corporate social responsibility case studies

8/8/2019 corporate social responsibility case studies

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CORPORATE SOCIAL

RESPONSIBILITY

ASSIGNMENT - 3

SUBMITTED BYASHISH KUMAR ANNEPU

DFT-VII


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Switcher / Whale clothes are distributed through three channels:

Independent retailers and Switcher boutiques, a total of 450 outlets in

Switzerland;

500 resellers specializing in serigraphy (screen printing and

embroidery), representing 50 percent of the Mabroucs sales revenue in

2000

Direct sale to consumers by way of the Switcher catalogue (since

1989) and through the internet by way of Switcher-World SA (since

2001).

Company Philosophy

The Mabrouc/Switcher philosophy is one of sustainable development,

preserving the environment, acting in a socially responsible manner and

making the work environment as enjoyable as possible, under economic

constraints.

Owner Robin Cornelius strongly believes that economic issue should not

prevent a company from being an active contributor to social development and

environmental protection.

Swiss consumers are aware about Switchers involvement in social issues.

Switcher does not advertise its social-related activities.

Awareness undoubtedly comes from the numerous press articles portraying

the company as a vivid example of good social / economic coexistence and

revealing Switchers owners particular charisma.

The citizen brand image is well developed, but still essentially limited to

Switzerland, due to Switchers geographical market concentration.


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International Standards

Switcher aimed at ensuring product quality at all production/distribution stages

and at complying with international environmental and social standards.

The company gained ISO 9001 certification in 1997.

Switcher and Whale products are Oeko-Tex 100 certified (absence of harmful

chemicals in production process).

Recently, the company engaged in ISO 14001 (environmental protection) and

SA 8000 (social accountability) certification.

Switcher requires from all its business partners that they engage in the same

process.

Switchers Code of conduct is in line with the Clean Clothes Campaign

(CCC) principles.

In 2000, along with two other Swiss companies (Migros and Charles Veillon),

Switcher agreed to be part of a pilot project for the independent monitoring of

its own code of conduct.

Auditing Partners on Working Conditions

Implementing these rules is done through a systematic audit of

Switcher suppliers.

The audit takes place through observation, checking company records and

legal documents, talking to labor union representatives, individual workers and

their families.

The audit procedure leads to the grading of the partner-company working

conditions on a four-level scale:


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Excellent,

Need some adjustments but are fair ; the company accepts to improve

conditions,

Bad, however the company is ready to launch necessary efforts over medium

term to upgrade and finally meet requirements,

Bad and the company is not willing to undertake corrective actions.

Switchers Environment and Social Relations Department keeps an open eye

on each suppliers social performance, through frequent factory visits,

discussions with labor unions and individual workers, and checks of

performance indicators (such as absenteeism, overtime hours, defective

pieces, and customer complaints).

Switcher/Prem Partnership In India

In the early 80s, Mabrouc SA developed a unique partnership with Indian

manufacturer-exporter Prem Durai Exports, today a part of the Prem Group of

Companies.

They signed an exclusivity contract by which Prem Groups full production was

destined to Switcher, Prem Group being in return Switchers unique supplier in

India.

Stimulated by Switcher and eager to respond to growing concerns about

quality, environmental protection and social accountability, Prem Group went for ISO

9000, ISO 14000 and SA 8000 certification.

In the process, the company realized that the standards required for

certification could only be met through greater control of upstream activities, which

led to vertical integration.

Production was first intended solely for export to the Swiss and German

markets.

Since 1999, Prem Group also supplies Switcher with products for the Indian

market which is growing steadily.

Production had increased 1.5 fold in one year, in 2000, capacity utilization

moving from 60 percent to 84 percent, with a workforce of 1,250 and an annual

turnover of $10 million.


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Higher productivity matched with a significant improvement in quality, with an

average rework level decreasing from 20.4 percent in 1998-99 to 8.3 percent in

2000-01 and average rejection level decreasing from 10.6 percent to 4.8 percent.

Major improvements can be traced to both equipment/technology upgrading

and new management practices.

Social Management

In complying with SA8000 standards, Prem Group has put into place, early

2001, a complete set of social accountability procedures.

The companys Social Accountability Systems Policy is well known and widely

spread: the policy statement is distributed to workers in their native language

(Tamil), to active NGOs and to local and regional political authorities.

Several recent press articles have contributed to its diffusion to the public.

Social management factors are reviewed below, with some of the operational

specifications thought to have a direct impact on the companys competitive

standing.


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Human Development

Ongoing training takes place at all levels to help workers develop multiple

skills and competences and thus provide career progression opportunities.

