$5\mathrm{.}3$ CASE STUDY

SUPPLY CHAIN $$ USING CHILD LABOUR OR PAYING UNFAIR RATES CAN DESTROY A BRAND

Consumers are becoming increasingly budget$-$conscious, which has encouraged retailers to seek efficiencies through their supply chain. This has led, in many cases, to sourcing stock from manufacturers in countries that pay low pay rates. However, this can carry additional risks. clothing, footwear and textiles from Asia, warning that chasing cheaper labour to reduce costs can backfire and ultimately damage fashion brands. They are putting pressure on public companies to provide more information about their supply chain, including details of which countries goods are coming from.

It is important for investors to consider which companies are managing these risks, when making investment decisions. However, public disclosure is often quite poor, leading investors to seek further information from other sources; they are seeking greater transparency and have put ethical supply chain management under the spotlight.

The collapse of a garment factory in Bangladesh in April $2013$ that killed more than $1000$ workers increased the focus on the issue and now retailers are expected to disclose the extent

to which they are exposed to one of the poorest countries in Asia and sign international labour agreements on sourcing and pay.

Concerns about sources of goods have existed for years, however. Decades ago, footwear group Nike was exposed in a sweatshop scandal. That was followed by other scandals, including the discovery that footballs used in the Australian Football League were made by children.

Investors who are signatories to the UN Principles for Responsible Investment identify supply chain labour standards as one of their priority areas for engaging with companies.

Source: Adapted from Eli Greenblat, 'Pressure on retailers to act ethically', The Age. $197$

QUESTIONS

The above article discusses investors' call for more transparency in regard to human rights and employment issues through companies' supply chains. Many companies discuss this information in their sustainability report. What is sustainability? Provide three examples of activities that are considered to have an impact on the sustainability performance of a company.

Corporate decisions to voluntarily disclose information about policies and practices relating to human rights and employment can be explained using a number of theories addressed in this unit. Discuss one of these theories, and explain, from a theoretical viewpoint, why firms would choose to provide this information when they are not formally required to do so$.$

How does a company's supply chain relate to determining sustainability of an organisation's operations? Explain your answer, supporting your view with examples from the article. LO$7$