ETHICS IN SOURCING AND WORKING

WITH VENDORS

Emily

Wiley

Kyla

Moore

WHAT IS ETHICS? How do you define ethics? Ethics is “the basic concepts

and fundamental principles of right human conduct. It includes study of universal values such as the essential equality of all men and women, human or natural rights, obedience to the law of land, concern for health and safety and, increasingly, also for the natural environment” (BusinessDictionary.com).

Ethics is hard to enforce because it can be subject to individual interpretations

VOCABULARY Ethical sourcing: means that the products are

created in safe working environments by employees who are treated well, paid reasonable salaries, and work legal hours. (Sanctus Mundo)

Unethical sourcing: products are created in environments that are not safe for the employees, where they are possibly not paid or treated well, and work far more than the legal hours.

Sweat shop: “a shop or factory in which employees work for long hours at low wages and under unhealthy conditions” (Merriam Webster)

Child labor: use of young workers in factories farms and mines, employing them to the point of “virtual slavery” (Korshunova)

ETHICS IN SOURCING AND WORKING WITH VENDORS

Consumers have voiced concerns over human rights and the environmental impact that comes with where their clothes are made

Contradictory with demands for fast fashion (Just-Style).

Retailers need to make sure the manufacturers that produce their products are ethical Safe, legal working conditions Friendly to the environment

SWEAT SHOPS

U.S. Department of Labor: sweatshop is a factory that violates two or more labor laws

Workers are subject to extreme exploitation

Could include absence of a living wage/benefits

Poor working conditions Verbal/physical abuse Could be so bad they do not

improve the economic condition of their employees (Vegan Peace Home).

SWEAT SHOPS CONTINUED

In order to no longer be a sweat shop Employees must

be paid a minimum wage Keep a time card Be paid overtime Be paid on time Be allowed to organize an

independent union

Often apparel factories are sweat shops (Global Exchange)

CHILD LABOR

Child Labor first became a problem in 18th century Britain with the introduction of the factory system

Grew from apprenticeships and family employment, which became virtual slavery, “especially among British orphans” (The Free Dictionary by Farfalex).

Most European countries passed child labor laws by 1940

Child labor became a recognized U.S. problem after the civil war

CHILD LABOR CONTINUED First Labor Standards Act was passed 1838

Set a minimum age limit of 18 for hazardous occupations

16 for employment during school hours for companies in Interstate commerce

14 for employment outside school hours in nonmanufacturing companies

In 1941 Congress passed this act International Labor Organization regulate the

employment of children In 2000, 2%-29% of children between the ages of

5 to 14 were a part of economic activity 1999 the International Labor Organization banning

any form of child labor that endangers the morals, health and safety of children Such as: slaver, forced labor, prostitution, criminal

activity, forced military recruitment (The Free Dictionary by Farfalex).

U.S. LAWS

Sweatshops U.S. Department of Labor requires…

Workers to be paid minimum wage Workers to keep a time card Workers to be paid overtime Workers to be paid on time

The Union of Needletrades Industrial and Textile Employees (UNITE) requires… that workers be allowed to their right to organize an

independent union (Global Exchange)

U.S. LAWS Child-Labor

Exist to protect children from exposure to hazardous, unsanitary, immoral conditions or overwork

Primarily applies to business enterprises but some non profit companies in certain states as well

The law controlling child labor is the Fair Standards Act of 1838

Federal law provides the basic framework for the employment of children

Minimum requirements include age restrictions, minimum wage provisions, hours of work provisions, and the prohibition of certain occupations

Each state also has its own child labor laws (The Free Dictionary by Farfalex)

COMMON OUTSOURCING COUNTRIES

Top most common outsourcing countries India China (Sourcing Line)

LAWS IN INDIA Workmen’s Compensation Act 1923

Compensation will be provided to an employee in the case of injury or to his dependents in the case of his death

Minimum Wages Act 1948 provides minimum wage to all

employees in all establishments Payment of Wages Act 1936

Regulates that time in which employees must be paid

No pay deductions unless specified by law

Similar to U.S. with the minimum wage laws, payment in a timely manner, and compensation

This does not mean sweatshops do not exist in India (Embassy of India)

LAWS IN CHINA All employees must receive rests, holidays

and ethical working conditions Women and children not allowed to work

underground or in mines Employers have to pay 150% of wages for

overtime, 200% for working without breaks, 300% for working national holidays

No national minimum wage Children under 14 not legally allowed to

work New law stating the guarantee of their job

if they work for a company for more than 10 years, but must be offered a contract, which they can negotiate

Under diminishing economy, employers paying employees less Firing employees who complain Labor laws not evenly enforced (Andromeda)

