Fashion at any price

401 Pages·2012·7.48 MB·English

GARMENTS WITHOUT GUILT?
AN EXPLORATION OF CORPORATE SOCIAL RESPONSIBILITY
WITHIN THE CONTEXT OF THE FASHION SUPPLY CHAIN:
CASE STUDY OF SRI LANKA

"CONFIDENTIAL"

PATRICIA SUSAN PERRY

Submitted for the degree of Doctor of Philosophy

HERIOT-WATT UNIVERSITY

SCHOOL OF MANAGEMENT AND LANGUAGES

JANUARY 2012

The copyright in this thesis is owned by the author. Any quotation from the
thesis or use of any information contained in it must acknowledge this thesis
as the source of the quotation or information.

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ABSTRACT

The aim of this thesis is to understand how fashion supply chain characteristics affect
the implementation of Corporate Social Responsibility (CSR) at factory level for
garment manufacturers in lower labour-cost countries that supply Western high street
fashion retailers. A dynamic, challenging global industry, the high street fashion
industry is one of few sectors under simultaneous pressure for short lead times and low
costs. Additionally, increasing global dispersion of garment manufacturing to lower
labour-cost countries has led to concerns about worker exploitation and firms are now
under pressure to deliver societal goals as well as shareholder profits. CSR represents
the business response to minimising the negative societal impact of global business
operations; however, the very nature of the fashion supply chain with the pressure on
cost and lead time compromises CSR implementation at factory level.

A qualitative case study approach was selected in order to gain greater depth of
understanding of CSR in fashion supply chains; specifically, to explore from a
managerial perspective the impact of negative and positive forces within the fashion
supply chain on CSR implementation, with a view to understanding how CSR
implementation can be reconciled with the competitive challenges of the fashion sector.
Fieldwork was conducted in Sri Lanka, a key global garment manufacturing location,
within 7 case study companies which were selected to represent the range of business
sizes and models in the export garment manufacturing sector. Data collection methods
included on-site face-to-face semi-structured interviews with key informants and non-
participant observation within factory environments. Analysis of interview transcripts
was conducted manually, using Eisenhardt’s (1989) method of within-case and cross-
case analysis, and triangulated with observational data and documentary evidence.

The theoretical contribution is the synthesis and categorisation of factors within the
context of fashion supply chains that impact both negatively and positively on CSR
implementation at factory level in a lower labour-cost country, followed by an
understanding of the interplay of global fashion supply chain characteristics and their
impact upon CSR implementation at factory level. It was concluded that the inherent
conflict between CSR principles and the characteristics of fashion supply chains may be
reconciled by moving away from traditional adversarial supply chain relationships and
adopting the Supply Chain Management (SCM) philosophy of long-term orientation
and shared goals between trading partners. Furthermore, CSR implementation was
influenced by product nature, the level of service provided by the supplier and the long-
term partnership approach to buyer-supplier relationship management in the Sri Lankan
context. The core basic nature of the product meant that orders were more likely to be
long-running, so manufacturers were sheltered from the unpredictability in orders and
frequent style changes characteristic of fast fashion. This level of stability enabled
suppliers to invest in CSR implementation. Full package suppliers fostered strong
relationships with retailers over considerable periods of time (10-20 years) and
collaborated on initiatives to increase efficiency and agility, such as cost reduction and
vertical integration of pre-production activities. However, contract manufacturers
without value-added services were unable to develop strong collaborative relationships
with buyers which would enable greater investment in CSR implementation. Although
Sri Lanka is classed as a global leader in ethical garment manufacture, much is therefore
dependent on the size and provision of services offered by the supplier, which dictates
the nature of the buyer-supplier relationship: vertically integrated full package suppliers
had closer links with buyers than contract manufacturers and hence greater ability to
drive CSR implementation through the business.
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ACKNOWLEDGMENTS

I would like to express my sincere thanks to my main supervisor Professor Neil Towers,
for his continuous encouragement and the expert guidance on content and structure he
has given throughout the research. Secondly I would like to thank Professor John
Fernie, who came on board during the third year of the research and provided further
encouragement as well as invaluable advice on the content. It has been a pleasure and
an honour to work under their direction. Finally, I would like to thank Dr John Sanders,
who joined the supervisory team towards the end of the research and provided expert
advice on structure.

