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In the global pursuit of lower costs do human rights matter? Argue against this statement.

In recent years, a number of businesses have been criticised over human rights abuses. Wal-Mart, US owners of Asda, have come under attack for using Chinese factories where child labour is rife for toy production . Human rights abuses exist in factories in the West too, as identified by Human Rights Watch’s report on low wages and poor working conditions of immigrant workers in US meat and poultry factories. In pursuit of lower operating costs in order to increase profits, these companies or their suppliers have compromised human rights in order to drive down costs. This essay explores the concept of human rights in a business context, looking at various examples, and argues that recognition of human rights is not merely a moral obligation but good business practice on economic grounds.

Overview

Human rights have been defined as

“those basic standards without which people cannot live in dignity. To violate someone’s human rights is to treat that person as though she or he were not a human being. To advocate human rights is to demand that the human dignity of all people be respected” .

Extensive human rights principles are codified in UN documents. Pressure is put on countries not adhering to the principles, especially for practices perceived as particularly abhorrent (e.g. torture, murder, imprisonment without charge or trial), but they are not all enshrined in law . Following principles that are not legally binding but are seen as morally desirable is a matter of ethics, and this leads to business dilemmas: there is a perceived higher cost of ethical behaviour and hence reduced profits and potentially decreased competitiveness if rival organisations continue to drive costs down by unethical means.

The case for and against ethical business practices

Arguments exist both for and against ethical business practices. Child labour and human rights abuses against workers have two main causes: (1) pressure to deliver cheaper goods and (2) local circumstances.

The Ethical Trade Initiative (2005) recognise several suppliers who are working to improve the situation regarding driving prices down: Gap, Nike, Tesco and Otto, all of whom have been accused of exploiting foreign suppliers. As one supplier explained:

“The only ham left in the sandwich is our labour costs. If the supermarkets squeeze us, it’s the only place were we can squeeze” .

The second situation is rather more challenging for businesses to address, and involves issues such as local poverty. China has legislation outlawing the employment of children under 16, but this is not always adhered to by factories . This is partly due to demand for work for under 16s:

“The poorest families are often left with no option but to send their children out to earn money” .

In a situation such as this, it could be considered more important to address the poverty than the child labour, as if the law is rigorously enforced, families could face increased hardship.

There is an argument that Western demand for cheap goods has driven the situation. However, consumers are increasingly aware of human rights issues in the supply of goods to Western markets and in some cases, campaigns have sought to force businesses to change their approach. This happened in the case of Nike, where a boycott campaign encouraged the organisation to address labour practices among its suppliers . This was in part due to youth activism reducing the desirability of Nike products. The power of the consumer was articulated by a 13 year old boy from New York’s Bronx:

“Nike, we made you. We can break you” .

Business Case for Ethical Practices

Implementation of human rights recognition can be challenging. Changing suppliers could mean workers face redundancy. Action Aid’s report advises Tesco customers against a boycott of Tesco’s South African fruit for this reason . It is far more beneficial for the buyer to continue using the same suppliers while simultaneously supporting CSR initiatives to help remove the causes.

Addressing supply chain management can involve considerable amounts of work. For example, Gap found that many of its buyers had little perception of how their actions impacted on individuals working in government factories. They are now developing a buyer training programme to address this. This may sound an expensive and complicated approach to address the issue, but there is a sound business case, outlined by Gap’s Vice President of Global Compliance, Dan Henkle:

“In examining our overall supply strategy, we realised that some of our [purchasing] decisions were not only impacting working conditions, but were also impacting quality, on-time delivery and cost” .

Ethical Responsibilities

When looking at supply chains and business operations, it becomes clear that a number of parties have duty to ensure human rights are not abused. Governments are able not only to legislate, but ensure legislation is adhered to – although many are concerned this may drive businesses to suppliers in other countries were legislation is less restrictive.