Upstream operations have been progressively automated.

Workers are trained for more downstream operations and for machine

monitoring and quality and task checking.

The training process contributes to motivating workers to develop their

abilities, helps in identifying higher-potential personnel for future promotion and is

considered to be a major factor of general performance improvement.

Training is also provided to all incoming workers on the following issues:

Background of the company, products and customer (Switcher);

SA8000 and its importance;

Companys procedures on accidents, disciplinary actions, complaints,

working hours, and overtime;

Committees in the factory and their activities.

All workers are thus well informed of the importance of social

management issues and the companys philosophy in that respect.

Building workers self-esteem and sense of responsibility is achieved

by developing awareness of each tasks importance in ensuring customer

satisfaction, and setting objectives for decreasing complaint levels.

Feedback from Switcher helps in measuring results. It is often

provided live to Prem management and workers, with frequent trips (every 2-

3 months) taking place between Switzerland and India.

Switcher/Prem Group believes in employee empowerment.


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Better working conditions, human development policy and improved work

environment, and a general Switcher/Prem philosophy to reinject benefits in social

programs and work-related improvement measures, are believed to have had a

direct impact on absenteeism and workforce turnover rate.

Overall, significant improvements in performance coincide with better workingconditions being implemented to comply with SA-8000 standards.

One of Switcher/Prems most significant initiatives was to establish work

contracts for all employees, a guarantee of year-long employment, contributing the

development of a sense of security and belongingness.

All workers also have the benefit of health and retirement plans, which

remains an exception in the Indian textile industry.

Occupational Health and Safety

Series of health and safety measures have been put in place.

Health and Safety functions are both decentralized and centralized.

Each Department is responsible for its own employees. In addition, a Health

and Safety Manager is appointed to coordinate the H&S functions and monitor theirimplementation.

Safety and fire fighting training is conducted regularly by trained

personnel/outside agencies.

First aid, health and hygiene training are conducted by visiting doctors. All

employees are trained both in safety and fire fighting and in first aid, health and

hygiene.

Specific safety precautions for daily work include, for example, requiring the

use of masks and finger guards for some of the tasks that remain dangerous.


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Labor Relations

All workers are unionized.

The company has two trade unions, the Central Indian Trade Union (CITU)

and the Marumalarchi Labor Federation (MLF).

Management labor relationships have developed on a cooperative mode,

as reflected in the composition of the companys Corrective Action Committee,

which brings management and union representatives together to solve problems.

Non-Discrimination

Prem Group follows a non-discrimination policy: The Company hires, trains,

compensates and promotes employees on the basis of performance and

competence irrespective of race, caste, natural origin, religion, disability, gender or

political affiliation.

With respect to gender, the company employs 43 percent women and 57

percent men, with equal pay for equal work, in accordance with the Equal

Remuneration Act, 1976.

Child Labor

ILO standards specify children under 15 should not be hired for work.

Prem Group has set the minimum age for recruitment at 18, for all tasks.

To implement such standards, systematic checking of young workers age is

necessary.

Contractors /suppliers are requested to implement the same principles and to

provide a written commitment to that effect.

In case a young worker was found to be working in the factory, despite the

checks mentioned above: it would be reported immediately to the Personnel

Manager.

For young workers over 15 years old, the company may try to maintain a light

work load for a few hours a day (no overtime), combined with school enrolment.


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For a child under 15, the company will provide free schooling and may pay a

stipend to the child to replace lost income to the family.

Forced Labor

In compliance with the Indian Bonded Labor System Act of 1976, Prem

Group does not engage in practices which lead to forced labor.

Workers are not forced to do overtime, as specified in the labor union

agreement.

Management Review Meetings

Management review meetings take place twice a year to evaluate the

effectiveness of the companys Social Accountability Systems.

Management reviews are of:

Adequacy, suitability and effectiveness of the companys SA policy;

Effectiveness of the systems and procedures;

Training and awareness programs;

Supplier conformance;

Concerns expressed by workers, customers and other stakeholders;

Internal/external audit reports.

Internal Audit

A Corrective Action Committee has been established to suggest corrective and

preventive actions.


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Members include four Prem Group managers and workforce representatives

elected by the workers.

Internal audits take place twice a year.

Ongoing monitoring allows for management to check out possible fluctuations

in performance and link them to specific events.

Supplier Audit

As for suppliers, they are required, once a year, to complete a questionnaire

about their commitment to SA 8000 standards, leading to eventual corrective

actions when needed

Visits to suppliers premises allow for checking the authenticity of the data

provided in the questionnaire.

