Ethical risk from sourcing products globally presents one of the major challenges in this global era. For instance, the Rana Plaza disaster that occurred on April, 24, 2013 in Bangladesh and that killed more than 1,000 workers has gained global attention on the unsafe conditions in overseas apparel manufacturing. The brand image of several american retailers and apparel companies was impacted during Rana Plaza disaster.
Ethical risk from sourcing depends on the state for the institutions that govern economic and social interactions. For instance, the Rana Plaza disaster exemplifies one of many instances of ethical risk present in sourcing products from countries with less control on corruption.
According to the New York Times, the 400-page report on the collapse of the Rana Plaza blamed the mayor for wrongly granting construction approvals and blamed the building owner for bribing local officials to get construction approvals (Yardley, 2013). Therefore, measures for the following factor obtained from World Bank database could be used to calculate country ethical risk index score:
Control of Corruption (CC) – “…capturing perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests…” (The World Bank)
Finally, sourcing risk from supplier’s country due to ethical issues can be determined using following criterion:
For instance, following country sourcing risk due to ethical issues can be determined based on country color that are based on calculated ethical risk index score for each country and that can be seen from map below: