Qn1: Why was it necessary to implement a program aimed at improving labour, hygienic, and social and health conditions of outsourced shop workers?

By 2005, Inditex’s Growth and sales had expanded beyond Spain and Europe at large. Though Inditex had undertaken CSR Initiatives before, most of the Initiatives were a knee-Jerk reaction at best. As Inditex expanded globally, it was grappling with close to 1800 External Suppliers, with little or no oversight/control over the working condition of the people under these many suppliers. Being a global player in retail now, it was imperative to come up with a CSR Initiative which was interwoven with the Company’s Corporate Policy. This Served 2 purposes:

1. As a profit making Organisation the initiatives undertaken to improve labour, hygiene,health and social condition would make the Supplier and the supply chain seamless and in the long run delivery tangible benefits(translates to lower cost and better quality of work force and hence the supplier can deliver better value)

2. These CSR Initiatives also would deliver Intangible Benefits in the form of extended cooperation from the local community, enhanced Corporate Image among stake holders, support from the local government and better brand value from well informed customers of Inditex.

According to Porter, Four major justifications for CSR initiatives are:

• Moral Obligation

• Reputation Out-in Linkages

• License to Operate

• Sustainability Inside-out Linkages

Strategic Importance of Morocco (Tangier) to Inditex:

1. Tangier was very important to Inditex since almost all of Morocco’s Production was sourced from this city, and Morocco accounted for 3% of Inditex’s Production.

2. Inditex was in an expansion mode in Europe and had expanded to cities like Slovenia and Slovakia outside of Spain and thus Morocco’s Proximity and lower cost of labour (1.89 USD) compared to neighbours like Turkey or Poland was a strategic advantage.

3. The Pilot study done by Fundacion Codespa indicated that Tangier, which had the highest concentration of textile workers, also had the highest number of people living in extreme poverty. Also, the pilot study revealed that, companies committed to CSR Initiatives were mostly local suppliers whereas foreign manufacturers who had setup shops were opposed to these initiatives since cost reduction and customer proximity were the primary reasons they were in tangier.

4. Withdrawal from CSR Initiatives at this juncture would have an adverse impact on their reputation, since Clean Clothes Campaign and Oxfam NGOs had already pointed out the adverse working condition of female workers in Inditex Outsourced Production centres in Tangier, amongst numerous other sites where workers toiled in less than ideal conditions.

5. Partnering with the Moroccan Government to Lift Female workers out of Poverty and provide training programmes to textile workers in Tangier ,is a strategic decision which is in line with Inditex’s long term Production plan and creates a win -win situation for both sides.