Ethical analysis ASOS - Grade: 2:1 PDF

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Ethical Analysis of ASOS 1

ETHICAL ANALYSIS OF ASOS by Hayley Ogle 33406205

Business and Management Samantha Crossley Leeds Beckett University 10/04/2017

Ethical Analysis of ASOS 2

1. Introduction 2.0 Stakeholder Analysis 2.1 Stakeholder Map 2.2 Salience Model 3.0 Ethical Analysis 3.1 Ethical Theory and Values at ASOS 3.2 Labour Conditions 3.3 Environmental Impact 3.4 Corporate Social Responsibility (CSR) & Sustainability 3.5 Globalisation 3.6 Traditional & Contemporary Ethical Theories 4.0 Bibliography

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1.0 Introduction Asos (As Seen on Screen LTD) was established on 3rd June 2000 by Nick Robertson and Quentin Griffiths, they are a worldwide online fashion store who have become one of the most popular retailers. Asos mainly target young female adults, however, they cater do for maternity and menswear too. A high majority of their sales are European and they ship to over 200 countries around the world. (ASOS, 2016). Asos hold a strong global position in the online fashion market (Mintel, 2016). Throughout the last decade, several articles have been published regarding the problem of exploited workers around the world, Asos’ brand has been a reoccurring name that has appeared in allegations made by the press. This has led to concern in relation to the way Asos’ produce their fashion clothing and very importantly, their ethical approach towards employees. Asos have been blamed for several cases of exploitation and recently denied that they knew about the workers who were illegally working for them, they have claimed to have acted to prevent this happening again, however they still do not currently disclose a full list of suppliers which causes suspicion. Due to the poor ethical practice offered by Asos, this report aims to provide an ethical analysis of the exploitation of staff, including illegal, underage and immigrant workers through the fashion industry chain. This will be completed through a stakeholder analysis, an ethical analysis of Asos and recommendations will be contributed as to how Asos can improve their ethical practice, governance and fulfil their social responsibilities as a respectable company.

Below are some examples that have caused concern relating to Asos ethical policies over the past 24 months:

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April 2015, VICE reported that numerous former workers and unions compared the ASOS warehouse to a modern-day sweatshop. (Clifton, 2015)

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August 2016, Mike Ashley, founder of ASOS admits his company has broken the law by failing to pay the national minimum wage to his employees. (Rodionova, 2016)

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September 2016, Independent reported that ASOS working conditions to be investigated by MPs. (Rodionova, 2016)

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October 2016, BBC reported that ASOS warehouse contracts ‘exploitive’ company bosses questioned over flex contracts. (Thomas et al, 2016)

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October 2016, Telegraph reports Children from the age of 15 discovered working for online retailer ASOS, working more than 12 hours a day. (Telegraph reporters (2016)

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-October 2016, The Huffington Post report BBC Panorama finds Syrian refugees ‘making clothes for ASOS, M&S, and Zara (Huffington Post, 2016)

2.0 Stakeholder Analysis Before producing a stakeholder analysis for Asos, it is important to recognize the precise definition of what a stakeholder is. There are more than 100,000 definitions of the stakeholder, Freeman (1984) defines, ‘stakeholders were initially defined as individuals or groups who were critical to the survival of an organization, especially businesses, including employees, customers, lenders, and suppliers'. Carroll and Buckhholtz, (2000) developed a theory that defined a stakeholder as ‘any individual or group who can affect or is affected by the actions, decisions, policies, practices or goals of the organisation.’ To have a sustainable business it must create value for customers, suppliers and its other stakeholders equally, this is known as stakeholder theory. Freeman (1984) further explains that stakeholder theory is the idea that these groups are vital to the success of a business and none of the stakeholders should be secluded. Over time stakeholders have gained more influence over a company and its process. Friedman's

Ethical Analysis of ASOS 5 (1970) shareholder model focusses on the responsibility of a business. He emphasizes that to have a successful business, the role of a business should be to create wealth and therefore the main importance of a business is for monetary gain. "Friedman does not argue against the social involvement of the company as such, rather simply that the company, and the owners especially, can decide to do what they think is fit” (Robinson, 2009, pp. 74).