Sincere thanks also to Lakshman Wimalasena, who provided the initial link to the Sri
Lankan garment manufacturing industry, which was the focus of the research.

I am also very grateful to the interviewees who provided their time and welcomed me
into their businesses in Sri Lanka.

I would like to dedicate this thesis to the memory of my mother, who inspired and
encouraged me to achieve the highest goals.
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GLOSSARY

CMT Cut, Make and Trim: a factory that carries out garment manufacture with
all materials supplied by the buyer

CSR Corporate Social Responsibility

LTTE Liberation Tigers of Tamil Eelam, a violent separatist organisation
formerly based in northern Sri Lanka that sought to create a separate
Tamil state in the north and east of Sri Lanka

PLC Product Life Cycle

SCM Supply Chain Management

SDB Social Desirability Bias

TCE Transaction Cost Economics

VMI Vendor Managed Inventory

LIST OF CANDIDATE’S PUBLICATIONS

Perry, P. and Towers, N. (2009) ‘Determining the antecedents for a strategy of
corporate social responsibility by small and medium-sized enterprises in the UK fashion
apparel industry’, Journal of Retailing and Consumer Services, 16, pp. 377-385

Perry, P. and Towers, N. (2012) ‘Fashioning a socially responsible garment supply
chain: a qualitative exploration of corporate social responsibility in Sri Lankan export
garment manufacturers’ in Choi, T.M. (Ed.) Fashion supply chain management:
industry and business analysis, IGI Global, Hershey, PA, pp. 327-362

Fernie, J. and Perry, P. (2011) ‘The international fashion retail supply chain’ in
Morschett, D., Zentes, J. and Swoboda, B. (Eds.) Case Studies on International
Management, 4th edition, Gabler, Wiesbaden, pp. 271-290

