Outsourcing Manufacturing to Developing Countries

Background

The development of new, more complex technologies continues at an accelerating pace. Many of these technologies have risks that have not been seen before or adequately assessed.  The risks these technologies incur are frequently exported to developing countries, which lack the infrastructure to support and implement these technologies safely. For manufacturers developing countries offer multinational corporations a competitive cost advantage compared to manufacturing in highly industrialized countries. Companies building plants in developing countries have the benefit of cheap labor and low operating costs. Health and safety regulations are often non-existent or at best inadequate to address the risks new technologies incur. There may be little incentive to promote environmental ethics, safety procedures and community investment. Even if regulations exist firms may find it economically advantageous to avoid compliance and pay penalties rather than to meet statutory safety or environmental requirements.

There have been numerous instances where plants established in developing countries have experienced workplace and community disasters that would be much less likely to have happened in industrialized nations. The 1984 catastrophe at the Union Carbide Plant in Bhopal, the capital city of Madhya Pradesh, in India is a prime example. Recently workers were trapped in manufacturing facilities with inadequate fire suppression or emergency exits as another example. Longer term health issues arise when workers are exposed to hazardous materials without adequate protective gear. Hazardous waste maybe introduced into communities without adequate treatment. The ethical responsibilities of multinational corporations and their senior management, engineers and scientists working for these organizations are frequently ignored.

Often there is a demonstrable difference in design, safety, operating and maintenance procedures when comparing plants in developing countries with similar plants in highly industrialized countries. Developing countries frequently lack community information and emergency response procedures to deal with large-scale disasters. The governments of developing countries may contribute to the risks if highly placed governmental officials are susceptible to corruption to overlook serious health and safety issues. 

The following fictitious scenario is based on a composite of real events.

Reduced Safety Standards In Design Specifications

Joe Martin is the Chief Design Engineer for a major multinational corporation. He leads a multidisciplinary team of engineers that have years of experience in the safe design of manufacturing plants in his home country, a highly industrialized nation. Joe and his team have been tasked with the design and startup of a new plant in Ethicana (a fictitious developing country). The plant will manufacture advanced solar cells and complete solar panels using a proprietary nanotechnology process that has never been used before. The decision to build the plant in Ethicana was primarily driven by the lengthy process to get approval by regulatory agencies in his home country. There has been very little research or data collected on the safe use of this new nanotechnology in manufacturing solar cells.

An important issue that Joe and his engineering team face is the design specifications set by management for the new plant have safety standards well below those for similar plants in his home country where the corporate headquarters is located. New computerized safety systems specified for use in his home country have not been incorporated into the design specifications for the new Ethicana plant to reduce costs. Joe’s team has been given a restricted list of approved low-cost instrumentation for the new plant that has a reputation of being unreliable.

Joe and his design team are very concerned. When Joe approaches senior management with his concerns he is sternly rebuffed and told that regulations in Ethicana do not require the same safety and environmental measures as those in his home country. Joe and his team feel very uncomfortable at the reduced design and safety standards for the new plant, but are keenly aware of management's negative reaction to their feelings. They feel compelled to design the plant to meet the specifications management provided. The plant is built accordingly.

 Starting up the plant.

Joe’s team immediately becomes aware that even existing safety standards are not being upheld. Nevertheless, the new plant is scheduled for startup.  Joe reports back to corporate headquarters that even though he has requested a safety inspection, the regulatory agencies of Ethicana have never inspected the plant and are not enforcing safety and environmental regulations. Joe requests permission from senior management to delay startup until safety inspections have been made. He is told to start up the plant immediately and that safety inspections will occur when local agencies can schedule time for a visit.