2.1 Stakeholder Map

Asos manages a wide range of stakeholders, both inside and outside of their organisation (Weiss, 2009). Figure 2.2 highlights the main stakeholders who are involved, those who can affect and are affected by using illegal and underage immigrant workers with Asos. The stakeholders involved have different levels of responsibility, Clarkson (1995) argues organizations are sustained by their primary stakeholders – ASOS’s primary stakeholders are their shareholders, governments, investors, employees, media and suppliers. Stakeholder management done right could help towards the success of the company.

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2.2 Salience Model

(Mitchel et al, 1997) In order to develop a better understanding; the theoretical framework is provided in appendix 2.2. Stakeholder salience is the degree to which managers give priority to competing stakeholder claims (Mitchel et al, 1997). There are three main aspects of the stakeholders; legitimacy, power, and urgency (Carroll et al, 2015). The idea behind the model is that the more salient stakeholders have priority and therefore need to be actively communicated with, whereas on the other hand lesser salient stakeholders have less priority and it is less important to continuously communicate, in Asos’ case it may be that they have seen their warehouses as less salient and haven’t kept great communication which has participated in the neglect of employees (Cornelissen, J. 2016).

Dangerous Stakeholder – News/Press A concern for Asos is the media, attention needs to be given to this high salient stakeholder as they hold legitimacy and urgency. Recently BBC News released a video

Ethical Analysis of ASOS 7 containing footage of Syrian refugee children making clothes for British shoppers which opened the eyes of the consumer to what goes on behind Asos' closed doors. This posed a massive threat, especially since the data was available online and easily accessible by Asos’s target audience, around a third of 16-24 year olds get their information about company’s online sources or social media (Mintel, 2015). The media don’t hold shares, or direct power but they can campaign and bring it to the attention of those who do (consumers and governments).

Definitive Stakeholder – Governments Governments around the world are cracking down on the misuse of workers, especially those who are working to supply countries that hold higher morals in their home country. The governments of the affected countries are powerful and legimate stakeholders (Cornelissen, 2008). Asos must direct attention towards this area or they could risk cutting off their supply source.

Dependent Stakeholder – Society Turkey is one of the main locations affected by Asos’ warehouses, the society here are being exploited are a dependant stakeholder, they lack power but have urgent, legitimate claims (Cornelissen, 2008). They rely upon other stakeholders for power such as the media to publicise the problem when they cannot, some of these workers may not even realise the extent of their rights or are unable to address them to due to working illegally.

3.0 Ethical Analysis After looking at the key stakeholders for ASOS, the following part of the report will now focus on Asos' established ethical values, CSR, and globalization.

3.1 Ethical Theory and Values at ASOS

Ethical Analysis of ASOS 8 For ethics, there have been many types of different theory, Robinson 2010 describes the divide between which can be normative (the basis for right and wrong) and descriptive (how we think about and practice ethics). Ethical theory is important in contemporary business settings. The normative dimensions of ethics are regarded as quite necessary when it comes to debating ethical issues in business and serve as a key part when it comes to tackling cases for decision (Robinson, 2010). Ethics are a very strong factor when it comes to business, it can be the determining factors for consumers when choosing between ASOS and any other brand. Considering this fact, ASOS has established an Ethical Code of Conduct and has likewise endeavoured to perform to the maximum in the understated elements. A review of its ethical code of conduct reveals the minimum standards that the company expects its suppliers, manufacture or procurers are supposed to uphold. Asos claims to draw its code of conduct from UN conventions and International Labour Organization core standards and adopts some best practice industry standards adopted by retailers globally (ASOS, 2008). Asos’s code applies to all its suppliers and all manufacturing sites for the company, they further state that it is the responsibility of the supplier to meet the outlined standard. However, in this case the suppliers have failed to uphold their responsibilities and this falls liable to the directors of Asos. The company’s ethical code of conduct specifically addresses the issues of business integrity, compliance with laws and regulations, employment terms, wages and working hours, freedoms, working environment, employment of underage workers, health and safety, and environmental management (ASOS, 2008). These elements form the basis of discussing how the company has performed in terms of ethics but how they have failed to meet the criteria.

