Assessing Ethical Challenges in the Retail Industry: A Study of Corporate Social Responsibility

This report assesses the ethical challenges existing in the retail industry and discusses the broad and narrow view of corporate social responsibility. It evaluates the responsibilities of retailers who purchase goods from Indian Factories and analyzes the application of ethical theories in the operations of companies. The report particularly focuses on the CSR policies of the fashion industry and the textile industry.

Running Head: BUSINESS ETHICS
Business Ethics
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Executive Summary
The purpose of this report is to assess the ethical challenges existing in the retail industry.
This report will also discuss the broad and narrow view of corporate social responsibility and
analyze why the broad view of corporate social responsibility is ethical. The retailers and
professionals involved in the manufacturing and the retail industry have some ethical and
social responsibility. This report will particularly evaluate responsibilities of retailers who
purchase goods from Indian Factories.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Retailing.................................................................................................................................3
Concept of Ethics in Retail Industry......................................................................................4
Corporate social responsibility of Retailing...........................................................................5
The different Views of CSR...................................................................................................9
Analysis of the operations of companies by the application of ethical theories..................11
Utilitarianism........................................................................................................................11
Conclusion................................................................................................................................11

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Introduction
Making ethical decisions helps the society to ensure that a sense of order and justice
prevails in the society. The retailers also have the responsibility to adopt a policy of CSR in
order to ensure that business carried on by such retailers do not adversely affect the
stakeholders of the retail industry. Corporate Social Responsibility (CSR) can be defined as
the responsibility of the business to adopt a sustainable approach which aims to create
economic, environmental and social benefits for all its stakeholders (Schwartz, 2017). Such
concept of Corporate social responsibility is often closely associated with corporate ethics,
thus as opined by CSR can be defined as a business’s ethical expression.
Thus in context of the retail industry it can be said that the retailers also have the
corporate social responsibility to comply with such ethical standards that aims to create
wellbeing of the workers and their families, sustainable economic development and positively
impact the environment. In the video Blood, sweat and Tshirt it is clearly evident that the
workers who are employed in the Indian factories are living in adverse health conditions.
They are getting low wages. No steps are being taken by the retailers to improve the
condition of the workers. The actions of retailers can be analyzed from the perspective of
good options. As opined by Ferrell & Ferrell (2016), retailing plays a very important role in
the economy as it serves the link between the manufacturer and the final consumer. Therefore
it can be said that it is of utmost necessity and importance that retailers comply with social
standards while conducting business and aim to positively affect the lives of the stakeholders.

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Discussion
Retailing
To understand the ethical obligations of the retailers it is important to have a proper
understanding of the term retail and the functions of retailers in the industry. The term retail
can be defined as a process of selling which is meant for final consumption and a sale to the
ultimate user (Ferrell& Ferrell, 2016). Therefore, retailing can be defined to be the interface
between the maker and the individual buyer purchasing for individual utilization. This
prohibits a direct coordination between the producer and institutional purchasers, for
instance, the government and other mass clients. Retailing is the last connection that
interfaces the individual client with the assembling and appropriation chain. A retailer is
engaged with the demonstration of pitching products to the individual buyer at an edge of
benefit (Abreu & Rocha, 2015).
Concept of Ethics in Retail Industry
Ethics can be described to be a stream of philosophy which aims to uphold the values
of the actions of individuals and assess such actions as right or wrong, moral or immoral
(Bhattacharya et al., 2017). As discussed before the retail industry acts as a direct link
between the manufacturer and the final consumers it is the duty of the retailers to act in an
ethical manner as their actions affect the lives of all the stakeholders involved. Some of the
unethical practices that exist in the industry of retailing affect the stakeholders, which include
both the final customers and the employees. Retailers often mislead the consumers by lying
to them or concealing the complete truth about the characteristics of the product from them.
However, the retailers should charge fair price and disclose all the characteristics of
the products sold by them as it would be unethical to mislead customers and charging more
from them. It can be said that ethics is very important in the long run of business as