 During startup, the operating technicians have reported the following problems to Joe and his team:

  1. Temperature and pressure gauges are unreliable and are frequently ignored.
  2. Process waste chemical volumes are exceeding the recommended capacity of the holding tank.
  3. The reserve waste storage tank is averaging 70% full and occasionally overflows.
  4. The refrigeration unit that keeps potentially explosive chemicals at low temperatures shuts down intermittently and requires manual restarting. 
  5. The gas scrubber, which is designed capture flammable gases escaping from the process, has been shut down due to an electrical problem. Escaping gases are being routed to the flare tower.
  6. The flare tower – which is designed to burn off flammable gases escaping from the scrubber -- has a defective automatic igniter. Periodically when the flame is blown out by high winds it does not re-ignite. An unknown quantity of unburned flammable gas containing nanoparticles escapes to the atmosphere until the flame is manually ignited.
  7. The water curtain -- which should capture any process gas containing nano-particles in the works area – lacks adequate volume. Process gas containing nano-particles escapes into the worker’s operating area.
  8. The warning system for the local community in the event of a plant emergency has never been tested and is not known whether it is operable.
  9. Recent nationalization policies of the Ethicana government have resulted in the premature replacement of members of Joe’s team of experienced engineers with less knowledgeable local citizens.  Due to training cutbacks, most replacement technicians at the plant are poorly trained, inexperienced and have little understanding of the manufacturing process. This has resulted in several accidents during operation exposing workers to hazardous materials including nano-particles whose long-term health effects are unknown.

Corporate Response to Safety Concerns

Joe reported his concerns to senior management at corporate headquarters and requested that the Ethicana plant operations be suspended until the faulty equipment, safety and operational issues are addressed. To make his point Joe tells senior management that this is a disaster waiting to happen and that if nothing is done he will be compelled to file a report with the Ethicana Worker Safety and Environmental Protection Agency. Senior management tells him to keep the plant in operation at all cost. He is told that ethics and morals have no role in operating a manufacturing facility profitably. 

Out of frustration Joe reported his immediate supervisor to the senior vice president for corporate operations regarding potential risks to persons living near the plant. He is told that there are no regulations in Ethicana requiring the communication of risks to the local population living near the plant. Nothing is done to inform the surrounding community of any potential risks.

Because Joe and many of his team lived in the local community during their assignment in Ethicana they are aware that there are no emergency response plans to cope with any events at the plant that could have a negative impact the local community. Joe knows that there is an inadequate supply of water and electricity which could affect the operation of safety equipment currently installed at the plant in the event of an emergency. 

Consequences

Joe is quietly replaced by a local citizen as the plant manager and transferred back to corporate headquarters. Joe receives a less than favorable performance evaluation from his supervisor for his work on the Ethicana project. The rest of Joe’s engineering team is replaced by local citizens and the team is transferred back to corporate headquarters. To add to Joe’s frustration, he finds out from an article in an Ethicana newspaper that the new Ethicana plant manager is the brother in law of the mayor of the city where the plant is located. The new plant manager's industrial experience is limited to vehicle maintenance for the city where the plant is located.

Responsibility of the Governments of Industrialized and Developing Nations

Currently, international law does not involve itself in industrial hazards, pollution or regulating multinational corporations in general.  Any disaster that results will be litigated in the country where the plant operates. The legal systems of most developing countries lack experience in dealing with multinational corporations or the consequences of a major disaster resulting from poorly designed and operated plants outsourced from highly industrialized countries. 

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As you read and analyze this case study, your reflective comments are requested on all of the following:

  • Who are the stakeholders, and how are they impacted both positively and negatively?
  • What knowledge and skills are needed to implement sophisticated, appropriate and workable solutions to the complex global problems facing the world today?
  • What interdisciplinary perspectives would help identify innovative and non-obvious solutions?
  • What insights can you articulate, based on your culture and other cultures with which you are familiar, to help understand your worldview and enable greater civic engagement?
  • What is your position on the right thing(s) to do?

