Business Ethics in the Retail Industry: A CSR Perspective

This article discusses the ethical obligations of the retail industry, particularly in the clothing sector, and the need for Corporate Social Responsibility (CSR) policies. It analyzes the industry through the lens of Utilitarianism and the broad and narrow views of CSR. The article also highlights the poor working conditions and low wages of workers in Indian factories.

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BUSINESS ETHICS
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Introduction
It can be seen in the video Blood, Sweat and Tshirt that the workers who are employed in the
Indian Factories are subject to poor work and health conditions. They are paid minimum wages
and the retailers are not taking any steps to ensure their well being and welfare. It can be stated
that ethical decision making ensures that justice and order is maintained in a society. Thus for
ensuring that the operations of the retailers are conducted in ethical manner, the retailers have the
obligation to adopt a policy of Corporate Social Responsibility. As opined by Schwartz (2017),
Corporate Social Responsibility is defined as the responsibility of business organizations to
operate in a sustainable way with the aim to create social, environmental and economic benefits
for all the stakeholders. The principles of Corporate Social Responsibility can be said to be
closely associated with the corporate ethics (Carroll, 2015). Corporate social responsibility has
also been defined as the ethical expression of a business.
Discussion
Retailing in the Clothing Industry
As stated before, workers who are employed in Indian factories are subjected to extremely
adverse work conditions. Such workers are underpaid and live in extreme poverty. This can be
considered to be the ugly side of the retail industry. For understanding the ethical obligations of
the retail industry it is essential to first have a proper understanding of the functioning of such
industry. As opined by Rabine (2017), retailing can be defined as the interface which exists
between the buyer and the individual who purchases the goods for personal consumption.
Retailing industry can also be defined as the last connection that exists between the individual

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client and the appropriate assembling chain. A retailer generally engages in demonstration of
pitching product to the individual buyer with a profit margin. Some of the unethical practices of
the retail industry include pitching higher prices of products, misleading stakeholders and
exploiting the workers by paying them lower wages (White, Nielsen & Valentini, 2017).
Analyzing the retail industry by ethical theory
Utilitarianism
According to the theory of Utilitarianism it can be stated that that individuals must act in ways
which ensures that the greatest benefit is created for the maximum number of people (de Lazari-
Radek & Singer, 2017). The actions of individuals are to be assessed by the utility created for the
stakeholders. Utility can be defined as the summation of benefit which is created minus the
efforts required to create such utility (Barrow, 2015). Utilitarianism is one of the main branches
of the consequentialist theories of Ethics.
In order to assess the operations of the Retail industry by the theory of Utilitarianism, it is first
essential to identify the relevant stakeholders involved in the process of retailing. The primary
stakeholders in the retail industry are the workers who are employed in the factories for
manufacturing clothes. As shown in the video Blood, sweat and Tshirt, the workers who are
employed in the Indian factories for manufacturing garments live in poverty and are exposed to
adverse working conditions. They are underpaid. The retailers outsource the task of
manufacturing clothes to developing nations so that they can hire cheap labor and get the job of
manufacturing clothes done at a cheap rate. However they do not take any steps to ensure the
wellbeing of the workers. Such retailers only focus on profit maximization. Thus by the
application of the ethical theory of Utilitarianism it can be stated that operations of the retail

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industry re inherently unethical as it does create any benefit for the primary stakeholders
involved.
Corporate Social Responsibility of the Retailing Industry
As stated before Corporate Social Responsibility is defined as the choices of businesses to
conduct its operations in a ways which have positive impacts on the society, environment and the
economy. As stated by Pedersen (2015), Corporate Social responsibility has a triple concern
which includes individuals, benefit and the planet. Corporate Social Responsibility and the retail
industry are very closely interrelated. It has been perceived by the retailers that Corporate Social
Responsibility is a great opportunity to reach out to the masses. Due to globalization the process
of outsourcing has increased significantly and its best use has been made by the retail industry
(Rabine, 2017). The retail industry in the modern times outsources the task of manufacturing,
assembling and disseminating clothes to the developing nations.
The rationale behind outsourcing the task of manufacturing to the developing nations is
that labor is cheaper in Countries like India and China which are developing nations. According
to Razalan et al. (2017), Retailers all over the world aim to take measures which ensure the well
being of the employees, maintain quality and of the products in all the stores of the retail
network. However such a task has become more complicated than ever before due to
globalization. The clothing industry is centered in the hands of large corporations which have
vast chains of supply that are based on outsourcing. Thus it means that such measures as
discussed need to be implemented all throughout the network of retailing. It can be said that the
textile and the clothing industry are closely related (Dabija, Pop & Postelnicu, 2016). The textile
industry form the vertical linkages of the Clothing industry. It can be stated that for a garment to
be sold, it has to go through a lengthy process from manufacturing, to designing to reaching the