APPLE In 2010, Apple’s audits found that 9 of

its suppliers in china had hired workers below the legal working age of 16

Other plants falsified audit materials Coached workers on how to respond to

questions from auditors 137 workers were exposed to toxic

chemical n-hexane, causing adverse side effects

A large number of suicides at Apple’s Foxconn supplier

Explosion that killed 3 workers and injured 15 caused by combustible dust trapped in vents

(Barboza, 2011) (Apple Computer Support)

FOREVER 21

Sweatshop located in downtown LA, not only overseas

Workers work 10-12 hour days for low wages

No overtime pay Unethical, dirty conditions (Fast

Fashion) Reputation for counterfeit goods

THE GAP Clothing being manufactured

by children as young as eight under unethical conditions

Sold by their parents to recruiters in India and taken to factories where they abused and forced to work morning until after midnight without pay

Gap worked to clean up its image by sending inspectors to India and by not selling the clothes produced by the children

Gap has not severed ties with the vendor in question (Ethical Shopping, 2007)

HOW TO AVOID UNETHICAL SOURCING?

Companies can avoid unethical sourcing by… Sending representatives regularly, often and

unannounced to check on conditions Do extensive research on vendors before

agreeing to work with them Check labor laws in sourcing country and make

sure vendors actually follow and enforce the laws Visit showrooms before agreeing to work with

them

INTELLECTUAL PROPERTY

Counterfeit Goods

VOCABULARY

Intellectual Property: the ownership of ideas and control over the tangible or virtual representation of those ideas

Intellectual Property Law: protects Intellectual property rights (IPR) of creators/owners by ensuring exclusive use of these creations Copyright Law: Covers literary, musical, artistic works

and software Trademark Law: Covers words, pictures, logo or other

graphic symbol Patent Law: Grants monopoly for a limited period of

time for the used and development of inventions Trade Secret Law: Any formula, process, pattern,

device or idea that provides the owner a competitive advantage

VOCABULARY CONTINUED Trademark Infringement: taking advantage of the value of a brand

by applying a trademark to products without permission of the owner of the brand

Patent: the exclusive right granted by a government to an inventor to manufacture, use, or sell an invention/idea/process for a certain number of years.

Counterfeit: something that a perpetrator forges, copies, or imitates without having the right to do so with the purpose of defrauding

Knockoffs: is an imitation, usually using lower-cost fabric and production methods and sold at a lower price.

Gray Market Goods: original goods (not knockoffs) sold by unauthorized vendors

Piracy: Act of selling and buying the counterfeit goods Illegal Transshipment: occurs when goods are shipped through a

third country or port to produce counterfeit documents that illegally change the COO

Inferior Goods: goods that have become in less demand as income rises

HOW CAN YOU LEGALLY GET AWAY WITH IT?

• Licensing Agreements: The licensee pays the licensor a royalty to use their company’s name, logo. Etc.

You see this a lot with perfumes and sunglasses

Knockoffs: knockoffs are imitations of products and are not being passed off as the real products, therefore they are not illegal

TRADEMARKS

Trademarks are the symbols, taglines, etc. that you associate with the company

Trademark Infringement is the biggest violation of intellectual property right

COUNTERFEIT GOODS

Top 10 Seized Counterfeit Goods10. Pharmaceuticals (3% of total goods seized)

9. Jewelry (4% of total goods seized)8.Watches/Parts (4% of total goods seized)7.Cigarettes (5% of total goods seized)6.Computers/Hardware (5% of total goods

seized)5.Media (7% of total goods seized)4.Handbags/Wallets/Backpacks (8% of total

goods seized)3.Apparel (10% of total goods seized)2. Consumer Electronics (18% of seized

goods)1. Footwear (24% of seized goods) (Top 10,

n.d)

TOP 5 COUNTERFEIT PORTS IN THE WORLD

5. Markets in Rome4. The Old City in Shanghai 3. Santee Alley in Silicon Valley2. Namdaemun Market in Seoul1. Canal Street in New York

(JetSetTV, 2009)

CANAL STREET

The Old City

Namdaemun

WHY IS COUNTERFEITING A PROBLEM?

Sweatshops Child Labor Economically damaging Funding of Terrorism Parts in the counterfeit goods http://www.youtube.com/watch?

v=TQJckaa_Wm8

COUNTERFEITING TODAY In March 2012, Officials in New Jersey seized an

estimated $325 million worth of counterfeit goods. This is the biggest of it’s kind by U.S. Department of Justice.

Goods included Coach, Louis Vuitton and other handbags; UGG boots, Nike sneakers, other shoes, and clothing.

The plan to seize the goods and shut down the ring was a 2-3 year process.

The smugglers were initially successful through the use of false ID documents and stealing corporate identities.

