Question B. Describe the situation with greatest ethical complexity that you have faced in your professional or academic life, and how your input helped resolved it?

Daniel Richard Mulvie

IE EMBA APPLICATION 31-05-2015

Sourcing Strategy• How do you spend €40 million in a way that is effective for the companies

business, but also ethically transparent way that it treats its partners and

employees.

• This is the situation with the greatest ethical complexity that I face. Through examples

from my daily work I will demonstrate why the situations are complex and how I have

resolved them

• Our products are sourced in developing countries which is typical in the sports apparel

industry because of low wage levels and the fact that it is very often that the textile

industry can be one of the first industries which can help to develop.

• Sourcing strategies that focus too heavily on minimum spend can be easy to carry out,

but my company as well as my personal interest is to produce products that respect

CSR. Sourcing strategies must fulfil many goals in unison to give us a competitive edge.

€40m

PROCUREMEN

T SPEND

Sustainability Compan

y Strategy

Innovation

CSRWage Levels

Trade Agreem

entsQuality Levels

Active Labour Force

Lead Times

Margin

Political Climat

e

Globalization

Figure 1: Elements of the Sourcing Straregy

Example 1. How can I help to solve the minimum wage issue?• Are workers in developing countries making products for western

consumers able to clothe, feed and educate their families?

• If they are paid the minimum wage then they cannot. There is a huge

disparity between the minimum wage and a living wage, (See figure 2) in

some countries the living wage can be 5 times as much as the minimum

wage

• Many brands hide behind the fact that they pay the legal minimum wage as

an indicator that they are responsible

• Based on my experience it is ethical to pay the living wage because it will

lead to sustainable development

Figure 2

Solution to the minimum wage• For example I along with partner NGO’s like the Fairware

foundation and the Asian Floor Wage discuss and audit our

partner factories records. We check and negotiate wage levels

across all workers in our partner factories and through our own

production

• I work together with other brands who are members of the

Fairware foundation and others to leverage our business and

encourage factories to pay a living wage

• As part of our CSR strategy we enforce a number of other

principals (outlined in figure 3) to ensure ethical treatment of the

workers in our partner factories and in our own production

WORKER

employment is freely

chosen

no discrimina

tion in employme

nt

no exploitation of child labour freedom of

association and the right to

collective bargaining

payment of a "living

wage"

no excessive working hours

safe and healthy working

conditions

a legally-binding

employment

relationship

Figure 3

Example 2. How can I ensure the companies that we work with help to create Sustainable Development?

• As part of my daily work I visit developing countries where costs are low and there is an abundant

workforce but ethical risks are high. Is helping to create an economy a good enough reason to start

manufacturing there?

• I am currently looking for a new partner as part of our sourcing strategy where labour costs are stable and there are

enough CSR safeguards in place. One of the places being Myanmar, where forests are being cleared for factories

and the rate of development is escalating after the EU lifted it’s trade sanctions.

• On the following page (figure 4) shows opposing methods of development currently used in developing countries

Opposing methods of development in developing countries

Investment in

MyanmarClearing of

forestBuilding of factories

Production of goods

Increased use of

fossil fuelsGDP

increaseUNSUSTAINABLE DEVELOPMENT

METHOD FOR ENCOURAGING SUSTAINABLE DEVELOPMENT

Investment in

Myanmar

Redevelopment of Brown

field sites

Building of sustainable factories

Production of goods

Increased use of

renewable energy

GDP increase

SUSTAINABLEDEVELOPMENT

UNSUSTAINABLE DEVELOPMENT

Figure 4

Solutions• I look at ways where we can encourage development in a sustainable way by

collaborating with producers who think and act inline with our company values

• We could do more as a company. We are a member of the global economy, even if we

act in the right way it doesn’t mean our current model of consumption is ethical.

• There is an unbalanced relationship between us, the manufacturers and the natural world

and the latter is the one with the quietest voice so far

Example 3. How can we ensure that the money we spend is used for ethical ends?

• Companies don’t want to talk about race, religion, gender or politics when they are doing business. It is often the

white elephant in the room. How do we do business in countries with other multinational companies when their

government could be discriminating against a minority and you are helping to fund them? Politics are rarely a

driving force in CSR strategies.

• We work in Israel which is home to at least 2 of the top five companies in seamless knitting in the world. Part of

profits of the company were used to fund the summer war in Israel in 2014. It would be easy to make a decision

if the facts were clear and someone had been convicted but this is not the case. (See figure 5)

Should we care about thefinal destination of our spend in Israel?

We help to create

€8 Million in profit is Israel

Around €2

Million goes on tax in total

Company has to

pay 26% in tax

13% of the tax

budget is spent on Defence

€260,000 PA goes to the

military

ETHICAL?Figure 5

Weighing up the ethical dilemma• The Israeli government has not been convicted of

any war crimes and thus is innocent until proven

guilty

• We do not doing business with the Israeli

government, but with many people who live their

from diverse backgrounds

• Israelis should have the funds to defend themselves

against aggressors. Continuing to support Israel will

one day lead to peace

• The government has been democratically elected

• The government has been involved in many wars

over the past years

• Israel's government official position on new

settlements on disputed land is in opposition to

international conventions

• Benjamin Netanyahu's recent position on a 2 state

solution has been negative

Conclusions• Spending money in the right way is an ethically complex situation. It touches many peoples lives around

the world and there are both positive and negative aspects to the decisions I make.

• What is clear is that decision making needs to take into account multiple aspects for businesses to be

successful and sustainable

• When choosing the companies to work with I shape my companies ethical view and our manner of

interaction to find solutions to complex problems.

• Business has the power to make a great change in the world because it is important how profits are

achieved.