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Comments

  • In this case study the stakeholders would be the Ethicana government, the corporation, and Joe. The Ethicana government and the corporattion want the new plant to be highly profitable and in doing so they do not enforce any safety or environmental regulations, causing Joe and his engineering team to feel personally responsible for any damage that would be done to the local community. Other stakeholders that would benefit from the creation of the plant in Ethicana would be the citizens who would be able to have jobs, allowing them to develop into a better country. However, something to consider would be that these positive aspects would be ruined by the pollution of the environment in the region as well as endangering the safety of the regions citizens. In order to solve these types of problems I would argue that the required knowledge and skills needed on behalf of the company would be providing proper training, the screening of workers to make sure that they are able to complete the job and have the necessary experience to carry out those goals, and creating an environment that focuses on the safety of its employees and the environment. If the company focused on keeping these policies in place it would allow employees to focus on their work and increase their ability to identify innovative solutions because they are not having to worry about the ethical delimas as there are none. The right thing to do is to respect others as human beings, and protect what they need to live peaceful and decent lives.
  • In this case study, we are presented with an ethical dilemma surrounding the proper safety in a work environment. The primary stakeholders in this case are Joe Martin and his team, the multinational corporation, the workers at the plant, the local citizens of Ethicana, and the Ethicana government. While there are mostly negative effects from this case study, there are some positive ones, including providing jobs for local citizens and boosting the revenue for the corporation. On the negative side, there are many safety concerns that jeopardize both workers and innocent citizens. Another negative is that if a lawsuit were to occur, it would show the company neglecting to make changes to a large number of well-known safety issues in the factory. The knowledge and skills that are needed to implement workable solutions in the complex world today include providing proper training, good management, and recruitment of competent workers. All employees should receive proper comprehensive training on the field they are working in and what to do in the event that ethical situations such as this arise. Another important skill needed is assigning people to the correct role. The management positions need to be well trained and educated and have a background in the work they will be managing in order to achieve maximum efficiency for the company. Having different interdisciplinary perspectives, such as different types of engineers and scientists as well as attorneys, can help provide a company with innovative, less-obvious solutions, giving the company an upper hand. While the engineers and scientists work on the development of a product. The attorneys are able to fight for it and are able to protect the company's assets. Based on my culture and that of the other cultures, I am very familiar with how today's multinational corporations work and how they treat their workers and citizens of the occupying area. Many of these corporations look to maximize their profits over everything else and do so by taking advantage of developing countries and their materials. This can enable greater civic engagement by encouraging the developing communities that are being taken advantage of to look into these multinational corporations and decide if they have a place in their society. My position on the right thing to do is to ensure the safety of the workers over anything else, and the company should do everything in their power to amend their previous mistakes. They should also initiate a company wide investigation looking into all other factories to insure that something like this could never happen to the company again.
  • The stakeholders in this scenario include Joe and his engineering team, the local workers and their families, the community using the Ethicana plant, the multinational corporation and its senior management, and the Ethicana government. The multinational corporation benefits from reduced costs and potentially increased profits. Additionally, the local economy might benefit from job creation, but on the other hand the workers and local community are exposed to immediate and long-term health risks due to inadequate safety measures and potential environmental disasters and as a result, Joe and his team face ethical dilemmas and professional repercussions for raising concerns.
    Addressing these complex global issues requires a broad set of knowledge and skills, including a deep understanding of ethical business practices, engineering laws, environmental science, and public health. Also, skills in communication as well as negotiation are also critical to working with the diverse interests involved. Implementing workable solutions demands coordination that can only be achieved with cooperation with very likeminded and humble people.
    Perspectives from people in fields such as engineering, and environmental science, would be helpful in finding innovative solutions. Engineers can provide technical expertise in designing safer technologies and processes, while environmental scientists can assess potential impacts on ecosystems and public health.
    Insights from multiple cultural perspectives can enhance understanding and enable greater civic engagement by highlighting the importance of community involvement and getting various perspectives involved which will also help the community feel more involved with decisions, which will improve relationships.
    My opinion on the right thing to do is to prioritize the safety and wellbeing of the workers and the community over the goal of making a short-term profit. I believe this is the best solution since in order to make money, corporations need to work like a well-oiled machine, and making a long-term profit will benefit not only the executives but the whole corporation in the long run.
  • The stakeholders include: Joe Martin and his engineering team, local communities that surround the plant in Ethicana, the workers of the plant, the Ethicanan government, and the corporation that looks over Joe’s team and owns the plant.

    There are many skills and knowledge that are necessary in this situation to overcome this issue from an ethical standpoint. First being understanding and expertise in the engineering and machinery aspect of the foreign plants. As well as basic skills in data analysis and problem solving. The next being a valid and unbiased understanding of basic human safety protocols. As well as the knowledge and empathy to be able to accurately assess the risks based on the ideals of prioritizing human life and safety.

