Page 2: What are business ethics?
Business has a responsibility to society. Business ethics are rules of conduct and principles and patterns of behaviour in business dealings that involve 'doing the right thing'. Part of this responsibility is to look after the wider community involved in the business process, including employees, across the globe.
Primark works with many third party suppliers and has a key concern to source ethically. Primark is very clear about where it stands on business ethics. 'As an international brand with a global supply chain we have a responsibility to act ethically. We embrace this responsibility as an opportunity to be a great force for good. Primark is committed to providing the best possible value for our customers, but not at the expense of the people who make our products.' In other words, this means making sure that, throughout the supply chain, Primark's goods are manufactured under good conditions and the employees in those factories are treated well.
Primark shares its values with its parent ABF. These values shape Primark's relationships with its stakeholders. Stakeholders are individuals and groups who have an interest in or are affected by a business. They may be internal, such as shareholders or employees, or external, such as government or the community.
Important business principles for Primark include respecting human rights and setting guidelines for appropriate conditions of employment in its suppliers' factories. Primark has over 600 major suppliers in 16 countries. These companies provide employment for over 700,000 workers in three continents. Primark is committed to making sure that its partners, both factories and suppliers, also act responsibly towards their employees.
Typically, textiles are manufactured in low-wage/high manual skill economies such as are found mostly in the developing world. Factories in countries such as India or China may supply a range of retailers and brands, producing goods according to each individual retailer's specifications. In these circumstances, the factory sets the same wage rate to employees, regardless of which retailer the goods are for. At least 95% of the factories supplying Primark also produce for other high street retailers.
Primark works to ensure ethical sourcing in a number of ways. It has an Ethical Trade Director, whose role is to make sure Primark goods are sourced ethically and who leads a team of ethical managers and executives based in the key sourcing countries. Primark is a member of the Ethical Trading Initiative (ETI). The ETI is an international alliance of companies, trade unions and nongovernmental organisations (NGOs) working in partnership to improve the lives of workers across the globe.
Economies of scale
Primark is able to offer value and low prices because its business model is based on high sales volumes and lower retail margins with minimal advertising. The company keeps costs down by buying large quantities of items and enjoying the economies of scale resulting from buying in bulk. In addition, retail prices are kept low through lean production and efficient operational practices. For example, using off-season factory time for production means that the costs are lower than at peak time. This is good for Primark, but it also means factory employees get work and pay when they might not otherwise have been needed. Therefore, its practices are both efficient and ethical at the same time.