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shop of the retailer. The clothing and the textile industry are generally treated as a single unit and
addressed as a single unit. It can be stated that companies that companies that are involved in the
fashion industry face cut throat competition from the other companies. Due to the cut throat
competition fashion companies strain them to obtain a higher profit margin. The fashion
companies aim to lower the cost of their apparel to obtain an edge in the market. However
cutting down such costs has made companies very difficult to adhere to the CSR rules and adopt
a CSR policy.
Further it can be stated that in recent times clothes are not assessed by their endurance.
Desire of the consumers can be considered to be the driving factor for fast fashion. The Clothing
companies have adopted to the new trend of innovating the styles of the garments so as ensure
that such garments are preferred by the consumers (Burnes & Towers, 2016). However this
practice has led to a lot of wastage of the garments that are outdated. The factors of cut throat
competition, low pricing of the garments and remarkable short life span of the clothes have made
the companies involved in the clothing industry realize the need to effectively manage their
chains of supply. Supply chain management can be considered to be instrumental for the success
of the companies of the fashion industry. According to Dabija, Pop & Postelnicu (2016), it is the
responsibility of the management of such companies to choose their suppliers wisely so as to
make sure that such suppliers not only perform the tasks that have been assigned to them but also
address environmental and social issues and exhibit responsible behavior. However as shown in
the video “Blood, sweat and Tshirt” the suppliers do not exhibit responsible behavior. They
exploit the workers in order to ascertain a higher profit margin.
According to Ferrell& Ferrell (2016), a fashion company cannot claim that such company
adheres to the rules of the CSR if the supply chains of such company do not follow the CSR

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policies. It can be said that multinational fashion companies have more pressure on them to act in
a socially responsible and ethical manner. No consumer wishes to buy garments which were
made in exploitative environments and by abused workers. Consumers refrain from taking the
guilt of harming people in the process of manufacturing garments by purchasing such garments
and want to be assured that the garments which were purchased were manufactured in decent
working conditions. The main ethical issues that exist in the industry of retail are : poor working
conditions of workers, long hours of work and low wages that are paid to workers. These factors
can be termed as social responsibility of the management of the companies (Burnes & Towers,
2016).. Thus it can be stated tat since fashion companies chose to outsource the production of
clothes to the developing countries, they need to ensure ethical practices are not only followed at
the head quarters but also in the factories. To ensure that the operations of the retail industry are
carried out in ethical manner, the companies must ensure that the workers employed at the
factories and the manufacturing units must be provided with a safe workplace, hygienic work
environment, decent wages which is not less than the minimum wage level which has been set by
the government, reducing environmental damages, contributing the local communities and
having good relations with the relevant stakeholders.
Broad view of CSR
The CSR policies of a company can be categorized in two Categories; the broad view and
the narrow view (Carroll, 2015).. The Broad view of CSR takes into account the influence and
the power which is exerted by the large corporations on the society. Such power and influence of
the large corporations over the society can be said to have increased significantly in the recent
times especially in capitalist markets. The Broad view of CSR perceives companies and
organizations as individuals and therefore asserts that such companies have ethical

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responsibilities towards the society in addition to only making profits (Vertigans, & Idowu,
2017). The broad view of Corporate Social responsibility of businesses had been coined by Keith
Davis. He had stated that businessmen cannot make decisions primarily focusing on economic
benefit. They are required to perceive that their decisions are likely to have social consequences.
The main rationale behind adopting the broad view of CSR by businesses is that businesses exist
in the society for the purpose of providing essential goods and services and therefore they have
certain obligations to their relevant stakeholders witch which such businesses share primary and
secondary relationships (Schwartz, 2017). Businesses earlier had been judged by the single
bottom line which took into consideration the economic responsibility of businesses however
after the broad view of CSR had been invented businesses were judged by a triple bottom line
which took into consideration social, financial and environmental services to be rendered.
Narrow view of CSR
The narrow view of CSR takes into consideration how the profits earned by the business
are to be utilized. Thus the narrow view of CSR focuses only on the morive of the business to
earn profits. The narrow view of CSR had been advocated by the American writer and
commentator Milton Friedman. Milton had stated that a business has responsibility other than
profit maximization (Bhattacharya et al. 2017). A business must aim to utilize its resources fully
while focusing on profit maximization.
Thus after analyzing both the views of CSR, it can be stated that retail industry as showed in the
video Blood, sweat and Tshirt only adheres to the narrow view of CSR. The retail sector of the
fashion industry only focuses on profit maximization and no other social responsibility. This can
be exhibited by the poor working conditions, low wages and poor lifestyle of the workers

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employed in the factories. However it can be stated that all businesses must adhere to the broad
view of CSR as they have social, environmental and economic responsibilities.

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Conclusion
Thus to conclude, it can be stated that retailers in the retail industry have the ethical
responsibility of complying with ethical standards to ensure the creation of well being of the
employees. They also have the responsibility to ensure that their operations have positive
impacts on the environment and create sustainable development. Retailing in the fashion industry
constitutes a vital link between the manufacturers and the final consumers. There are a lot of
stakeholders involved in the process of retailing which include workers employed in the
factories, the clients who purchase the clothes produced by such workers and the final
consumers. Hence complying with ethical standards is a must to ensure that the lives of all the
stakeholders re affected positively. The actions of the Retail industry which outsources the task
of manufacturing garments to the Indian factories can be said to be inherently unethical as
assessed by the ethical theory of Utilitarianism. The retail industry only adheres to the narrow
view of CSR which focuses on profit maximization and ignores the Broad view.

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