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businesses must comply with ethical standards if they are to succeed in the future (Pedersen,
2015). The retailers also have ethical responsibilities towards employees. However in the
video Blood, Sweat and Tshirt it has been illustrated that the retailers are not fulfilling their
ethical responsibilities that they owe to the worker. The retail industry employs a large
volume of people therefore proper policies and procedures must be formulated in order to
ensure the well-being and welfare. Such policies and procedures must aim to promote fair
recruitment, selection, training of employees (Littell& Doh, 2015). Negative issues existing
in employment relations can adversely affect the reputation of a business to its customers,
lead to low staff morale and low productivity (Ferrell& Ferrell, 2016).
It is evident in the video “Blood ,Sweat and T-shirts” that the workers and the
employees who primarily manufacture the clothing are adversely affected by the harsh and
unfavorable working conditions. The workers are highly underpaid and are made to live in
acute poverty and adverse living conditions. The retailers of the fashion industry exploit the
workers of the developing countries by paying them much lesser wage rate than the minimum
wage rates. Thus, retailers fail to ensure the wellbeing and welfare of the employees.
Retailers have a duty to comply with Corporate social responsibility.
Corporate social responsibility of Retailing
Corporate Social Responsibility (CSR) can be defined as the responsibility of a
business association for the effects of its choices and exercises on society, the planet and its
own success. Corporate Social Responsibility can be defined to have the "triple main
concern" of individuals, planet, and benefit (Steenkamp, 2017).As opined by Schwartz,
(2017), not only do responsible, sustainable and transparent CSR methodologies strengthen
the reputation of a brand, they aim to positively affect the community and hence the
marketplace of the community. A strong marketable strategy, installed into the business

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culture, reflecting the values and objectives of the organization through key CSR application,
will create a gainful and sustainable future for all.
It can be said that there is strong relationship between Corporate Social Responsibility
and the retail industry. This relationship has to be perceived to be something more than a
mere channel of distribution of goods which are socially responsible. Retail sectors of
businesses must perceive CSR as the opportunity to reach out to the mass and form a
connection with the interests of the people. With expanding globalization, the clothing
business is presently regularly scattered geologically, with assembling, dissemination and
retail tasks split over a few distinct areas and nations (Abreu & Rocha, 2015). Worldwide
retailers endeavor to guarantee their worldwide corporate measures for wellbeing of
employees, work, manageability, quality of items are adhered toand kept up all through their
store network. Nevertheless, this is yet a day-by-day challenge.Because of globalization that
empowered progressive decrease of trade obstructions and made the flow of labor, services
and goods more intemperate, the clothing industry is centered mostly in the hands of vast
partnerships with boundless supply chains, based on outsourcing According to Ferrell&
Ferrell (2016), that the textile and the clothing industry are intricately related.
The textile industry gives the most input to the clothing industry and forms the
vertical linkages. For a garment to be sold, it has to go through a long process from making to
designing to reaching the shelf of the retailer (Franco, 2017). Thus, it can be said the clothing
and the textile industry are to be treated as a single unit. However, the competition faced in
the clothing industry is cut throat and different fashion companies strain themselves in order
to acquire a slight higher profit margin. It can be said that in modern times people find a wide
variety of choices of apparel at low costs. This cut throat competition has driven the
companies to lower the cost.

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Thus, cutting down costs so drastically has made it even more difficult for the
companies of the fashion industry to adopt a CSR policy and follow CSR rules (Salib et
al.,2015). The fashion industry and the textile industry are governed by many bilateral
contracts between the countries which are involved in the manufacturing process of the
garments as well as many international trade agreements. The fashion and textile industry has
introduced a wide array of technological advancements. Moreover the technology introduced
in the textile industry is comparatively inexpensive than human labor and thus poorer
countries of the world who manufacture the garments become more competitive in the
apparel world.
The modern trend is that clothes which used to be identified by their endurance have
been put out fashion. The recent trend is desire for fast fashion. This constant innovation and
need to keep up with the modern trends of the market have made the clothing industry over
produce clothes, which are wasted once the trend goes out of fashion. It can be mentioned
that the textile industry is a driving factor of economic growth in developing countries. The
textile industry provides basic jobs which do not require any special skill and knowledge to a
large number of people (Abreu & Rocha, 2015). This industry especially employs women
who have little chance of seeking employment elsewhere. Since language is not much of a
barrier in the textile industry many immigrant are also employed in the textile industry. This
has been illustrated in the video blood sweat and t-shirt. A large number of unskilled and
labor were employed in factories for the purpose of manufacturing clothes for retailing.
Due to the aforementioned factors of cut throat competition, low pricing and short life
span of the clothes manufactured companies that are engaged in the sector are required to
effectively manage their chain of supply. The supply chain management in the clothing
industry is an instrumental for the success of the companies that are engaged in the clothing
sector. It can be said that the managers of the companies engaged in the clothing and textile