    Interdisciplinary perspectives can include fields such as social and environmental sciences to see how this problem might affect surrounding environments and people within these environments. Other fields include economics and technology, to try and find more cost efficient (not necessarily cheaper) and more efficient technology could positively affect the plant. The most important field involved is Law, to make sure the changes that are being made are legal and not causing other issues.

    Living in America, I have witnessed many different cultures and think that culture is very valuable and helps people understand people all around the world. By understanding other cultures it allows for a more positive environment and contributes to equality. Learning from other cultures can help me better understand the worldview and promote civil engagement.

    I believe, in the instance of Ethicana, that Joe Martin had the right to do what he did. I personally believe that the health and safety of people is more valuable than cost efficiency. I believe in prioritizing human and environmental rights to keep the world safe and clean. I believe that all individuals deserve the right to equality and safety.
  • The rapid march of technology has presented multinational corporations (MNCs) with unprecedented opportunities to gain a competitive edge. However, the flip side of this progress is often obscured—the practice of exporting risks to developing countries. In these nations, where infrastructure and regulations may be inadequate, MNCs find allure in cost advantages like cheap labour and reduced operational expenses. This essay seeks to delve into the ethical complexities of exporting risks to developing countries, with a particular focus on a fictitious scenario set in Ethicana, an emerging nation. In this scenario, a multinational corporation embarks on manufacturing advanced solar cells using a proprietary nanotechnology process.

    In this unfolding narrative, a diverse cast of stakeholders plays pivotal roles, each harbouring unique interests and concerns. The multinational corporation, alongside its senior management, engineers, and scientists, anticipates significant positive impacts in the form of cost savings. The local population in Ethicana potentially stands to gain employment opportunities, a positive outcome in its own right. Nonetheless, the adverse repercussions are far-reaching. Workers in the plant face hazardous conditions compounded by the unreliability of equipment, imperiling their safety and well-being. The local community, devoid of adequate safety measures, remains exposed to potential hazards, endangering their livelihoods. Furthermore, the environment faces degradation due to improper hazardous waste disposal and unchecked emissions.

    In grappling with these complex global challenges, professionals, especially engineers, must possess a deep-seated understanding of safety standards, environmental ethics, and risk assessment. Equally vital are their skills in ethical decision-making, effective communication, and the courage to champion safety and ethics, even amidst formidable obstacles.

    Drawing on interdisciplinary insights can provide novel solutions to ethical dilemmas as depicted in this scenario. Experts hailing from diverse fields such as environmental science, law, sociology, and international relations can offer invaluable perspectives on creating a more ethical and secure working environment in developing countries. These multifaceted viewpoints can bridge cultural divides and instigate a shift towards responsible business practices.

    Cultural disparities loom large in this narrative. The friction between Joe, the Chief Design Engineer, and Ethicana's government mirrors the divergence in values and priorities. Recognizing and respecting the local culture and ethics is paramount in fostering deeper civic engagement. Joe's unwavering ethical stance emphasizes the primacy of safety and ethics, even at the cost of delaying plant operations or incurring higher expenses. In contrast, senior management's profit-driven approach highlights a stark cultural contrast in values and priorities.


    Joe's ethical position is unwavering: profit should never eclipse safety and ethics. He firmly believes that the right course of action lies in ensuring the safety of workers, the local community, and the environment, even if it necessitates postponing the plant's startup or incurring additional costs. In stark contrast, senior management prioritizes profit over safety and ethics—a common ethical dilemma faced by MNCs in similar situations.
    The multinational corporation's response encapsulates a recurring ethical conundrum in the business world. Senior management's reluctance to address ethical concerns and their disregard for safety and environmental responsibilities raise profound questions. Their unwillingness to prioritize safety over profit underscores a pressing issue that demands redress.