They covered up the UGG tags with fake brand names, and would have one letter missing from a word to hide the counterfeit goods. (Bates,

2012)

KNOCK-OFFS

The difference between a counterfeit and knockoff is that counterfeits are passed off as the real product and knock-offs are purely imitations.

KARDASHIAN KNOCK-OFFS

The Kardashian Kollection at Sear’s recently got in trouble with their handbag line that looked oddly familiar to a few famous designers.

They have already been delivered cease-and-desist letters from Monica Botkier and it won’t be surprising if they get a few more.

(Fenner,2011)

BALENCIAGA

CHLOE

YVES SAINT LAURENT

GUCCI VS. GUESS

“Guess is being accused of specifically ripping off 4 designs 1. Gucci’s Red and

Green Stripe 2. The interlocking G

pattern 3. The square G 4. The Brand name’s

delicate script front”

(Krupnick, 2012)

HOW CAN YOU TELL?

Retailer Knowledge Know your product and quality

THINGS TO LOOK FOR

Look for spelling Errors on products and packaging

Look to see whether there is a barcode or not Products from different manufacturers sold

together No contact information on product

QUIZ QUESTIONS

What is the name of the company who owned a sweatshop in downtown LA?

Name one way to avoid unethical sourcing.

Which country has no national minimum wage?

What is the main difference between a counterfeit good and a knockoff?

What is the number one counterfeit good sold?

REFERENCES Andromeda, R. (n.d.). eHow Money. Retrieved from Labor Laws in China:

http://www.ehow.com/list_7810908_labor-laws-china.html Apple Computer Support. (n.d.). Retrieved from Apple and Ethics: Consumer Response to

Unethical and Inhumane Factory Labor Practices in China: http://www.resourcesforlife.com/apple/ethics

Barboza, D. (2011, May 24). The New York Times. Retrieved from Explosion at Apple Supplier Caused by Dust, China Says: http://www.nytimes.com/2011/05/25/technology/25foxconn.html

Bates, T. (2012, March 2). Millions of dollars in fake goods stopped at port, officials say. Retrieved from http://www.app.com/article/20120302/NJNEWS10/303020100/Millions-dollars-fake-goods-stopped-port-officials-say

BusinessDictionary.com. (n.d.). Retrieved from Ethics: http://www.businessdictionary.com/definition/ethics.html

Embassy of India. (n.d.). Retrieved from Labor Laws: http://www.indianembassy.org/labor-laws.php

Ethical Shopping. (2007, October 30). Retrieved from Gap Caught in Child Labor Scandal: http://www.ethicalshopping.com/clothing-accessories/clothes/gap-caught-child-labor-scandal.html

Fast Fashion. (n.d.). Retrieved from What is a Sweatshop?: http://fastfashion.weebly.com/unethical-production.html

Fenner, J. (2011, November 4). Kim Kardashian’s Purses Are Pretty Flagrant Designer Knockoffs. Retrieved from http://www.styleite.com/media/kim-kardashians-knockoff-handbags/#4

Global Exchange. (n.d.). Retrieved from "Free Trade" and Sweatshops: http://www.globalexchange.org/fairtrade/sweatfree/faq

REFERENCES CONTINUED JetSetCD. (2009, September 9). The Top Five Counterfeit Shopping Districts In The

World. Retrieved from http://www.jaunted.com/story/2009/9/9/121143/4651/travel/The+Top+Five+Counterfeit+Shopping+Districts+In+The+World

Just-Style. (n.d.). Retrieved from The Ethics of Sourcing: http://www.just-style.com/hot-issues/the-ethics-of-sourcing_id154.aspx

Krupnick, E. (2012, April 5). Guess vs. Gucci trademark case heats up in court. Huffington Post. Retrieved from http://www.huffingtonpost.com/2012/04/05/gucci-guess-trademark-lawsuit_n_1405784.html#s824192&title=Guess

Korshunova, E. N. (n.d.). The Free Dictionary by Farfalax. Retrieved from Child Labor: http://encyclopedia2.thefreedictionary.com/Child+Labor

Merriam Webster. (n.d.). Retrieved from Sweatshop: http://www.merriam-webster.com/dictionary/sweatshop

Sanctus Mundo. (n.d.). Retrieved from Ethical Sourcing: http://sanctusmundo.com/products/ethical-sourcing

Sourcing Line. (n.d.). Retrieved from Top Outsourcing Countries: http://www.sourcingline.com/top-outsourcing-countries

The Free Dictionary by Farfalex. (n.d.). Retrieved from Child Labor Laws: http://legal-dictionary.thefreedictionary.com/Child+labor+laws+in+the+United+States

Vegan Peace Home. (n.d.). Retrieved from Sweat Shops and Child Labor: http://www.veganpeace.com/sweatshops/sweatshops_and_child_labor.htm