Hard Hats and Hard Truths: Ethics and Corporate Responsibility in Sri Lanka's Construction Industry
Image 1 — Construction workers on site: behind every project stands a chain of contractors, subcontractors and labour suppliers — and at the very bottom of that chain, a worker who deserves more than the system currently offers them.
Introduction
Nike's factory workers in Indonesia were paid 14 cents an hour in 1991 while the company reported record profits. In 2010, fourteen young workers took their own lives at Apple's supplier Foxconn in China as a result of 12-hour shifts, military-style management and complete social isolation. In 2020, Boohoo's garment workers in Leicester were paid less than half the legal minimum wage and forced into factories during a pandemic with no protection — until the company lost more than £1 billion in market value in a single week (The Guardian, 2020).
Three industries. Three countries. One pattern — organisations that knew exactly what was happening in their supply chains looked the other way and attributed the problems to someone else.
The same happens in Sri Lanka's construction sector. And unless the industry faces up to this reality, the workers at the bottom of the chain will continue to suffer.
What Is Ethics in HRM?
Armstrong (2020) argues that ethical HRM requires organisations to take genuine responsibility for the wellbeing of everyone affected by their operations — not just direct employees, but everyone employed through their supply chains and subcontracting arrangements.
Carroll (1991) proposed the Corporate Social Responsibility Pyramid — four levels of organisational responsibility that every business must fulfil simultaneously. These levels range from Economic responsibility (making profit), Legal responsibility (obeying the law), Ethical responsibility (doing what is right even when not legally required) and Philanthropic responsibility (actively contributing to society). Carroll argued that genuine corporate responsibility demands operating at all four levels — not camping at the base and calling it enough.
Figure 1 — Carroll's CSR Pyramid (1991) Applied to Sri Lanka Construction
| Level | What It Means | Sri Lanka Construction Reality |
|---|---|---|
| Philanthropic | Give back to society | ❌ Almost nonexistent |
| Ethical | Do what is right | ❌ Structurally absent |
| Legal | Follow the law | ⚠️ Selectively applied |
| Economic | Make profit | ✅ The only consistent priority |
Source: Adapted from Carroll (1991)
Video 1 — Corporate Social Responsibility and Business Ethics Explained
Source: YouTube
The Ethical Facade
Legge (1998) identified what she termed the ethical facade in HRM — organisations that publicly claim to practise ethical people management while systematically exploiting workers through their operational structures. Nike had a supplier code of conduct. Foxconn had HR policies. Boohoo had an ethical sourcing framework. None of these mechanisms protected the workers at the bottom of the chain.
In Sri Lanka's construction industry the same phenomenon is present. Main contractors issue safety policies, make welfare commitments in tender documents and speak of worker dignity in corporate presentations. Meanwhile, the subcontractors who actually employ the majority of workers operate entirely outside these stated values. A clean image is maintained for the main contractor at the expense of the exploited worker — and when problems occur, no responsibility is taken.
This cannot be attributed to poor management. It represents a fundamental design feature of the industry.
The Labour Supply Trap — Sri Lanka's Unique Ethical Failure
One of the most prevalent and deliberately overlooked ethical failures in Sri Lanka's construction sector is the extensive use of labour supply companies as a legal and moral buffer.
Rather than recruiting workers directly — which would trigger EPF, ETF and formal contract obligations — large construction contractors engage labour supply companies to provide the workforce. The supply company argues it is merely supplying people, not managing them. The main contractor argues the workers are not its employees. A perfectly designed arrangement arises in which the worker falls between both parties — with no EPF, no ETF, no insurance, no written contract and no legal recourse when injured, underpaid or dismissed.
Sri Lanka's EPF Act further compounds this problem. The law only requires employers to register for EPF if they employ more than fifteen workers. Labour supply companies and small subcontractors are fully aware of this threshold and deliberately maintain their workforce below fifteen to circumvent this legal requirement. In practice, some labour supply operations manage hundreds of workers — but deliberately split their workforce across multiple registered entities, each maintained below the fifteen worker threshold, to avoid EPF obligations entirely. The fact that the overwhelming majority of construction workers in Sri Lanka have no EPF, no ETF, no gratuity, no formal contracts and no insurance is not accidental. It is deliberate and systematic.
Sri Lanka's Labour Minister has confirmed that approximately five to six million workers in the country have no pension, no gratuity and no paid leave whatsoever (EconomyNext, 2023). The World Bank (2020) found that around 70% of Sri Lanka's entire workforce is informally employed — with informal workers facing inferior working conditions, no job security and significantly elevated risk of poverty. Construction workers sit at the very heart of this informal economy.
Carroll (1991) is precise on this point — ethical responsibility begins exactly where legal responsibility ends. The EPF threshold may exempt small employers from the law. It does not exempt the main contractor at the top of the chain from its moral obligation to ensure that every worker on its site — regardless of which company signed their cash envelope — has basic social protection.
Figure 2 — Sri Lanka Construction: The Supply Chain Trap
How responsibility disappears down the chain — and workers end up with nothing
Source: Adapted from Carroll (1991), ILO (2023) and World Bank (2020)
The Supply Chain Problem
Chan et al. (2013) demonstrated in their study of Apple and Foxconn that the most serious labour exploitation in global supply chains occurs at the point furthest from the brand — where oversight is weakest and accountability most diffuse. The brand profits. The supplier delivers. The worker suffers.
In Sri Lanka's construction sector this dynamic plays out on every major project. An international contractor secures a large government infrastructure contract. They subcontract civil works to a local contractor. The local contractor engages a labour supply company. That company provides day labourers paid in cash — no documentation, no contracts, no protection. When a worker is injured — the main contractor passes responsibility to the subcontractor, the subcontractor to the labour supplier, who has already moved to the next project.