    This case study underscores the ethical predicaments confronting multinational corporations as they outsource risks to developing countries. It underscores the pivotal role of professionals, particularly engineers, in advocating for ethical practices and stringent safety standards, even when buffeted by corporate pressures. Furthermore, it underscores the exigency of international regulations and legal frameworks that effectively address such issues, preventing disasters and safeguarding the welfare of all stakeholders. In a world where technology continues its inexorable advance, ethical considerations must reign supreme in the boardrooms of MNCs, irrespective of geographical locations or profit margins.
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  • The stakeholders are: the government of Ethicana, local communities surrounding the plant, the corporation that owns the plant, Joe Martin and his team, and workers at the plant.

    The overlooking of the potential risks the Outsourcing Company imposes on the country can negatively impact the public opinion of the government's officials. However, The plant brings a consistent revenue source for a developing country’s government and infrastructure.

    Although, local communities are provided stable jobs for locals in the community and could potentially boost their economy The escaped emissions and hazardous waste could potentially affect the health of locals or anyone who consumes natural resources from the area ex: animal products, local water sources.

    The shady practices of the multinational corporation Joe Martin works for could damage its reputation and potentially result in legal trouble and fines in the event of a disaster. Though the company benefits through the cheaper labor as well as building and manufacturing costs due to the laid back regulations of Ethicana.

    Joe and his team are ethically responsible for the well being of others when it comes to their work. Their work could potentially harm others, which could result in consequences for Joe and his team. However, Joe’s team has the opportunity to lead a successful mission in creating solar panels with developing technology that could potentially change the world.

    Workers at the plant are directly exposed to the hazardous waste frequently as well as work in an unsafe environment which could compromise their health and well-being. Their jobs at the plant provide stable sources of income in a country that could have a struggling economy and widespread poverty.

    The world needs ethical engineers to help combat the problems it is facing today with corporations outsourcing projects like this hypothetical Ethicana scenario. People who are designing these projects must be knowledgeable in the principles of ethics and must have the skills and discipline to do everything in their power to hold corporations that violate ethics accountable. Even if doing so involves, going to their higher up superiors or even whistleblowing.

    The political and legal perspective combined with cultural and social perspectives could create solutions to companies who exploit underdeveloped nations for financial gain. New laws could be put in place to discourage outsourcing labor and goods from domestic nations who plan to exploit these countries with their laid back regulations and abundance of cheap labor.

    Large corporations in the United States often prioritize efficiency and return on investment over the safety of workers and even the environment. However, not only are there bureaucratic agencies to keep them in check legally, but also the public opinion on companies can largely affect their profitability based on their endeavors and potentially shady methods if exposed.


    Not only should Ethicana enforce stricter rules and regulations to hold corporations in check for the safety of their citizens and domestic labor force, but the corporation Joe Martin works under should enact laws that hold multinational countries operating or based within their borders to higher ethical standards even when operating in other countries. These laws should hold corporations like this one outsourcing from Ethicana responsible for the damages and potential risks they pose on all people and the environment.
  • In this case study, key stakeholders include Joe Martin, the Chief Design Engineer, the multinational corporation, the citizens of Ethicana, and the government of Ethicana. The multinational corporation and the brother-in-law of the mayor of the city in Ethicana are identified as beneficiaries, while Joe, the workers in the new plant, and the local community are negatively impacted.
    Ethical engineers play a crucial role in addressing complex global challenges. They should possess the knowledge and skills necessary to prioritize the well-being of all project stakeholders. This involves acting ethically, even in the face of challenges, and collaborating across disciplines to ensure the best outcomes.
    Consulting environmental scientists, urban planners, and disaster relief specialists can provide valuable insights. Their perspectives can contribute to preventing environmental damage, informing the local community about potential health concerns, and preparing for emergencies.
    The case underscores the importance of prioritizing human life and health over profit. International companies can create mutually beneficial scenarios by implementing ethical safety measures and ensuring effective plant management. While outsourcing to developing countries is not inherently unethical, differences in culture and environmental laws create room for legal but unethical practices.
    In this scenario, Joe and his design team demonstrated ethical responsibility by raising concerns with upper management. However, the company's adherence to legal but unethical practices requires rectification. The company should prioritize building a functional and safe plant. This involves thorough testing of technology, using quality materials, and obtaining proper safety inspections before operation.
    The right course of action for the company is to align its practices with ethical standards. Building a plant that prioritizes functionality and safety not only benefits the company but also ensures the well-being of workers and the local community. By adopting ethical engineering principles and collaborating with diverse experts, companies can navigate international operations responsibly, contributing to positive global outcomes.
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  • The case study highlights a very relevant and current issue that many developing countries are struggling with. Unethical manufacturing practices put many parties at risk and can affect the environment, for the profit of only a few. The main stakeholders in the case study are Joe Martin and his team, the workers at the plant, the local citizens, corporate management, the company shareholders, and the local government. Joe Martin is a relevant stakeholder because he is responsible for the design of the plant, this leaves him liable to any occurrences, and makes him morally obligated to ensure safety in its operation. The workers are subject to the conditions of work, and are the ones who’s safety is at risk, in my opinion this makes them the main stakeholders. The local citizens are also at risk because of the warning system being untested, and the environmental damages that are possibly occurring. The local government is a significant stakeholder because the public opinion on them is dependent upon their decisions being transparent and with the public’s safety as top priority. Corporate management is a stakeholder because they are responsible for the financial success of the plant, and are also ethically accountable for decisions taken in its regard. FInally, the company’s shareholders are stakeholders because the plant’s financial success will affect the value of their shares, they would be affected negatively if the plant is shut down.

