Australian businesses are being forced to scrutinise their supply chains after reports of unsafe conditions and workers being beaten have emerged this week.
This morning The Australian Financial Review claimed Qantas, Electrolux and other international companies have been sourcing products including airline headphones from a Chinese prison, where inmates were beaten or placed in solitary confinement if they failed to meet production targets.
Yesterday, Qantas confirmed to The Australian Financial Review the prison was its main supplier and it said it had suspended dealings pending further investigation.
“Qantas is very concerned by these allegations,” a spokesperson was quoted as saying.
Qantas reportedly audited the manufacturing facilities in China in May and had received written assurances there was no forced labour in any part of the supply chain.
This report sparked further concern over the ethicality of businesses’ supply chains, as earlier this week ABC’s Four Corners exposed Bangladeshi workers who claimed they’d been physically abused and threatened while working in sweatshops for some of Australia’s best known retailers.
The businesses raised in the program included Rivers, Coles, Target and Kmart and the factories were said not to meet international standards.
Since these revelations, Coles has said it is leaving Bangladesh in the next few weeks and if the supermarket giant returns it has said it will sign the Bangladesh garment industry safety accord, introduced following the collapse of a factory building which killed more than 1100 people in April.
Kmart and Target have already signed the Bangladesh Fire and Safety Agreement.
While speculation is flying of workers are being abused to manufacture products sold or used by Australian businesses, retail expert from Bentleys David Gordon told SmartCompany big businesses already have comprehensive compliance processes in place.
“The process requires staff and senior executives within the supply chain to ensure their partners overseas comply with certain policies, but as we all know compliance can be seen to have two separate effects.
“The larger organisations will not only audit their overseas agents, but also their supply chain partners and their international manufacturers.
Gordon says compliance with international standards has two impacts on businesses.
“Compliance protects and supports the brand integrity and the product quality, but the second impact is it does to some extent naturally constrain the company’s operators from delivering the most optimal financial result,” he said.
“It’s a competitive world and you have to get your margins right and the lowest cost manufacturers and distributors and sometimes they can have questionable work practices,” he says.
Gordon says compliance costs businesses extra money, and sometimes businesses skimp on compliance in order to save on costs.
“Some businesses just don’t have the knowledge of the ethical standards or the money to spare. The only way some businesses feel they can often compete is for their partners overseas to have a low cost, non-compliant or semi-non-compliant organisation,” he says.
Retail Doctor Group chief executive Brian Walker told SmartCompany for businesses to ensure their supply chain is ethical, there must be full transparency from all parties.
“What retailers need to do is to get full transparency from suppliers and make sure they understand the processes and practices and be willing to ask questions.
“Unfortunately though, sometimes regrettably there is nothing a retailer can do until they find out,” he says.
Walker says with many examples in recent history of workers being mistreated in third world factories, retailers have the right to question the processes of their overseas suppliers.
“Ask the questions and then rely on honesty and transparency, but if this does occur then afterwards make sure not to associate your business with this kind of practice.
“China is just a flight away, so if you’re a small business go and look at the production and the set up,” he says.
In the case of Qantas, Walker says it’s likely during the audits the mistreatment of workers was concealed, although on occasion companies are cognisant of the breaches.
“Regrettably we live in a world where it’s not a level playing field and people will look for advantage in this way,” he says.