This is not a glitch in the system. This is the system.
Nike used exactly this argument about its Pakistani suppliers in the 1990s. It did not work for them. It should not work for Sri Lanka's construction industry either.
The Business Case for Ethics
Nike lost over ten years of brand reputation. Boohoo lost £1 billion in market value in less than a week. Amazon removed their products from its platform. Investors filed a £100 million lawsuit. The consequences of ethical failure in supply chains are severe and long lasting (The Guardian, 2020).
Sri Lanka's construction sector is increasingly dependent on international investment and foreign contractor partnerships. European and Gulf clients have now formally embedded ethical supply chain standards into construction contracts. Organisations that cannot demonstrate EPF compliance, formal employment contracts and worker insurance across their entire supply chain will lose those contracts. Ethics and commercial survival are no longer separate conversations — they are one and the same.
A Fair Criticism
It is genuinely difficult to monitor ethical standards across a complex multi-tier construction supply chain. Sri Lanka's regulatory framework has real weaknesses — the fifteen worker EPF threshold is a legislative gap, not something contractors invented. Managing dozens of small subcontractors with limited resources is a real challenge.
However, Carroll (1991) argues that difficulty can never justify the abandonment of ethical responsibility. The fifteen worker EPF threshold may relieve small firms of their legal obligation. It does not relieve the main contractor of its moral obligation to every worker on its project. Building EPF compliance and insurance requirements into all subcontracting agreements costs far less than managing the reputational and financial consequences of a scandal.
Conclusion
Nike knew. Boohoo knew. And Sri Lanka's main contractors know exactly what conditions exist within their supply chains.
The hard hat might protect a worker from falling debris. But when that same worker cannot access EPF, insurance, a written contract or any recourse when injured — because their employer is a labour supply company contracted by a subcontractor hired by a main contractor that has never met them — the hard hat is protecting a person the system has already decided is disposable.
This is not poor management. It is a fundamental ethical failure — deliberately designed, consistently maintained and enabled by the organisations at the very top of the chain who profit from it while pointing to the EPF threshold as their conscience.
References
Armstrong, M. (2020) Armstrong's Handbook of Human Resource Management Practice. 15th edn. London: Kogan Page.
Carroll, A.B. (1991) 'The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders', Business Horizons, 34(4), pp. 39–48.
Chan, J., Pun, N. and Selden, M. (2013) 'The politics of global production: Apple, Foxconn and China's new working class', New Technology, Work and Employment, 28(2), pp. 100–115.
EconomyNext (2023) 'Sri Lanka must include informal sector workers in social security system: Minister', 15 March. Available at: https://economynext.com (Accessed: 5 April 2026).
ILO (2023) World Employment and Social Outlook: Trends 2023. Geneva: International Labour Organization.
Legge, K. (1998) 'Is HRM ethical? Can HRM be ethical?' in Parker, M. (ed.) Ethics and Organisations. London: Sage, pp. 150–172.
The Guardian (2020) 'More than £1bn wiped off Boohoo value as it investigates Leicester factory', 6 July. Available at: https://www.theguardian.com (Accessed: 5 April 2026).
World Bank (2020) Informality, Job Quality and Welfare in Sri Lanka. Washington DC: World Bank.
This is a very important post that clearly shows how workers in construction are often treated unfairly through the supply chain system. It reminds us that companies should care for all workers, not only direct employees. Do you think companies will change only if the law becomes stronger?
ReplyDeleteThank you for this thoughtful point. Stronger law is necessary but not sufficient on its own. Sri Lanka's existing labour legislation already provides a framework — the issue is enforcement, not absence of rules. Carroll (1991) makes this distinction clearly — ethical responsibility begins precisely where legal obligation ends. Companies that wait for the law to force them into decent behaviour have already failed the ethical test. The more powerful driver of change, in practice, is commercial pressure — European and Gulf clients are now embedding ethical supply chain requirements directly into contracts. When non-compliance costs contracts, behaviour changes faster than any legislative reform can achieve
DeleteVery powerful and thought-provoking post. I like how you clearly connected global supply chain failures with the realities in Sri Lanka’s construction sector, it really shows that this is a systemic issue, not isolated cases.
ReplyDeleteThe explanation of the labour supply chain structure and the EPF threshold loophole is especially impactful, as it highlights how responsibility becomes diluted and workers end up unprotected.
I agree that ethical responsibility should go beyond legal compliance, especially for main contractors who ultimately benefit from the entire supply chain.
In your opinion, what would be the most realistic policy or enforcement change that could start closing these gaps in Sri Lanka’s construction industry?
thank you for the question. The most realistic change would be making EPF compliance a mandatory pre-qualification requirement for all public sector construction contracts. Currently, main contractors win government projects without any obligation to demonstrate that workers throughout their supply chain have basic social protection. If EPF compliance across all subcontractors became a condition of tendering — not just a clause in the contract — the incentive structure changes immediately. Contractors would begin auditing their own supply chains because losing a government contract is far more costly than absorbing the compliance overhead.
DeleteThis section dismantles the “small contractor” excuse. difficulty doesn’t erase ethical duty. The EPF threshold may exempt small firms legally, but it doesn’t absolve main contractors morally. building EPF and insurance into contracts is cheaper than the reputational damage of a scandal. what looks like poor management is actually a designed ethical failure, with brands at the top using legal loopholes as a shield.actually good a blogspot.
ReplyDeleteThank you for this sharp observation. The loophole-as-shield dynamic is exactly what makes this so difficult to dismantle — it gives the main contractor plausible deniability while the worker carries all the risk. The shield only holds as long as clients and regulators accept the arrangement. When they stop accepting it, the economics change overnight.
Delete