    A very dynamic skillset is required to implement solutions to the complex global problems the world is facing today. An understanding of the specific field the problem is based upon is crucial, for instance if the problem involves technical knowledge then that knowledge is essential to understand its depth and offer a viable solution. Additionally, soft skills are required to deal with the people involved in the problem and be able to communicate and understand insights. Furthermore, being able to analyze data and interpret how decisions will impact it is crucial to understand how to solve complex problems.
    Being from Costa Rica, I am very aware of the interest in multinational corporations for low cost labour in developing countries. These companies bring many jobs and nurture the companies economy, but they also don’t pay any direct taxes and their prioritization for profit can lead to a myriad of issues. The policy issue isn’t particularly prevalent where I’m from, but I have visited multiple places where unsafe work conditions put laborers at risk. This is inhumane, and I believe the best way to ensure it doesn’t occur is for companies to be subject to inspections by non governmental agencies, following a structure that prevents corruption.
    Regarding the case study, I believe the right thing to do would be to shut down the plant and prioritize the workers’ and local citizens’ safety. Joe’s decision to push the information to upper management was the right thing to do, once replaced he could have also gone public with the information.
    • Your experiences with Costa Rica and its government give you a deeper understanding of multinational corporations and their exploitation of developing countries. You seem very passionate about the well being of Laborers and the affects these corporations could have on a developing nation. I agree that the workers' and local residents' safety should be prioritized, even over the profitability and efficiency of the plant.
  • Given the intricacies of our world setting, in situations such as outsourcing to different countries, different parties encounter both positive and negative impacts. The various stakeholders, which are multinational enterprises, benefit in rising economies, and nearby government authorities benefit through debasement by dismissing security concerns for individual pick up. With all things considered, though, the latter side is impacted completely differently. Workers fight with risky conditions and wellbeing risks, while nearby communities are susceptible to natural harm, highlighting a need for security safety measures. Specifically, in this instance, Joe Martin's group wrestles with moral situations emerging from compromised security measures. The environment faces the risk of contamination, and potential long-term wellbeing and natural issues linger over future eras. To handle these challenges, a multi-disciplinary approach is required, requiring mastery and competencies in building morals, legitimate comprehension, and successful communication. A cross-disciplinary point of view involving crossing morals, natural science, humanism, universal law, open wellbeing, and corporate social duty, can offer a more novel point of view. Besides, information gathered from varying social establishments and societies makes a difference in the importance of prioritizing security, normal ethics, and community well-being over advantage. Personally, my stance stands at multinational enterprises having an ethical and moral duty to guarantee the security of their specialists and the communities in which they work. Government agencies, both in creating and industrialized countries, ought to collaborate to set up and implement worldwide security benchmarks. Civic engagement should be the standard in holding corporations and organizations accountable for their actions, which will contribute to the solution of this worldwide issue.
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