Anyone who thought the issue of ethical trade would disappear from view as the economy goes sour will have had a shock over the past week. Value retailer Primark was dragged into the dock by an exposé on the BBC’s Panorama programme last week, which alleged that children in India were working long hours in poor conditions for factories producing the retailer’s clothes.
Meanwhile, Tesco faced accusations from lobby group War on Want that workers at a factory in Bangalore were producing clothes for the retailer at half the living wage and were forced to work overtime. Tesco has hit back saying that War on Want has failed to specify which factory was involved so it is impossible to check the situation.
While these revelations have undoubtedly caused a media storm, it is hard to gauge the damage done to the retailers’ brand images. There is little evidence that shoppers are shunning the stores in light of these revelations.
One source believes the Panorama programme will do little to harm sales at Primark since its shoppers are largely on low incomes themselves. Ethical concerns tend to be more prominent among the middle class, which is why the source believes Tesco could find concerned consumers turning their backs on the store if the allegations stick. “It may see a slight decline in sales of its high-end products,” he says.
Then again, a new report from retail researchers Allegra Strategies suggests that concerns about Primark’s ethical stance is offputting for a significant number of women.
In a survey carried out between October 2007 and February 2008, Primark topped the rankings as the retailer that consumers refused to shop at, with 10% of women reluctant to visit the stores. “Ethical grounds were definitely one of the reasons they gave. I imagine that would be much higher under the circumstances,” says Allegra fashion director Emma Cheevers. That said, attracting shoppers has not been a problem for the fast-expanding retailer, and the 10% of refusniks are probably not part of its target market anyway.
But all these perceptions contribute to Primark’s overall brand image. In the long term, a trickle of negative stories can have a detrimental effect, as McDonald’s discovered when it was forced to conduct a thorough programme of corporate social responsibility to deflect criticisms.
Some see Primark’s response to the Panorama programme as unconvincing and liable to do little to ingratiate itself with concerned, ethical shoppers. The retailer declined to put up a spokesman to appear on Panorama to defend its position or apologise. Instead, Primark took the unusual step of launching a website to promote its ethical credentials.
Ethicalprimark.co.uk was unveiled last week (MW last week) and sets out the retailer’s position on ethical sourcing, including a rebuttal of the Panorama allegations.
But Andrew Wilson, managing director of corporate social responsibility consultancy Corporate Citizenship, which has advised Cadbury and Unilever, says Primark’s response “misses the mark completely”. He says: “It tries to go on the offensive and misses the point which is that it should take responsibility. It makes some valid points but in a way that antagonises its critics further.” He believes the retailer should admit it had made an error and “show a degree of contrition”.
Instead, Primark portrays itself as a victim of unscrupulous suppliers who were breaking its rules on ethical conduct by employing unaudited subcontractors. A Primark spokesman says: “At no time did they give an inkling they were using subcontractors… We were working with them and they were deceiving us.”
To compound matters, Primark’s decision to stop using the suppliers concerned led to critics accusing it of “cutting and running” and leaving the suppliers and their long-suffering workers in the lurch. This goes against the spirit of ethical trading practice, which suggests that brand owners should work with suppliers who are discovered to be mistreating workers and encourage them to improve their practices.
However, the Primark spokesman insists that ties were cut with the three suppliers only after a long period during which the retailer had attempted to improve their systems.
“Those three factories were all in a remediation programme,” he says and adds that the company had been unable to give the three a clean bill of health for a range of reasons and the Panorama allegations were the final straw that led to their contracts being terminated.
However, nowhere on its ethicalprimark.co.uk website, nor in the press release which announced Primark was ceasing business with the suppliers, did the retailer mention this background. The spokesman says failure to include the information had been an oversight and promised to rectify the situation by rewording the website. This still had not happened as Marketing Week went to press.
Ethicalprimark.co.uk makes much of the retailer’s membership of the Ethical Trading Initiative, a scheme backed by the Department for International Development, which encourages brand owners to audit their suppliers and work with them to improve labour conditions.
The ETI has worked with many brand owners to improve supply chain conditions, though campaigners have claimed it provides a fig leaf for brand owners to hide their shameful practices.
However, ETI director Dan Rees says: “Yes, there has been some improvement, but there needs to be more. We are open about what needs to be done and the need for brands and governments to improve practices,” he says.
Workers’ rights are fast becoming as key to creating a brand image as advertising, logos and 360-degree marketing strategies.
There is an ethical brand hierarchy led by the likes of Green & Black’s, Innocent Drinks and Waitrose. It would be unthinkable for any of these to transgress ethical working conditions in their supply chain. Then there are middle ranking ethical brands such as Tesco and Asda, where exposés on labour rights can have a marginal effect. The value retailers such as Primark are probably at the bottom of the pyramid in terms of their customers’ expectations of ethical behaviour.
But it would be a complacent brand owner who failed to take ethical issues seriously. A brand could become so besmirched by allegations of unethical practice that it suffers long-term damage.