Governance, corporate social responsibility, and sustainability. Clarke Ltd. is a Canadian company with its headquarters and Canadian manufacturing plant located in Mississauga, Ontario. The company also has a plant in Tianjin, China. The company manufactures a variety of medical products, including oxygen masks, feeding tubes, catheters, and other plastic hoses used in a variety of applications. Clarke has been asked to bid on a contract for the Hope Children’s Hospital, located in London, Ontario. If Clarke wins the bid, it would be the exclusive supplier of these medical supplies to the hospital for a two-year period.

As a public institution, the hospital will award the contract to the lowest bidder, but will factor in quality of the product in reviewing the bids.

The management of Clarke Ltd. is keen to win this order. It has lost recent bids and is currently operating well below capacity in its Mississauga plant. Without this contract, Clarke anticipates it will have to lay off workers in Canada.

The Tianjin plant is operating near capacity. Clarke knows its costs to manufacture in China are significantly less than in Canada for several reasons:

a. Labour costs are 40% lower.

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b. Due to more stringent environmental regulations in Canada, the fixed costs allocated per unit are approximately 30% lower in China (assuming both plants operate at long-run normal capacity).

c. Energy costs are 20% lower in China due to the use of coal as the primary fuel.

Clarke is considering how it should approach the bid for this contract. It is deciding whether it should produce in China or in Mississauga. It believes that although the Tianjin plant is near capacity, it will be able to accommodate this order without a significant effect on its existing sales. It is also considering whether it should negotiate with its workers in Mississauga to reduce their wages by 20% to make the plant more competitive. Clarke also knows that one of the ways to reduce its costs (and hence improve its chance

-of being successful on its bid) is to use a lower grade of plastic in production of the masks and tubes. This lower grade of plastic would save 25% of the direct materials costs. It is known, however, to puncture more easily and have a shorter useful life. This means that a patient who has an extended stay at the hospital would require the tubes and masks be replaced more frequently.

REQUIRED 1. Discuss the ethical and corporate social responsibility issues raised.

2. Discuss the sustainability issues raised.

3. What are your recommendations to Clarke on how it should proceed with the bid?

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