”
• In September 2010, Levi’s & H&M Announced they
Would Ban Sandblasting Globally from 2011
Onwards
• In 2011, Armani & Versace Responded to a Social
Media Campaign & Announced a Ban (But Not Dolce
& Gabbana)
• Alternatives? Chemical, Stonewashing, Laser,
Sandpapering by Hand …
Ecological Impact?
2,900
litres
11,800
litres
11,800
litres
Where is cotton
produced?
Uzbekistan: A
Country Devastated
Environmentally &
Socially by Cotton
Production for
Export

• Institutionalized
Forced Child
Labour
• The Draining of an
Ocean Through
Mismanagement of
Irrigation for
Cotton Production
Cotton Production
Issues Include:
• Forced Child Labour – Running into Tens of Thousands of Children
• Human Rights Violations –
• Corrupt & Brutal Government, Totalitarian Dictatorship that Institutionalises
Violence, Intimidation, Imprisonment for those that Refuse to Comply with State
Demands
• Severe Poverty –
• 28% of Population Unable To Meet Basic Needs,
• Wages Under $7 Dollars a Month for Adults Working on State Cotton Farms
• Excessive Pesticide Use –
• Leading to Diseases & Deformities in People
• The Draining of an Ocean (Aral Sea) –
• Massive Environmental Consequences Due to Gross Mismanagement of Water
Resource For Cotton Production
CSR in the Textile Pipeline:
Uzbekistan Cotton Production
• One of the Global ‘Big 5’
Cotton Producing Nations &
Second Largest Exporter of
Cotton Worldwide

• Sells Over 800,000 Tonnes Of

Cotton Worth Over $1billion
Annually

• Europe is a Major Buyer –

Buys Approx One-third
Aral Sea Decline
CSR & Marketing Strategy
 GREEN
MARKETING
 GREEN
MARKETING
STRATEGY
S E G M E N TAT I O N
A N D TA R G E T T I N G
Green Marketing domain there are two main
approaches for segmenting consumers: according
to consumer's characteristics or according to
purchase behavior.
- Attitude towards Environmental
- willingness to contribute to environmental
protection
- eco-friendliness of the consumers providing a
description and the main characteristics of four
groups: aspirants, addicts, adjusters and
avoiders.
- Etc…
Dangelico & Vocalelli (2017)
 POSITIONING AND
D I F F E R E N T I AT I O N
• Consumers tend to buy green products from green companies
• A green brand can be positioned through various attributes that
will contribute to differentiate it from competitors. This
positioning can be based on functional or emotional product
attributes.
• A positioning strategy based on the functional characteristics
of products can be enhanced by environ- mental benefits
coming from production processes or product usage.
• positioning is the emotional positioning , based on three
possible types of benefits provided by the brand:
• a feeling of well-being (“warm glow”), often associated
to act altruistically)
• possibility of expression through consumption of green
brand as a status-symbol),
• benefits arising from sensations and feelings
experienced through the contact with A ture (Kals et al.,
1999).
GREEN MARKETING MIX
PRODUCT -
• Products bring benefits to
consumers and the natural
environment
• Need to evaluate and remove the
perceived gap in performance
compared to traditional products
• Green packaging as a key component
of the product.
PRICE –
• Willingness to pay a premium price
for a green products does exist.
PROMOTION –
• Clear communication of green products and
brand characteristics to reduce information
asymmetry
• Eco-labels and packaging as key identifiers of
green products
• Generic and misleading messages could
generate green washing
PLACE -
• Close the loop of the consumption cycle
reduces costs and improves service
Dangelico & Vocalelli (2017)
Lets focus on that
Green Product
 What is a GREEN Product?
“Although no consumer product has a zero impact on the
environment, in business, the terms ‘green products’ or
‘environmental product’ are used commonly to describe
those that strive to protect or enhance the natural
environment by conserving energy and/or resources and
reducing or eliminating use of toxic agents, pollution, and
waste”.
Ottman et al. (2006, p. 24)
Environmental
Responsibility
• Pollution Prevention & Control
• Bio-degradable Materials
• Environmentally Friendly
Processes
• Proper Disposal of Waste
• Lean Manufacture – Less Waste,
Less Cost
• Sustainable Raw Material
Resources
• Employee Training
Influence of Buying Practices on CSR
• Product Nature of Fashion Garments:
• Unpredictable Demand, Short PLC, High Product Variety
• Esp. Low-cost Fast Fashion - Business Model Can Result in Squeeze on
Cost & Lead Time & Labour Standards at Factory Level
• Retailer Pressure on Suppliers to Achieve Target Price Demand for Flexibility in
Meeting Customer Demand – Peak Seasonal Orders as well as Changing,
Increasing, Decreasing or Cancelling Orders at Short Notice
• Difficult to Forecast Demand so Buyers Want to Minimise Risk And Wait Until
Last Possible Minute to Commit to Orders – Esp. in Recession when Buying
Becomes More Cautious
Influence of Buying
Practices on CSR
Link Between Retailer Buying Practices &
Labour Conditions at Factory Level in Globally
Dispersed Supply Chains
Buying Practices Undermine Efforts to
Implement CSR – Buyers Unwilling to Factor in
the Increased Cost Of Ethical Production
Summed Up By Senior Exec from Bangladesh
Garment Manufacturers & Exporters Association:
“Buyers need to also consider the fact that all
these come at a cost and we are helping the
buyers to protect their brand image. But buyers
are not contributing anything”.
Responsible Buying
Practices
Development of Long-term Stable
Relationships with Suppliers
Supports Business Sustainability,
Supplier can Invest in His (and Your)
Business e.g. Machinery, Training
Sustainable Pricing & Timely Payment
Supports Business Sustainability &
Enables Supplier to Pay Wages on
Time
Realistic Delivery Schedules
To Avoid Excessive Amounts of
Overtime
To Avoid Supplier Having to Pay for
Air Freight
Source: Gap Inc. 2004 Social Responsibility Report
(available on Gap website)
CSR Inhibitors & Drivers
in the Garment Industry
CSR Inhibitors
• Downward Price Pressure
• Product Nature
• Labour Intensity of Manufacture
• Retailer Buying Practices
• Supply Chain Complexity
• Supply Chain Power Distribution
CSR Drivers
• Consumer Desire for ‘Guilt-free
Fashion’
• Trust → Commitment,
Cooperation, Collaboration
• SCM: Long-term Orientation,
Shared Goals
• Supply Chain Rationalisation
• Supply Chain Integration
CSR IN PRACTICE
Retailers Response: CSR