Perry, P. (2012) ‘Exploring the influence of national cultural context on CSR
implementation’, Journal of Fashion Marketing and Management, 16 (2), pp. tbc
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TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION TO THESIS .......................................................................... 9
1.1 INTRODUCTION, RESEARCH OBJECTIVES, SCOPE AND STRUCTURE OF THESIS
…………………………………………………………………………………………………….9
CHAPTER TWO: SUPPLY CHAIN MANAGEMENT ...................................................................... 12
2.1 THE NATURE OF SCM ........................................................................................................... 12
2.2 THE HIGH STREET FASHION SECTOR: ENVIRONMENTAL TRENDS .................... 15
2.3 SUPPLY CHARACTERISTICS IN THE HIGH STREET FASHION SECTOR ............... 18
2.3.1 GLOBAL FASHION GARMENT SUPPLY CHAIN STRUCTURES ....................................................... 18
2.3.2 THE INFLUENCE OF PRODUCT NATURE ON SUPPLY CHAIN OPERATIONAL DESIGN ..................... 22
2.5 GLOBAL FASHION GARMENT SOURCING PATTERNS ............................................... 28
2.6 SRI LANKA: SELECTION CRITERIA FOR A GARMENT SOURCING LOCATION . 38
2.7 TRADING RELATIONSHIPS IN GLOBAL FASHION SUPPLY CHAINS...................... 54
2.7.1 POWER BALANCE IN FASHION SUPPLY CHAINS ......................................................................... 55
2.7.2 THE SHIFT FROM ADVERSARIAL TO PARTNERSHIP RELATIONSHIPS ........................................... 56
2.7.3 INFORMATION SHARING ........................................................................................................... 67
2.8 ETHICAL CONCERNS IN GLOBAL FASHION SUPPLY CHAINS ................................ 70
2.9 SUMMARY OF SCM ................................................................................................................ 74
CHAPTER THREE: CORPORATE SOCIAL RESPONSIBILITY ................................................... 76
3.1 THE NATURE OF CSR ............................................................................................................ 76
3.2 THE PHILOSOPHICAL ANTECEDENTS OF CSR ............................................................ 78
3.2.1 THE DEONTOLOGICAL PERSPECTIVE ......................................................................................... 78
3.2.2 THE TELEOLOGICAL PERSPECTIVE ............................................................................................ 81
3.2.3 ADOPTION OF A PHILOSOPHICAL PERSPECTIVE TOWARDS CSR ................................................ 83
3.3 THE BUSINESS CASE FOR CSR ........................................................................................... 84
3.3.1 SHAREHOLDER VS. STAKEHOLDER THEORY OF THE FIRM ......................................................... 84
3.3.2 THE BUSINESS BENEFITS OF CSR ............................................................................................. 90
3.3.3 THE EFFECT OF CSR ON FIRM PROFITABILITY .......................................................................... 99
3.4 THE EFFECT OF SOCIAL AND CULTURAL INFLUENCES ON CSR ........................ 100
3.5 CSR IN THE CONTEXT OF THE GLOBAL FASHION SUPPLY CHAIN .................... 102
3.5.1 THE INFLUENCE OF RETAIL BUYING PRACTICES ON CSR IN FASHION SUPPLY CHAINS ............ 104
3.5.2 RESPONSIBLE RETAIL BUYING PRACTICES IN FASHION SUPPLY CHAINS .................................. 108
3.6 THE ROLE OF CSR IN SUPPORTING SUSTAINABLE DEVELOPMENT .................. 113
3.7 ORGANISATIONAL IMPLEMENTATION OF CSR ........................................................ 114
3.8 MEASURING CSR PERFORMANCE IN FIRMS .............................................................. 116
3.9 SUMMARY OF CSR ............................................................................................................... 117
3.10 SUMMARY OF LITERATURE REVIEW ........................................................................... 118
CHAPTER FOUR: RESEARCH METHODOLOGY ........................................................................ 122
4.1 INTRODUCTION ...................................................................................................................... 122
4.2 RESEARCH PARADIGMS .................................................................................................... 122
4.1.1 PHENOMENOLOGICAL PARADIGMS ......................................................................................... 125
4.1.2 SOCIAL CONSTRUCTIVISM/CONSTRUCTIONISM ....................................................................... 125
4.1.3 SELECTION OF A RESEARCH PARADIGM .................................................................................. 126
4.2 THEORY DEVELOPMENT .................................................................................................. 128
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4.3 QUALITATIVE RESEARCH ................................................................................................ 129
4.4 CASE STUDIES IN QUALITATIVE RESEARCH ............................................................. 131
4.4.1 TYPES OF CASE STUDY ........................................................................................................... 133
4.4.2 QUALITY CONSIDERATIONS AND VALIDITY IN QUALITATIVE CASE STUDIES ........................... 134
4.4.3 GENERALISATION IN QUALITATIVE CASE STUDIES ................................................................. 143
4.4.4 THE CASE STUDY PROCESS ..................................................................................................... 144
4.4.5 SELECTION OF CASES ............................................................................................................. 145
4.4.6 CASE BOUNDARIES ................................................................................................................. 149
4.4.7 DATA SOURCES ...................................................................................................................... 150
4.5 DATA ANALYSIS ................................................................................................................... 155
CHAPTER FIVE: CASE-BY-CASE ANALYSIS WITH RESEARCH MODEL CONSTRUCTS 165
5.1 CASE STUDY COMPANIES .................................................................................................... 165
5.2 COMPANY A ........................................................................................................................... 165
