Effect of social compliances on competitive advantage of apparel companies in Sri Lanka

Abstract

Apparel industry plays a significant role in Sri Lankan economy as the number one foreign exchange earner and employment provider. Despite many pitfalls, industry continuously booms in the global market. Gained reputation over the years as an ethical and quality apparel supplier among competitors is a greatest strengths to industry. Issues regarding working conditions of the manufacturing facilities blemished the reputation of many world renowned buyers; hence social or ethical compliances were introduced as a remedy. Compliances can be voluntary or mandatory; standards become mandatory after promulgated into national law as a regulation. This research investigated the impact of Social Compliances related to apparel industry in Sri Lanka. The different Social compliance standards found to be more or less similar in core content. Hence 'Worldwide Responsible Apparel Producdon' (WRAP) being the most widely implemented compliance standard in the country was selected for this study. Out of twelve WRAP principles, only ten principles were taken into consideration as they were directly addressing the working conditions, labour issues and regulations related to them. Data collection of this study was through questionnaires and interviews with Human Resources and Compliance managers. From the total of seventy-six apparel manufacturing companies listed in WRAP official website, sixty four companies that were possible to cover under practical circumstances were selected to survey. Another opinion survey was carried out with hundred and ten execudves in sixty companies. Data were illustrated in descripdve charts and analyzed through Freedman test, Mann Whitney test. Anderson Darling test statistics were used to check normal distribudon. Implementing seven WRAP principles were found to be effective. Improvements in factory performance were observed after WRAP. Many WRAP indicators influenced productivity and quality. Effect on Competitive Advantage of Apparel companies was analyzed through Porter's Diamond model. All the three hypotheses: Social Compliances have an effect on working conditions of Apparel companies in SL, Social Compliances have an effect on Labour standards of Apparel companies in SL and Social Compliances have an effect on competitive advantage of apparel companies in SL were accepted.