The company maintains records of suppliers and sub-contractors degree of

compliance with SA standards over the years, providing some sense of

progress being made and helping to point out most appropriate remedial

action.

Ability to reach and maintain SA-8000 standards is an important criterion in

selecting and retaining a supplier.

This practice is well in line with Switchers own auditing procedure resulting in

a 4-level grading scheme of its business partners.

This backward process consists in vertically integrating partners along SA

standards.

Image Building

The Switcher/Prem partnership has become a benchmark in the

Indian garment industry.


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Neil Kearney, General Secretary of Belgium-based International Textile,

Garment and Leather Workers Federation, praised the companys

accomplishments with respect to wages and working hours, health and safety.

Extending Social Accountability

A charitable trust was initiated by Switcher and Prem Group to provide free

health, safety and education services to the workers, their families and to the

public in general.

The social contribution philosophy spreads out to a number of activities.

Seven schools are running, fully funded by the trust, free of charge, for

workers children and those from poorer families of Tirupur and nearby

villages. Employees children, are automatically accepted, other children are selected

among the poorer families of Tirupur and nearby villages.

A criterion of selection is the familys motivation to see their children through

school.

Four dispensaries were opened in the factories and schools for free medical

service and hygiene advice.

Safety awareness and first-aid training is provided on a regular basis in thefactory.

An AIDS awareness and prevention campaign was launched in 2001,

Some observers have compared such initiatives with 19 th-century European

paternalism.

Criticisms are few, however, and do not seem to emanate from Indian sources.

The possibility for Switcher to go public in the near future is an ongoing

question and great concern. Switcher managers are looking at different ways in which shares could be

made available to socially committed stakeholders, in order to avoid

jeopardizing the companys current line of action and its strong partnership

with Prem Group.


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Questions

Q1. What were the main benefits of SA8000

Q2. What predictions would you make about the future of the

company?

Q3. Can this model be profitable today?

Q4. How replicable is the Switcher/Prem Durai business model?

Q5. Which aspects are most/least replicable and why?


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Q1. What were the main benefits of SA8000?

Answer:

The main benefits obtained by the adoption of the SA8000 standards are as follows:

Enhanced production: - The certification plays a great role in production

increasing steadily but in a stable manner.

Higher Capacity Utilization:- The levels of capacity utilization are bound

to increase thus making the production system more efficient.

Quality: - The quality of production is enhanced and the number of re-

works required is lessened.

Technology upgrade: The application of certain principles in SA8000

trigger the up gradation of technology and new management principles

being applied to further optimize the process.

Consumer satisfaction:- The workers are made aware of the various

consumer complaints and assisted in building their self esteem and sense

of responsibility for decreasing consumer complaints.

Time management:- The social accountability principles help in

tremendous reduction of overtime by finding the optimal balance between

work and rest periods.

Absenteeism: - Better working conditions, human development policy and

improved work environment, reinjection of benefits in social programs and

work-related improvement are believed to directly impact absenteeism and

workforce turnover rate.

Reduced Worker dissatisfaction: Steps taken to provide occupational

safety, non-discrimination and improvement in work organisation and

general working condition assist in the reduction of discontentment among

workers.

Social benefits:- Various steps are taken to improve the condition of the

society. These may range from operating schools, dispensaries and

providing water access. These above said activities assist in enhancing the

society and lead it towards prosperity. The organisation can benefit from

the human resource generated in the long run along with improving

conditions of the current workforce to realize immediate benefits.


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Q2. What predictions would you make about the future of the

company?

Answer:-

Till date the company has shown exemplary progress ,becoming a model for

others in the apparel business.

The partnership between Switcher and Prem group has displayed

incomparable commitment towards each other and successfully negotiated

through rough patches.

The factors such as longterm commitment trust building and sharing values

have ensured that the business deal goes beyond contractual commitments.

The enduring value system and the commitment level displayed give a hint

about a successful venture which has been managed intricately at variouslevels.

The activities of social responsibility have benefitted the society, employees

and the organisation thus emanating positive image and results.

The results have been affirmative and proven to provide long-term monetary

as well as other types of benefits to the organisation.

The future can be portrayed on the lines of various principles implemented and

the benefits that are being reaped from these. In light of the ongoing flourishing partnership, the future of the organisation is

predicted to be bright, progressive and expansive in all aspects as shown in

past with indications of continuing efforts to further strengthen the commitment

to be socially responsible as well as economically successful organisation.


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Q3. Can this model be profitable today?

Answer:

The business model of the organisation is laid down on the principles of mutual

exclusive benefits.

While the complete production of Prem group was completely dedicated

towards Switcher. In turn the former has been made the unique supplier of

Switcher in the country.

The underlying rationale behind the success of the partnership is the

commitment and belief in values and benefits of a long-term relationship.

These enduring commitment lead to the accomplishment of objectives rarely

achievable in a condensed time frame.

This type of model can be successful as well as non-successful depending

upon various factors like market conditions, vendor speculations, competition,

mutual understanding and cooperation.

The model of this type guarantees good amount of long term benefits on one

time investments requiring implementation of various systems.

Since this model also seeks parity in contribution along with the contractual

bindings, it might be difficult for covertly ambitious partners to survive in such a

model.

In cases where partners agree on a common platform to surpass their

convention bound relation and strive to achieve for mutual sustenance and

benefits then in those cases success is possible for such kind of mutually

coexistence business model .


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Q4. How replicable is the Switcher/Prem Durai business model?

Answer:

The Switcher/Prem business model is a very unique and exclusive in nature.

The model works on an easy principle of one organisation dedicating/providing

services on a whole to the partnering organisation and in turn gets an equally

viable opportunity to make profitable business.

This model however replicable isnt easy to do so without the required amount

of commitment, patience, mutual trust, understanding and acceptance.

Replicating this model can be expensive, tedious and time consuming before

expected results are realized.

It requires a high level of thought process to assess the contractual binding

required in the process of becoming an exclusive supplier or manufacturer.

In-depth analysis of the organisations market image, capabilities, finances,

compliances and various other business dynamics should strictly be done.

The model also has some portions out of the contractual bonds where in

Switcher stimulates Prem group to go for various certifications such that their

products produced at Prem group factories comply to the same certification

norms to which originally Switcher products comply to.

The certification portion may be a hitch in replicating the model as the

organisation doing so will be assuring its quality, responsibilities and receive

competitive edge but in the process of doing the same it may cost the

organisation a hefty amount in all.


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Q5. Which aspects are most/least replicable and why?

Answer:

The following are the least replicable aspects of the business model followed by

Switcher and Prem Group:

Vertically integrating activities by backwards integration may not always beeasily done as it would require a staged and planned development with huge

capital requirement.

Providing amenities such as a free canteen is a very difficult and a bold move

as cost is a prime concern in garment industry, the food being completely

sponsored by the company adds to the overhead costs which may feel

burdensome with large number of employees.

Establishing work contracts for all employees along with a guarantee of year-

long employment.

All workers also have the benefit of health and retirement plans, which

remains an exception in the Indian textile industry.

Providing a sense of security may backfire at the organisations objective of

providing security cover to its employees in the sense that they may become

rest assured of their job and have less productivity.

Providing retirement and health benefits to an extent is fine unless the costs

remain in tolerance

Suppliers are required to comply by the SA8000 standards of which the

organisation does a yearly audit to authenticate their commitment towards the

certification in order to retain the suppliers.

The suppliers may act apprehensively to the act of vertically integrating their

activities and obtain certifications same as that desired by the buyer which may

be quiet difficult in cases where adamant suppliers only supply small

components ,quantities or the suppliers for the particular component are very

few.


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The following are the most replicable aspects of the business model followed by

Switcher and Prem Group:

The partnership model followed is perfect to serve the purpose of entering a

new market wherein partnering with a local firm knowing local conditions for

marketing your product.

Outsourcing to places where costs incurred are less is also a suitable

alternative to cost reductions

Occupational health and safety, measures to ensure all employees are trained

both in safety and fire fighting and in first aid, health and hygiene.

The Non-discrimination policy adopted is also an easy way to keep a balance

in the work force and avoid dis-contentment of gender biasing.

The child labour and the forced labour policies are also one which can be

readily replicated to avoid any type of violation or discrepancies in the work

force.

Conducting comprehensive internal audits and ongoing monitoring allows for

management to check out possible fluctuations in performance.

The social contribution philosophy that focuses on funding several social

activities spreading out to a number of activities.


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Status prior to certification

Strengths

Yesim was already strong in certain areas prior to certification:

Exercised the fundamental right of Freedom of Association and had aCertification Body trade union.

Paying a living wage.

No double booking of orders.

Strong support of the CEO for improving workplace conditions.

No reported worker rights violations.

Benefits and Challenges in Obtaining Certification

Third-party driven social compliance plan.

Systematic approach to responsible and sustainable business

practices relating to subcontractors.

Credible reference for customers concerned with workplace issues,

proper recognition of Yesims achievement and therefore new orders.

Introduction of a management system that would be helpful as a

business tool.

Training of individuals in the company to be available to work on CSR

issues.


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Costs of Compliance of Concern to Yesim

Possible delays in achieving certification, delays in business

operations resulting in dissatisfaction among new customers.

Overtime limits might mean loss of flexibility, higher costs and

possible inability to meet customer needs without becoming

noncompliant.

Monitoring system to control overtime on a daily basis with a yearly

limit of 270 hours per year per worker was viewed as costly.

Meeting customer needs through shifting burdens to subcontractors

was a danger, and a monitoring system to observe their practices

was viewed as challenging and possibly costly.

Outcomes

1. Compliance Was Speedy

No delays. Findings of certification audits and follow-up audits were

monitored by Yesims own management system and the expected

benefits were achieved.

Measurable Achievement:

Factory proposed for certification at first audit (no major nonconformances).

Awareness of the program was raised at the managerial level and at

the worker level, with vocational training and an effective

compliance and environmental health and safety committee, as well

as ample NGO engagement.

2. Company Awareness of Workplace Issues Was Raised

Awareness of the program was raised at the managerial level and at

the worker level, with vocational training and an effective

compliance and environmental health and safety committee, as well

as ample NGO engagement.


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Measurable achievement

Overtime Limit : In 2006, just four out of 2500 employees exceeded yearly

limit of 270 hours, by 2007 (end of September): Only one employee exceeded

yearly limit.

3. Improved grievance system

Greater coordination with trade union representatives through

periodic meetings. Concerns raised during trainings or site audits

were addressed.

Measurable Achievement:

Communication and training were initiated for a new grievance system.

Feedback that its details were effectively conveyed and it is functioning.

4. New Programs for Environmental Health and Safety.

Yesim determined that as part of their social compliance program,

there should be ongoing training and monitoring, internal audits, as

well as a corrective action request system.

The company is now undertaking:-

o AKUT Research and Rescue emergency preparedness

project.

o Ergonomic studies. - Revised personal protective equipment

(PPE) selection system.

o Detailed risk analysis.

Measurable achievement:

37% decrease in total lost time due to incidents.

Lost days fell from 652 days to 414 days (238 days gained).


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Questions:

Q1. With cost considerations so important in the global apparel market, will

CSR issues adequately raise demand to offset cost issues?

Q2. Is enough being done to publicize certification among buyers?


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Q1. With cost considerations so important in the global apparel market, will

CSR issues adequately raise demand to offset cost issues?

Answer:-

Cost has always been an integral part of the apparel business since time

immemorial.

Cutting cost may not every time serve the purpose for realizing better profits.

Cost cutting may also result in compromising on quality and various

parameters that add-value to the product.

Thus it is necessary to find an alternative for offsetting the cost issues.

CSR activities aim at serving the purpose of paying back the society to offset

for the resources utilized from it along with providing the company with benefits

of its activities.

CSR activities if directed in the right direction can bear long-term benefits

(tangible and intangible) for the organisation.

These activities present a credible reference for customers

concerned with workplace issues and proper recognition of the

organisation.

These benefits are realized in form of image building, confidence and appeal

among consumers.

CSR activities help portraying a companys responsible image such that the

consumers feel a sense of pride in having been connected to the company and

its products.

It is a kind of intangible benefit that results in image enhancement.

The image enhancement in turn results in the increase in acceptance and

consequently a considerably growing consumer base.

Dynamic consumer base provides growth in potential sales and concurrently

enhanced profits

Thus CSR activities to a certain limit have potential of developing or generating

demand that can help offset the cost issues.


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Q2. Is enough being done to publicize certification among buyers?

Answer:-

Certification is something that guarantees the compliance to certain norms by

an organisation.

A certification by others outside the organisation are perceived to be an

achievement less achieved, providing a competitive edge over other

competitors without the certification.

Buyers most likely prefer organisations with most number of certification, as

per the popular belief more the better

Publicising the certifications held by an organisation is done to reflect anorganisations commitment towards excellence that makes them the preferable

choice above others.

Publishing on websites or sharing experiences at conferences is also a good

medium of communicating to buyers about an organisations pursuit to attain

excellence.

Presentations at buyer seller meet provide an active platform for advertising.

It can never be sufficient to tell if enough has been done to publicise

certification among buyers as different mediums are effective for different types

of buyers, thus the choice of the communication channel/medium may be

decisive in the effectiveness of the advertisement.

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