Microsoft Google Walt BMW Apple

Disney
"People think of Tesla as an eclectic
car company but the whole purpose
of Tesla was to accelerate the advent
of sustainable energy.” Elon Musk
A GREEN FUTURE?
Green Future?

• The Environment & Climate Change

• Carbon Auditing
• Labour Rights as Human Rights
• Move from Utilitarianism to Kantian Ethics
• Workers are not Merely Factors of Production
• Transparency & Accountability
• Supply Chain Management
• Rationalisation, Consolidation, Partnerships
Based on Trust
• Institutionalisation of CSR
To C o n c l u d e
• The research and industry interest on ethical retailing has grown hugely on the
last ten years.
• Retailers invest in ethical practices because it is not only meeting the needs of
todays consumer but it is fashionable, profitable, external pressures and
essentially it is the right thing to do.
• Retailers have devised sophisticated strategies' in order to invest in this concept
– CSR.
• Five dimensions of CSR environmental dimension, the social dimension,
economic dimension, stakeholder and voluntariness dimension all are managed
to ensure the strategy is addressing the external pressures.
• Truly investing in this strategy means adapting the marketing mix.
• Are brands and retailers adapting their marketing mix or are they just green
washing?
REVISION GUIDE
• Provide a definition of ‘ethical retailing’ green marketing, CSR, etc.
• Changes in the marketplace from both a consumer and retailer perspective.
• Why retailers invest an ethical approach and CSR
• The better responses will define CSR and explore some good examples.
• Examples of best practice.
References
Adams (2002) ‘Retail profitability and sweatshops: a global dilemma’, Journal of Retailing and Consumer
Services, 9 (3), pp. 147-153
Burke, L. and Logsdon, J.M. (1996) ‘How corporate social responsibility pays off’, Long Range Planning, 29 (4),
pp. 495-502
Davis, K. (1973) ‘The case for and against business assumption of social responsibilities’, Academy of
Management Journal, 16 (2), pp. 312-322
De Brito et al. (2008) ‘Towards a sustainable fashion retail supply chain in Europe: organisation & performance’,
International Journal of Production Economics, 114, pp. 534-553
Hale and Wills (2005) Threads of Labour
Klein (2000) No Logo, Flamingo, London
McWilliams, A. and Siegel, D. (2001) ‘Corporate social responsibility: a theory of the firm perspective’, Academy
of Management Review, 26 (1), pp. 117-127
Nidumolu et al. (2009) ‘Why sustainability is the key driver of innovation’, Harvard Business Review, Sept., pp.
57-64
Oxfam (2009) Good Fashion Report
Porter, M.E. and Kramer, M.R. (2006) ‘Strategy and society: the link between competitive advantage and
corporate social responsibility’, Harvard Business Review, 84 (12), pp. 78-92
Smestad (2010) ‘The sweatshop, child labour, and exploitation issues in the garment industry’, Fashion Practice,
1 (2), pp. 147-162
Teng & Jaramillo (2006) ‘Integrating the US textile and apparel supply chain with small companies in South
America’, Supply Chain Management: An International Journal, 11 (1), pp.44-55
Welford, R. and Frost, S. (2006) ‘Corporate social responsibility in Asian supply chains’, Corporate Social
Responsibility and Environmental Management, Vol. 13, pp. 166-176
Zadek, S. (2004) ‘The path to corporate social responsibility’, Harvard Business Review, 82 (12), pp. 125-132
References
Labour Behind The Label www.labourbehindthelabel.org
Clean Clothes Campaign www.cleanclothes.org
Ethical Trading Initiative www.ethicaltrade.org
No Sweat www.nosweat.org.uk
Impactt www.impacttlimited.com
EFF www.ethicalfashionforum.com
La Mode Ethique www.lamodeethique.com
Estethica http://www.londonfashionweek.co.uk/estethica

www.cleanupfashion.co.uk – report by War On Want & Labour Behind The Label on CSR in the UK high street
fashion industry
www.responsible-purchasing.org – EU fairtrade initiative to improve buying practices when sourcing from lesser
developed countries
www.fashioninganethicalindustry.org – Clean Clothes Campaign targeting fashion students & educators to raise
awareness of ethical fashion
THANK YOU.
Any questions?