5.2.1 COMPANY HISTORY AND BUSINESS OPERATION ..................................................................... 165
5.2.2 CSR INHIBITORS .................................................................................................................... 168
5.2.3 CSR PILLARS ......................................................................................................................... 175
5.2.4 CSR DRIVERS ........................................................................................................................ 182
5.2.5 SUMMARY .............................................................................................................................. 187
5.3 COMPANY B ........................................................................................................................... 188
5.3.1 COMPANY HISTORY AND BUSINESS OPERATION ..................................................................... 188
5.3.2 CSR INHIBITORS .................................................................................................................... 192
5.3.3 CSR PILLARS ......................................................................................................................... 196
5.3.4 CSR DRIVERS ........................................................................................................................ 202
5.3.5 SUMMARY .............................................................................................................................. 204
5.4 COMPANY C ........................................................................................................................... 205
5.4.1 COMPANY HISTORY AND BUSINESS OPERATION ..................................................................... 205
5.4.2 CSR INHIBITORS .................................................................................................................... 208
5.4.3 CSR PILLARS ......................................................................................................................... 211
5.4.4 CSR DRIVERS ........................................................................................................................ 216
5.4.5 SUMMARY .............................................................................................................................. 219
5.5 COMPANY D ........................................................................................................................... 220
5.5.1 COMPANY HISTORY AND BUSINESS OPERATION ..................................................................... 220
5.5.2 CSR INHIBITORS .................................................................................................................... 222
5.5.3 CSR PILLARS ......................................................................................................................... 227
5.5.4 CSR DRIVERS ........................................................................................................................ 232
5.5.5 SUMMARY .............................................................................................................................. 234
5.6 COMPANY E ........................................................................................................................... 235
5.6.1 COMPANY HISTORY AND BUSINESS OPERATION ..................................................................... 235
5.6.2 CSR INHIBITORS .................................................................................................................... 236
5.6.3 CSR PILLARS ......................................................................................................................... 239
5.6.4 CSR DRIVERS ........................................................................................................................ 246
5.6.5 SUMMARY .............................................................................................................................. 248
5.7 COMPANY F ........................................................................................................................... 249
5.7.1 COMPANY HISTORY AND BUSINESS OPERATION ..................................................................... 249
5.7.2 CSR INHIBITORS .................................................................................................................... 251
5.7.3 CSR PILLARS ......................................................................................................................... 253
5.7.4 CSR DRIVERS ........................................................................................................................ 256
5.7.5 SUMMARY .............................................................................................................................. 258
5.8 COMPANY G .......................................................................................................................... 259
5.8.1 COMPANY HISTORY AND BUSINESS OPERATION ..................................................................... 259
5.8.2 CSR INHIBITORS .................................................................................................................... 260
5.8.3 CSR PILLARS ......................................................................................................................... 263
5.8.4 CSR DRIVERS ........................................................................................................................ 264
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5.8.5 SUMMARY .............................................................................................................................. 266
5.9 SUMMARY OF CASE-BY-CASE ANALYSIS .................................................................... 267
CHAPTER SIX: CROSS-CASE ANALYSIS WITH RESEARCH MODEL CONSTRUCTS ....... 278
6.1 INTRODUCTION ................................................................................................................... 278
6.2 CSR INHIBITORS .................................................................................................................. 278
6.2.1 DOWNWARD PRICE PRESSURE ................................................................................................ 278
6.2.2 PRODUCT NATURE .................................................................................................................. 280
6.2.3 LABOUR INTENSITY OF MANUFACTURE .................................................................................. 282
