MGMT2001 2024
Case Study
Case/Background
Dyson (dyson.co.uk), a company that designs and manufactures household appliances, is
currently being sued by workers employed by a third party in a Malaysian factory where Dyson
products were being manufactured. The claim alleges that workers were subject to unlawful and
exploitative working conditions and that Dyson is liable because it knew, or ought to have
known, of the alleged illegal practices. They point to Dyson’s previous public statements about
their procedures for detecting and preventing forced labour in their supply chains.
Driven by environmental, social, and governance (ESG) principles, governments and regulators
are increasingly obliging businesses to identify and address human rights and environmental
risks along their supply chains. A transition from previous ‘soft law’ standards to “hard law”
obligations has the potential to impact businesses outside the territories in which regulations are
imposed, including businesses based in the UK. Businesses will need to monitor new legislation
as well as their own supply chains in preparation for greater scrutiny by regulators and by
contracting parties who are directly bound by the new rules.
The EU is bringing forward a series of mandatory supply chain due diligence proposals over the
next two years under its “Green Deal”, a programme of policy initiatives with the overarching
aim of making the EU climate neutral by 2050. The EU's measures are designed to have extra-
territorial reach with the aim that commodities traded through the EU and products placed on the
EU market are sourced / manufactured responsibly.
UK companies with an EU presence will be directly affected but any UK companies supplying
in-scope EU companies will be indirectly affected. The regulatory scrutiny is wide-ranging. For
example, the Deforestation Regulation will require companies trading commodities with the EU
(including cattle, cocoa and wood, as well as products made from those commodities such as
leather, chocolate and books) to ensure their supply chains are not linked to illegal deforestation.
According to the Food & Drink Federation, EU trade made up 69 per cent of the UK’s total food
and drink imports and 55 per cent of exports in 2022. All of this trade will be covered by these
regulations. Those companies found to be non-compliant can have products confiscated, be
denied access to the EU market or, in the worst cases, potentially be fined up to 4 per cent of
their annual turnover in the EU.
Germany has already implemented its own Corporate Due Diligence Obligations in Supply
Chains Act (Lieferkettensorgfaltspflichtengesetz - LkSG) (the German Act) in January 2023. As
with a similar EU directive, it requires companies to have a compliance management system to
assess and report on the risk of ESG abuses within their own companies, with direct suppliers
and, where they are deemed to have “substantial knowledge”, indirect suppliers. Any UK
businesses which trade directly or indirectly with German companies will therefore be subject to
scrutiny via their German counterparts and will need to be able to account for their own onward
supply chain, or risk losing business. Furthermore, UK companies with branches in Germany
employing more than 3,000 employees are already bound. This threshold will fall to 1,000
employees from next year.
Regulations relating to supply chain due diligence have also been introduced outside the EU in
recent years, including the Business Supply Chain Transparency on Trafficking and Slavery Act
in the US (2020), the Transparency Act in Norway (2022) and the Corporate Responsibility on
Human Rights (C-262) statute in Canada (2022). This is a developing area, but the direction of
travel globally is clear.
Risk
There is an obvious risk to any UK businesses which are directly bound by local laws in other
jurisdictions, including supply chain due diligence regulations, of being subject to legal claims or
regulatory action in those jurisdictions.
There is also a risk of disputes between contracting parties where one has allegedly failed to
comply with its ESG-related obligations. For example, a German company seeking to ensure its
own compliance with the German Act may request a contractual warranty from a supplier that it
has complied with the relevant statutory codes of conduct. Claims could arise where any such
warranty is allegedly breached.
Question
Dyson has been growing through its innovation based on R&D investments, which require
continued investment. However, as a global manufacturing company, managers must
navigate the complexities of managing the supply chain across countries, which now poses
greater supply chain-related risks.
[Body] Against this backdrop, write a report (case study) on Dyson, focusing on
organizational change. Should Dyson change its manufacturing strategy in terms of off-
shore manufacturing?
[Recommendations & Conclusion] What strategy would you recommend to Dyson to deal
with the current problem. Detail your approach to resolve the issue in 1-3 years (short-
term) and 5-10 years (long-term).
https://www.farrer.co.uk/news-and-insights/managing-supply-chain-risks-in-uk-retail-
manufacturing-and-hospitality-businesses/
https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en