3.3 Environmental Impact Asos is certified carbon neutral, and they also have implemented emission reduction measures both in their warehouses and during the delivery process. Further, the

Ethical Analysis of ASOS 9 company struggles to reduce the amount of waste generated from its packaging. However, there is some inadequacy evidenced by the company’s lack of implementing the emission and waste reduction interventions on their supply chain (Robertson, 2017). There are also questions on whether the company uses eco-friendly materials in their clothing as they do not indicate that they do, additionally, the company has not shown any commitment to eliminating the use of hazardous chemicals during the production process. Asos’ introduction of ‘Eco Edit’ product range in 2010 shows that the company is certain and playing along to the customer demand for ethical products (Robertson, 2017). Regardless of this collection being just a small percentage, the company is striving to make policy changes to reflect a larger percentage. Asos’ is rated to be having the worst ethical rating for environmental reporting by Ethical Consumer (Ethical Consumer, 2015). Ethical Consumer claims that Even though the company has a reasonable understanding of its environmental impact, it does not specify quantified future environmental impacts, and lacks independent verification of such. The company’s performance is fair in some areas, but it is not enough. Despite the outlined positive progresses, the company needs to improve in all segments.

3.4 Corporate Social Responsibility (CSR) & Sustainability Corporate social responsibility is not a new concept, over years several definitions of what CSR means have been put forward. A straightforward explanation by European Commission (2001) states ‘Companies’ integrating social and environmental concerns in their daily business operations and in their interactions with their stakeholders daily.’ Are a range of low priced clothing and a higher profit more important than ASOS’s responsibilities towards to society? Friedman (1983) simply argues that pursuing social responsibility is very costly and these costs would be conveyed to customers, shareholders and even employees (reduced wage). This theory is seen to be outdated, but ASOS has

Ethical Analysis of ASOS 10 shown traits of this by putting the customers' needs before their employees to save money, they have cut corners to produce quick and cheap clothing. For a low-income consumer, a brand's ethical commitment is not always the most important factor, the low prices often overshadow all other things. (Mintel, 2016). On the positive side, Asos have taken significant actions in terms of corporate social responsibility and sustainability. ASOS runs a corporate responsibility program bearing the slogan ‘Fashion with Integrity: epitomizes our approach to business’ (ASOS, 2017). The program adopts a four-fold approach; on the products, on the nosiness, on its customers, and the community. ASOS undertakes a range of initiatives in these areas. Some include supporting charities (women and child, poverty and climate change and young adult charities) through donations from ASOS foundation, partnering with Uduyan Care to improve the quality of life for disadvantaged women and children in India, donating to the Retail trust (looks after the welfare of those working in the retail industry), and collaborated with Oxfam to donate life products and IT equipment (ASOS, 2015). The company is also a four-year patron of the Prince’s Trust (a youth charity). Another notable CSR initiative is The Green Room, this is a section of the company’s website that is dedicated to ethically-focused brands and the brands are offered a selling space for their products.

3.5 Globalisation Being solely an online entity, the company has a global audience spanning across over 200 countries using its website (ASOS, 2016). This presents the company with not only opportunities but challenges alike. Asos is however at a better-placed position as it can gain significant competition using its distinct and exclusive brands and products. Overall, the company nets substantial gains from globalisation (ASOS, 2016.) Regardless, there are some ethical dilemmas surrounding globalisation that the company may face. The initial sense of continuously globalising the company brings a challenge for corporate ethics

