30 June, 2021 - 01 July, 2021
05 July, 2021 - 08 July, 2021
06 July, 2021 - 08 July, 2021
10 July, 2021 - 12 July, 2021
14 July, 2021 - 16 July, 2021
Ho Chi Minh City, Vietnam
As last year came to an end, I wrote about the value of family businesses, and how the fact that family-owned companies were embedded in the community made them naturally more likely to have maintained what is now recognised as a forward-thinking approach to supporting a wider range of stakeholders than shareholders alone. As part of a community, the welfare of employees, their families and the wellbeing of the local society all had to be considered.
It would be wrong to look back too steeped in nostalgia. Injuries at work were for decades far too common, investment was often minimal or slow, and I have worked in tanneries where in living memory workers were paid in cardboard ‘money’ which they had to exchange at local stores. It was not all benign.
Nevertheless, I remain convinced that with family businesses, the good aspects remain largely true. I well remember one of the few things my father told me about his 40 years working for a family-owned tannery in Scotland was that in all his time they had always paid every bill promptly, regardless of how difficult trade was at the time. It was a powerful point compared to many experiences I have had, with more international businesses juggling with cash flow after becoming over-indebted for one reason or the other.
There is another aspect to all this, which is that industries which use leather like footwear, garments, leather goods and gloves are far less labour intensive than tanning. This is demonstrated in having large installations with drums, heavy fleshing, splitting and shaving machinery and sizeable waste treatment plants. With a much more capital-intensive business, it is not so easy to pick up a tannery and move it somewhere with cheaper labour; and anyway, the gains will be quite small.
Tanneries get pulled into new locations for other reasons, usually to do with access to raw material or to customers, and well structured locations will survive much longer. Hence, we see that while China was able to grab 60 per cent plus of many leather using industries, it never got near this proportion with tanning. Italy has not just survived, but prospered, and places like India and Brazil have retained big volumes. Where tanning disappeared tended to be elderly plants, overwhelmed by modern urbanisation with little or no space to improve layouts or build waste plants suited to the increasingly tight new regulations.
This dip into the workings of economic geography leads us into more recent industrial history highlighted when Porter realised the dangers being created by the pursuit of badly defined terms like “optimisation” and “efficiency”. In 2011, he and Kramer wrote a thought -provoking paper in the Harvard Business Review entitled Creating Shared Value.
In a way, the new thinking had developed out of the idea of the “virtual corporation” like Nike, which controlled everything but only owned the brand, the marketing and the distribution. Production moved to where it was cheapest, and this meant increasingly to China in recent times. The danger for these “anywhere and everywhere” companies was success was measured mostly in short term financial returns to shareholders and the longer term needs of customers and suppliers; longer-term issues that create lasting success got ignored. In fact, Nike has proven to be one of the more thinking of this pack and has done a better job. The ruthless drive for efficiencies has sat more with a more recent generation of ruthless practitioners.
There is no doubt that since the financial crisis a decade ago, the business environment has been changing, and this has accelerated through the pandemic. A hankering after a “return to normality” has come with the recognition that what was “normal”, was in many instances totally unsuited for future business.
Increasingly, the global approach, when allied with the tight pursuit of short-term results, had lead to an abandonment of struggling communities, the depletion of natural resources and the ignoring of the long term viability of suppliers. It was not always one-sided. Some communities were glad to see the back of manufacturing, which they considered old-fashioned and dirty. How often have we heard of the leather industry being classed as a sunset industry? Yet, replacing tannery employment and that of other manufacturing with warehousing and retail employment is not equivalent in terms of offering job satisfaction and living wages upon which citizens and communities can thrive. A better balance is needed. If the leaders of many of these communities were to visit a Leather Naturally member or other top tannery today, they deeply regret not working harder to keep this industry and supporting its transition into the 21st century.
So, while the family business, when working well, is an invaluable aspect of a prosperous community, manufacturing, and in particular tanning, is also a key element. We are currently fighting for leather as a superb sustainable material, but alongside this, we need to let it be loudly known that modern leather production is a good industry, which a community should be proud to have present and one which offers the opportunity to develop many associated jobs in the surrounding area. Given the changing geopolitics right now, and the creative thinking going into supply chains, perhaps there is room for some creative thinking.
Leather is a great material, and leather making is a good industry. As we move towards COP-26 later this year, we need these points to be loudly made.
January 13, 2021
Follow Dr Mike Redwood on twitter: @michaelredwood
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