|
|
 |
|
| Thought Leaders: Industry |
Expensive Discounts
David A. Schwerin
01/01/2008
|
Throughout 2007, China was widely
condemned for manufacturing a flood of faulty, dangerous products, as well as
for generating widespread air and water pollution. The cause of these problems
is not as obvious as many commentators claim, and the implications for investors
and consumers reach farther than most suspect.
 I was privileged recently to give the keynote speech at an
ethics conference in Dalian, China. One of the other speakers at the conference
was a representative of the U.S.-China Business Council, whose members are among
the largest U.S. companies doing business in China. In his excellent
presentation, the speaker devoted considerable time to the problems these
companies have monitoring the safety and environmental records of their Chinese
suppliers. Supply-chain relationships are complex, and there are often many
layers of subsuppliers the Western customer may not be aware of. His point was
that U.S. companies want to sell safe products from environmentally friendly
factories, but that it is very difficult to monitor and police all those
involved.
Yet Western companies do, in fact, deserve their share of the
blame. Inflation has pushed the price of almost all products higher over the
past dozen years. However, because of the buying power of large retail chains
and the cheaper labor in developing countries, prices of clothing imported into
the United States have been in an almost continuous decline.
How can prices keep dropping? From corners being cut. For
example, according to a recent Wall
Street Journal article headlined "Ravaged
Rivers," dumping waste directly into rivers has been a deliberate policy of many
Chinese companies in order to avoid the cost of treating contaminated water. Who can blame them when, according to an executive director of Hong Kong–based
Pacific Textiles Holdings, the first thing the discount-store executives say
when they meet with their Chinese suppliers is, "How much discount do I get from
last year?"
This cutthroat approach mirrors what U.S. CEOs have reported to
me about their experiences dealing with multinational retail stores. "They will
squeeze you until you are limp" is how one CEO described his dealings with one
of the world’s largest retailers.
Painful Obligations
Both consumers and investors have the power to improve a
situation that places children’s health at risk and creates a degraded global
environment. From a consumer standpoint, we can take a principled stand by
boycotting companies that follow irresponsible business practices and
patronizing only those businesses that act responsibly. Doing the latter may
cost more in the short run, but, as we have seen, dangerous products and filthy
air and water inevitably result in much steeper prices.
Individuals of wealth have a special obligation to pay more for
products made by manufacturers who protect the environment and ensure that their
products are of the highest quality and safety. If those who can afford to pay
more shirk their responsibility, they have no one else to blame.
|
|
|
|
|
|
|