6.2.4 RETAILER BUYING PRACTICES ................................................................................................ 284
6.2.5 SUPPLY CHAIN COMPLEXITY .................................................................................................. 288
6.2.6 SUPPLY CHAIN POWER DISTRIBUTION .................................................................................... 290
6.3 CSR PILLARS ......................................................................................................................... 293
6.3.1 MORAL PHILOSOPHY .............................................................................................................. 294
6.3.2 COMPETITIVE ADVANTAGE .................................................................................................... 295
6.3.3 SUSTAINABLE DEVELOPMENT ................................................................................................ 297
6.4 CSR DRIVERS ........................................................................................................................ 300
6.4.1 CONSUMER DESIRE FOR GUILT-FREE FASHION ....................................................................... 300
6.4.2 TRUST AS AN ANTECEDENT OF COMMITMENT, COOPERATION AND COLLABORATION ............. 302
6.4.3 SCM: LONG-TERM ORIENTATION AND SHARED GOALS .......................................................... 307
6.4.4 SUPPLY CHAIN RATIONALISATION .......................................................................................... 308
6.4.5 SUPPLY CHAIN INTEGRATION ................................................................................................. 311
6.5 SUMMARY OF CROSS-CASE ANALYSIS ................................................................................ 312
CHAPTER SEVEN: THEORETICAL PERSPECTIVES ON CROSS-CASE ANALYSIS,
CONCLUSIONS, LIMITATIONS AND FUTURE RESEARCH ..................................................... 314
7.1 INTRODUCTION ................................................................................................................... 314
7.2 CSR INHIBITORS .................................................................................................................. 314
7.2.1 DOWNWARD PRICE PRESSURE ................................................................................................ 314
7.2.2 PRODUCT NATURE .................................................................................................................. 315
7.2.3 LABOUR INTENSITY OF MANUFACTURE .................................................................................. 316
7.2.4 RETAILER BUYING PRACTICES ................................................................................................ 320
7.2.5 SUPPLY CHAIN COMPLEXITY .................................................................................................. 322
7.2.6 SUPPLY CHAIN POWER DISTRIBUTION .................................................................................... 323
7.3 CSR PILLARS ......................................................................................................................... 324
7.3.1 MORAL PHILOSOPHY – THE NORMATIVE CASE ....................................................................... 326
7.3.2 COMPETITIVE ADVANTAGE – THE BUSINESS CASE .................................................................. 328
7.3.3 SUSTAINABLE DEVELOPMENT ................................................................................................ 330
7.4 CSR DRIVERS ........................................................................................................................ 332
7.4.1 CONSUMER DESIRE FOR GUILT-FREE FASHION ....................................................................... 332
7.4.2 TRUST AS AN ANTECEDENT OF COMMITMENT, COOPERATION AND COLLABORATION ............. 333
7.4.3 SCM: LONG-TERM ORIENTATION AND SHARED GOALS .......................................................... 336
7.4.4 SUPPLY CHAIN RATIONALISATION .......................................................................................... 337
7.4.5 SUPPLY CHAIN INTEGRATION ................................................................................................. 339
7.5 RESEARCH CONCLUSIONS ............................................................................................... 343
7.5 RESEARCH CONCLUSIONS ............................................................................................... 344
7.5.1 THE FIRST RESEARCH OBJECTIVE ........................................................................................... 344
7.5.2 THE SECOND RESEARCH OBJECTIVE ....................................................................................... 345
7.5.3 THE THIRD RESEARCH OBJECTIVE ......................................................................................... 346
7.5.4 THEORETICAL IMPLICATIONS ................................................................................................. 349
7.5.5 MANAGERIAL IMPLICATIONS ................................................................................................. 350
7.6 LIMITATIONS ........................................................................................................................ 352
7.7 FUTURE RESEARCH DIRECTIONS .................................................................................. 353
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APPENDIX I - APPAREL INDUSTRY PRODUCTION COSTS BY COUNTRY (2003-2004) .... 388
APPENDIX II - INSTITUTIONALISATION OF CSR: GLOBAL STANDARDS AND
ACCREDITATIONS ............................................................................................................................. 389
APPENDIX III - OBSERVATIONAL CATALOGUE ....................................................................... 390
APPENDIX IV - EXAMPLE OF COLOUR-CODED INTERVIEW TRANSCRIPT .................... 392
APPENDIX V - EXAMPLE OF THEMATIC TABULATION FOR COMPANY A ...................... 393
APPENDIX VI - LOCATION OF EXPORT PROCESSING ZONES (EPZS) AND INDUSTRIAL
PARKS IN SRI LANKA ........................................................................................................................ 394
APPENDIX VII - METHODS FOR COLLECTING DATA ON CONSTRUCTS OF CSR........... 395
APPENDIX VIII - QUESTIONNAIRE ............................................................................................... 396
APPENDIX IX - INITIAL CONCEPTUAL FRAMEWORK OF THEORETICAL CONSTRUCTS
FOR STUDYING CSR IN SMES IN GARMENT SUPPLY CHAINS ............................................. 401

