Is This the Year When Supply Chains Become Socially Responsible?
Essay by Yonny Lam • April 16, 2017 • Case Study • 318 Words (2 Pages) • 952 Views
Essay Preview: Is This the Year When Supply Chains Become Socially Responsible?
FIN 3023 Intermediate Corporate Finance
1st reading: Is this the year when supply chains become socially responsible?
Should these companies take action against its suppliers that treat their own workers poorly even if such actions are costly?
In 2013, there was a “tipping point” for the implementation of social programs in overseas plants by major consumer brands. The Rana Plaza disaster in Indonesia, apparel retailers and producers of the garment industry, had waked the society for the awareness of corporate social responsibility. After this incident, companies saw a sudden switch in their client's’ attitude to social accountability. However, such actions of being social responsible are usually costly. The reasons why these companies should take those actions against its suppliers that treat their own worker poorly are the followings:
First, the customers are more aware of the issues of corporate social responsibility. They are concerned about where their products are coming from and if the company is abiding by all laws and ethical conduct. Just from knowing this, the company should take action against its suppliers when they know employees are being treated poorly. Although the goal of the entrepreneur is to maximize stockholders wealth, in order to do so one must remain ethical. If the company do not respond to the needs of the society ,the customers may resist to purchase from the brand. When it came to the disaster in Indonesia, the consequences were much more costly than if the company had reported the poor conditions. One of the consequences being that now this company is seen as an unethical in the media and by its customers.
In addition, being social responsible is a way to increase the business profit. It is a way to enhance the firm’s reputation by taking action against its suppliers. This let the stakeholders know the corporation concerns about the society and not just maximizing its profit. This may create value for all of its constituencies.
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