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industry must therefore choose their suppliers very wisely. They should ensure that their
suppliers not only fulfill the task they are assigned but also exhibit responsible behavior and
address the social and environmental issues (Takkar, 2015).
As opined by Ferrell& Ferrell (2016), company cannot claim that adheres to the
policies of CSR if its supply chain violates the provisions of CSR. It can be said that to
ensure the existence of closer trade relations with the manufacturers, the companies engaged
in the clothing industry must lower the number of their suppliers. Having a lower number of
suppliers would help companies ensure that transparent bonds exist between the parties
involved in the process of manufacturing textiles and ensure improved information sharing
between the parties involved in the process of production of garments. It can be said that
there are a lot of opportunities for implementation of the CSR principles in the structure of
the clothing and textile industry. The environment and the society at large are at stake
throughout the entire process of manufacturing and supplying garments.
As opined by Abreu (2015), the large multinational companies engaged in the
clothing industry have more pressure on them to act in a socially responsible manner than
medium and small enterprises. The fashion industry faces the demand for garments which
were not made in exploitative conditions by workers who were abused. Consumers of
garments do not want to take the guilt for harming people by the process of manufacturing
clothes thus they want to be assured that the clothes purchased by them had been
manufactured in decent conditions. The main issues of CSR that exist in the clothing industry
are working conditions of the laborers, hours of work and the wages paid to the workers.
These three factors can be considered to be the social responsibility of the employers to the
employers (Cao, 2017). As companies engaged in the clothing industry opt to outsource and
the process of manufacturing to other countries, companies need to ensure that they comply

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with ethical practices not only at the headquarters. Businesses and organizations are required
to ensure that that the subcontractors of such businesses are following the CSR standards.
Many large corporations have been held responsible for the wrongdoings of their
subcontractors. Some of the businesses have been disconnected with the operations of their
subcontractors. Some big organizations like Gap Inc. have faced adverse media publicity and
customer boycott. As opined by Abreu (2015), companies involved in the clothing industry
can chose to develop responsible methods for the day to day operations. Some of the means
to ensure that the operations of the companies are conducted in a socially responsible manner
would mean providing safe and hygienic working conditions to the employees, reducing
environmental damages, maintaining good relations with the stake holders and helping locl
communities.
The different Views of CSR
Narrow View
It can be stated that the rules related to the corporate social responsibility of
companies is dependent on various factors. How the profits that are earned by the company
are to be utilized has to be determined. It can be said according to the narrow view of CSR
that the benefits of the that are directly associated with the company or particular aspects for
the company are of utmost importance to the company (Vertigans& Idowu, 2017). In
accordance with the narrow view, the management of the company only considers and
analyzes the factors that can be beneficial for the company. Milton Friedman, the American
commentator and writer, had introduced the narrow view of CSR. He opined that a business
organization has no responsibility other than maximization of profit (Cheng, Ioannou&
Serafeim, 2014). He further stated that a business has only one responsibility, and that is to