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CHAPTER ONE: INTRODUCTION TO THESIS

1.1 Introduction, research objectives, scope and structure of thesis

The aim of this thesis is to develop theory on Corporate Social Responsibility (CSR) in
fashion supply chains by formulating new propositions concerning the impact of
obstacles to and drivers of CSR implementation in garment manufacturers supplying
Western fashion retailers. Alongside a longstanding passion for fashion, the
researcher’s interest in CSR developed as a result of becoming aware of the anti-
capitalism movement going mainstream (Klein, 2000). Having spent time volunteering
and working with disadvantaged people, as well as having spent time in developing
countries, the researcher became interested in whether and how business and societal
goals could be aligned for mutual benefit. The context of the fashion supply chain came
from the researcher’s longstanding passion for fashion and her increasing awareness of
the negative media publicity surrounding working conditions in garment manufacturers
in developing countries that supply Western high street retailers with fashion product.

The research objective is to identify and evaluate the impact of factors that inhibit or
promote implementation of CSR within the fashion supply chain, in order to develop an
integrative framework for successful CSR implementation in garment manufacturing
firms in developing countries that supply Western retailers with fashion product.
Specific research objectives are:

1) To identify the factors that inhibit or drive implementation of CSR within
the globally dispersed fashion supply chain context

2) To examine the consequences of CSR Inhibitors and Drivers on CSR
implementation in garment manufacturers in developing countries that
supply Western retailers with fashion garments

3) To develop an integrative framework that provides an implicit strategy for
CSR implementation in a developing country garment manufacturing
business supplying high street fashion garments to Western retailers.

This thesis focuses on the garment manufacturing function as distinct from textile
manufacturing and assumes a narrow definition of CSR to include social issues of
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worker exploitation only. Environmental issues of pollution, degradation and depletion
of natural resources mainly relate to textile production, therefore are considered to be
outside the scope of this study and are not addressed. Furthermore, the focus is on
fashion garments sold to consumers through high street retailers such as Marks &
Spencer, TopShop and Nike, rather than luxury fashion, workwear, uniforms or
protective wear. For reasons of consistency, the term ‘garment’ rather than ‘apparel’
will be used throughout and refers to clothing such as trousers, tops, skirts and coats,
but does not include footwear or accessories. The US term ‘apparel’ appears on
occasion in quotes and references but is taken to have the same meaning as ‘garment’.

This chapter presents the contextual background, scope and direction of the research, as
well as setting out the structure by summarising each chapter in turn.

Chapter Two examines how the concept of Supply Chain Management (SCM) has
evolved to become an important management discipline. It explores how macro factors
such as globalisation have increased focus on SCM, as well as examining how fashion
industry-specific factors such as product nature influence supply chain design. In order
to illustrate the range of criteria to be considered in global garment sourcing, the chapter
includes an evaluation of Sri Lanka. This provides the background information on the
location of the seven case study companies, in terms of setting out the nature of the
industry, its strengths and weaknesses relative to neighbouring Asian garment-
producing nations, and the history of CSR within the industry.

Chapter Three seeks to understand CSR as a theoretical construct in terms of the
economic argument and the utility argument. The defining character and context of
CSR is established by exploring the global business trends and societal issues which
have converged to give rise to the current focus on CSR. The business case for CSR is
presented, in terms of the strategic benefits. A review of the philosophical antecedents
comprises the normative case for CSR, in terms of the deontological and teleological
perspectives. CSR is also underpinned by stakeholder theory, which links to the
boundary of the firm, and the question of how far along the supply chain responsibility
of the firm should extend, especially in the context of global garment supply chains
where fashion retailers are foremost marketers and rarely own manufacturing facilities.
The chapter then discusses recent innovations and practices in fashion garment supply
chains which have brought about current awareness of CSR issues. It concludes by
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