Ethical Analysis of ASOS 11 (Herold & Stehr, 2010). Asos could argue they are making jobs for workers, especially in Turkey where they mainly rely on warehouse work. But it is causing a long-term negative affect especially on those who are working when they should be in school, due to the high demand of fast fashion (BBC, 2016). Another possible ethical challenge in globalisation that the company may come to face is an intercultural challenge (Herold & Stehr, 2010). ASOS operates across different societies with varied ethical norms and different cultural and religious traditions. It is a challenge to choose the set that the company should comply with, however, right now ASOS are having problems both in UK based sites and those in other countries. Another possible challenge is based on the controversy surrounding free trade and outsourcing which ASOS may be embroiled in. As the company progresses in its globalization efforts, it faces a conflict between the norms established by the company and the ethical norms prescribed in the host company which the company wants to transfer the code to.

3.6 Traditional & Contemporary Ethical Theories Traditional ethical theories are founded on modernism dated back to the 18th century (Crane & Matten, 2010). They are primarily normative theories; the theories are eternal and they do adopt universally applicable moral principles for any complicated contexts and situations. Traditional ethical theories are further classified into consequentialists and non-consequentialists. Consequentialists include utilitarianism, egoism, and hedonism. (Fieser, 2008). Consequentialist ethical theories base moral judgment on the outcomes of an action. The utilitarianism theory claims that an action is morally right if the results produce happiness and good among a larger proportion of the people affected by the action (Crane & Matten, 2010). In this case employees are suffering, ASOS are offering next day delivery and a wide variety of clothing (Mintel, 2016), their consumers may be happy but this does not make it morally right.

Ethical Analysis of ASOS 12 On the other hand, non-consequentialist theories base moral judgment on its intrinsic properties or the agent's character and not on the outcomes of the action (Crane & Matten, 2010). For instance, deontology theory bases judgment on the moral principles that underline the action. Contemporary ethical theories, on the other hand, are those developed in the 20th century and thereafter. They do reflect changes in how people think about the society and on how they relate with achievements in cultural and intellectual spheres. These theories are classified into three main categories; ethical relativism, postmodern ethics, and analytical ethics (Dahlern, 2013). For instance, ethical relativism theories claim that an action is wrong or right depending on what the society determines to be right or wrong (Crane & Matten, 2010).

4.0 Recommendations for Improving Ethical Practice It is evident to see that there are some inconsistencies amongst ASOS’s ethical practice, the organization needs to take more consideration and care as to where their products are coming from and if they are being produced ethically. It is important to recognize where the problem is stemming from, to prevent this from happening again in the future. ASOS state they have tried their best to act in a socially responsible way but have failed to fulfil this claim. The recommendations that follow ASOS may wish to practice helping them gain better ethical practice and sustainability.

4.1 Building Sustainable and Ethical Supply Chains One of the primary areas from which ethical issues are arising for ASOS is in their warehouses and supply chain, particularly their factories. ASOS should improve factory monitoring to check on any rising incidents. Since the supply chain is quite tied to

Ethical Analysis of ASOS 13 corporate social responsibility and concerns about environment, health, and safety (Guthrie, 2012), they may need to put more efforts in making these channels more sustainable and ethical. Asos should invest more money in the company and perhaps raise the sales prices. Higher prices will translate to increased profit margin which can be invested into making sure all warehouses and processes are acceptable (Lejeune, T, 2016). In the long-run this will build trust with consumers and the small increase in price will be justified by the ethical morals they can offer.

4.2 Developing a More Robust Code of Ethics The current code of ethics that the company uses is quite general and diffuse hence negatively impacting compliance and monitoring. A more robust code of ethics will provide direction and guidelines for the different stakeholders in the company’s processes. It will also foster transparency and accountability in the management structure of the organisation.

4.3 Embedding a Legal and Ethics Distinction in the Policy Asos should clearly define the difference between what may be legal and what is ethical. By embedding this difference in policies on ethics, actions taken should be judged on ethics and rather not on their legality. This will ensure that Asos does not use legality over what is right. Not everything that is legal is always ethical (Kellior, 2007). Asos need to make stricter policies with their management staff who are in charge in the warehouses, they do not encourage exploitation but have been neglectful to let it happen. Traini...