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fullyutilize its resources while engaging in its activities for the purpose of profit
maximization.
However such acts of the business organization have be with the binding of the law.
All business must engage in free competition and not indulge in fraudulent or deceptive
activities. From this perspective of CSR the society is not an important stakeholder. Tai&
Chuang (2014), argued that only governmental and non-governmental organizations, non-
profit organizations have the responsibility of contributing significantly to improve the
society argued it. Friedman further stated that the CSR can be threat to the Capitalist system.
However, it should not affect the operations of the organizations
Broad View
According to the Broad view of CSR, it can be said that the power and influence of
corporations have increased significantly over the years in the capitalist market. However, it
is debatable what ethical obligations do corporations owe to the society and its relevant
stakeholders. In accordance with the broad view of CSR it can be stated that Corporations are
to be treated as human creations (Steenkamp, 2017). Therefore, in addition to making profits,
organizations and corporations also have the responsibility to uphold other CSR principles.
The Keith Davis had introduced the Broad view of CSR and according to the broad view it
can be stated that decisions of businesses have social consequences and it was held that
businessmen cannot make sole economic decision.
The Stakeholder model of the Broad view of CSR it can be stated that corporations
have responsibilities and obligations to the stakeholders who share both primary and
secondary relationships with he concerned business organizations (Schwartz, 2017). One of
the other arguments in favor of the broad view of CSR is that business is allowed to exist and
operate in a society as they provide necessary services and goods to the society. Thus

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Businesses are to be judged by a triple bottom line which includes financial, social and
environmental services to the society as opposed to the previously judged concept of single
bottom line which used to take in to consideration the financial services to the society
(Pedersen, 2015).. Thus after discussing both the views it can be stated that the retailers who
buy from the Indian markets only comply with the narrow view of CSR.
They only focus on profit maximization of the company and neglect the other social
and environmental factors. Such retailers are not concerned about the welfare and the
wellbeing of workers who are employed in the manufacturing industry. The poor lifestyles,
unhealthy and unsafe work environment and very low wages of the workers demonstrate that
the retailers do not comply with the broad view of CSR principles. However all
organizations have the ethical responsibilities to all the stakeholders involved ad therefore the
broad view of CSR is to be adhered to while conducting business.
Thus after discussing both the views of CSR it can be said that the retailers have reduced the
meaning of CSR to its narrow view. As shown in the video, Blood Sweat and Tshirt, the
retailers only focus on profit maximization instead of improving the working conditions of
the workers employed in the Indian Factories.
Analysis of the operations of companies by the application of ethical theories
It can be said that the operations and actions of organizations can be assessed from the
perspective of different ethical theories.
Utilitarianism
According to the theory of Utilitarianism, it can be said that only those actions of individuals
are considered to be ethical which produce the maximum benefit for the most number of
people (Mill, 2016). The consequences of actions to individuals must create utility for the
most number of people. Utility can be defined as the summation of the benefit created for the

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stakeholders minus the effort required to perform such action. As opined by Barrow (2015),
Utilitarianism is one of the main branches of consequentialism theories. Thus in this context
it can be said that actions of the retailers are not ethical as they do create benefit for the
workers who are involved in the manufacturing process. They are the primary stake holders
in the given scenario. The low wages, poor style and poor work environment point out that
the retailers to ensure the wellbeing of the workers are doing nothing. The retailers only focus
on the profit maximization.
Conclusion
Thus to conclude it can be said that all business organizations that exist and operate have the
responsibility to adopt and uphold CSR policies. CSR or Corporate Social Responsibility of
the business organizations is defined as the responsibility of the business organizations to
conduct business in an ethical sustainable manner . It is the responsibility of the business
organizations to ensure that their operations have positive impacts on the society,
environment and the economy.
The retail industry acts as a direct link between the manufacturer and the final
consumers it is the duty of the retailers to act in an ethical manner as their actions affect the
lives of all the stakeholders involved. The Clothing industry is very competitive in nature and
it outsources the process of manufacturing the clothes to the developing nations. Therefore it
is the responsibility of the industry to implement CSR policies to not only in their
headquarters but also in the countries to which the task of manufacturing clothes is
outsourced. As evident in the video the retailers who buy goods from the Indian factories are
considering the narrow view of CSR as they are only focusing on profit maximization and
neglecting the welfare of the workers. However all business organizations must consider the

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broad view of CSR as it in compliance with the ethical standards. Further, the actions of the
retailers can be considered inherently unethical if judged from the Utilitarian perspective.

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