This shows the importance of international standards. Otto Group demand the same ethical trade standards from all its suppliers, whatever their price. Suppliers are regularly audited to ensure labour standards are met. The power of individual businesses must not be underestimated: large corporations may generate profits that give them resources far exceeding that of governments. For example, Shell’s recently announced profits of $22.9bn vastly exceed the 2004 GDP of $15.6bn of Kenya (NB: the US figure of 1,000,000,000=1 billion is used here: a UK billion has 12 ‘0’s, but the American billion is normally used in financial data).

There must also be pressure from consumers to provide an ethically-sourced product by being willing to accept higher prices, perhaps implementing changes in their own buying habits e.g. accepting longer lead times for clothes replicating catwalk styles to appear in high street stores.

Not only does ethical sourcing make business sensing in helping avoid quality issues and bad press, but a business can also use its practices as a USP (unique selling point) to differentiate itself from less ethically-aware competitors. The Body Shop have used this position from their outset and the Co-operative Bank have attributed a 16% increase in profit to a policy of only investing in businesses with good records on recognising human rights and other ethical concerns .

Conclusion

The trend is an increase in ethical practices among businesses. In1988,18% of UK businesses had implemented an ethical code of practice, rising to over 50% in 1998 . For many businesses, this includes human rights recognition, so an already strong business case can only grow in the coming years. This reinforces the case for human rights and other ethical concerns to be addressed and upheld within any contemporary business strategy.

References

China Labor Watch and National Labor Committee (2005) Colorful Children's Toys Made Under Miserable Conditions Report 21/12/2005 at

http://www.chinalaborwatch.org/en/web/article.php?article_id=50306

Cowe R (2001) Co-op Bank profits from morality in The Guardian 08/05/2001

Crane A and Matten D (2004) Business Ethics (Oxford University Press, Oxford)

ETI (2005) Bridging the gap between commercial and ethical trade agendas (Ethical Trading Initiative Briefing Paper no. 5)

Gittings J (2001) China’s children labour round the clock in The Guardian 26/09/2001

Human Rights Watch (2005) Immigrant Workers in the United States Meat and Poultry Industry Submission by Human Rights Watch to the Office of the United Nations High Commissioner for Human Rights Committee on Migrant Workers at http://www.hrw.org/backgrounder/usa/un-sub1005/

Kotler P and Lane Keller K (2005) Marketing Management 12e (Pearson Education, New Jersey)

Klein N (2000) No Logo (Flamingo, London)

Marcousé I, Gillespie A, Martin B, Surridge M and Wall N (2003) Business Studies 2e (Hodder Arnold, Oxon)

Royal Dutch Shell (2006) 4th Quarter Financial Report at http://www.shell.com/static/investor-en/downloads/

quarterly_results/2005/q4/q4_2005_key_financial_data.xls

Tesco (2005a) Treating people how we like to be treated (social responsibility review 2005) at www.tesco.com/everylittlehelps/socialdetail.htm#sc

Tesco (2005b) Response to ActionAid report at http://209.238.219.111/Tesco-statement-re-ActionAid-report-13-April-2005.doc (repository, Business and Human Rights Resource Centre website)

White A (2005) Fade, Integrate or Transform? The Future of CSR (Business for Social Responsibility) at www.bsr.org/CSRResources/ResourcesDocs/BSR_200508_Allen-White_Fade-Transform.pdf

Wijeratna A (2005) Rotten Fruit: Tesco profits as women workers pay a high price (ActionAid)

World Bank (2005) Survey of GDPs for 2004 by nation at http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf

Office of the United Nations High Commissioner for Human Rights

http://www.ohchr.org/english/law/index.htm

1948 Universal Declaration of Human Rights http://www.un.org/Overview/rights.html

1989 Convention on the Rights of the Child

http://www.ohchr.org/english/law/crc.htm

Human Rights definition from the Human rights Resource Center at the University of Minnesota at

http://www1.umn.edu/humanrts/edumat/hreduseries/hereandnow/Part-1/whatare.htm

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