Ethical Offshoring

Question: If you can cut costs by outsourcing work overseas, should you do it?

Sep 1, 2008  

by Fil Fraser

Keeping: Maybe the ethically best thing is to offshore, bringing jobs and increased income to those who would otherwise have to make do with less. But maybe this is bogus; we now know that often the true cost of cheap is very high indeed. Producing things at the apparently lowest price can take a terribly high toll on human well-being (for example, through exploitative working conditions, including child labour) and on the environment. After all, why is the stuff so cheap? It is because wages are next to nothing and environmental protection is minimal to non-existent.

And the facts matter. Perhaps the offshore location has decent labour protection and maybe the environmental impacts will be insignificant. But how do you know that? You may be told one thing when you do the research, but the reality on the ground may be completely different, especially given that so many offshore locations do not have the rule of law. On paper the applicable laws may look fine, but in fact they mean nothing because they are not applied.

Chapman: The all too common view of the competitive marketplace is based on Darwin’s survival of the fittest. There are only two kinds of enterprise alternatives in the orthodox Darwinian world view: the quick and the dead. Well, Darwin was much more complex and perspicacious than he has been given credit for. He had a much more insightful observation that applies to the current outsourcing/offshoring challenge for those of us in the so-called developed world when he said: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

Knight: This is not an easy thing to do because the raison d’être of business is profit. But profits should not come before people. I’d be very concerned about the families and communities that would be hurt locally if the operation is moved offshore.

Keeping: Pressed to give an answer in the abstract, I would say you should always resist going offshore. As a consumer, I always do – where I can. I long ago decided that I would rather have one pair of shoes made in Canada (if I can find them), rather than three made elsewhere, because I want a vibrant and varied economy in Canada. Too many people don’t get the disconnect. They shop at Costco but lament the fact that their children and grandchildren can’t find decent jobs in the manufacturing or supply sectors.

Chapman: The adaptability in the offshore supplier is where I see our ethical dilemma, not if outsourcing should be done for marketplace and competitive reasons. I have no problem with China and India eating our manufacturing lunch because they are more competitive. After all, in 2005, the purchasing power parity in Canada was $35,078 per capita, but only $4,091 in China and $2,126 in India. Individuals in those developing countries have a long way to go to get anywhere close to the quality of living we enjoy in Canada. I don’t begrudge them the opportunity such outsourcing may provide.

That said, I do have ethical problems if the companies outsourcing into BRIC countries compete in ways that do not enhance the capacity and ability of their workers and their families to have a better quality of life. I have an ethical issue if they ignore human rights or want to damage the environment and accept corruption as an acceptable cultural norm, all in the name of lowering costs.

The Final Word
In addition to seeking ethical answers to business challenges, CEOs need to consider the new world of consumer backlash fuelled by the instant communication of the Internet. Telus, Rogers and Bell, as well as scores of companies whose enterprises impact the environment, are learning hard lessons about how to deal with angry customers. The bottom line is not the only consideration.

The Right Call is a rotating panel examining issues of corporate ethics. If you’d like advice on a compromising situation (no names used), send details to feedback.

Current Issue