Ethical procurement is no longer just a matter of trust between the buyer and supplier in the supply chain. There are a number of factors that must be considered. Of course, purchasing ethics plays a part in both global and local procurement but it can be more of an issue internationally. A willing or previously undiscovered breach in ethics along the supply chain can be a major disadvantage, creating negative press coverage as well as the ethical implications themselves.
The following factors need to be considered:
Trust is any business is a key factor – when a purchase order is sent by a buyer they trust the seller will despatch the goods as confirmed for the price agreed. This element of trust is often formalised into a form of contract or agreement. Yet there is also the level of ethical trust that is not always formalised. Ethics are often a hard thing to discuss between companies. Internationally there can cultural and legal differences, which can impact on the ethical beliefs of other countries. Unless these matters are discussed or witnessed they may never be highlighted as an issue. There is often an assumption that all business is carried out ‘above board’ and is perfectly legal but this can sometimes not be the case.
Forced Labour and Abuse
When purchasing globally over locally the buying company needs to be aware that not all countries have the strict labour laws of the UK and Europe. In some developing nations corruption is still present and the abuse of labour occurs. Being involved in these practices, even through indirect association, can greatly disadvantage the company reputation, company brand and the any associated companies within the supply chain. Labour abuse can happen in many forms such as:
- Slave Labour– where people are forced to work for little or no payment in return
- Forced Labour– where people are forced to work to under the threat of violence or abuse to themselves or their families
- Child Labour– under age children are made to work long hours for little or no pay
- Sweat Shops and Abuse– people are made to work under extreme, dangerous and/or poor conditions and/or long hours with little pay
- Exploitation– workers are exploited because of their situation such as ethnicity or their current environment i.e. war zone.
The only way to avoid purchasing from a supplier who is guilty of this kind of abuse is to thoroughly investigate the company and their supply chain. This investigation can include such simple steps as: visiting the supplier premises and talking to some of their employees as well as asking for supplier and customer references. Of course, this kind of investigation becomes a lot more complicated for a global supplier over a local one.
Recently CNN reported of the use of forced monkey labour in Thailand. Monkeys were being used to collet coconuts for the production of coconut milk. When this was uncovered it lead to the US chain of Costco stores dropping the supplier brand from their stores. This story highlighted the importance of investigating suppliers along the whole supply chain.
Systems such as ‘Fairtrade’ are in place and can help ensure the global suppliers and their workers are being treated fairly. So looking for a Fairtrade certified supplier can help alleviate some of the ethical risk. The Fairtrade Foundation state fairtrade is: “..about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world.” This is something all companies should be aiming for within their global supply chains.
Corporative Social Responsibility (CSR) is an extremely important topic for all companies and part of CSR is environmental sustainability. Ethically companies need to be aware of the impact their company is having on the environment – not just their own company but their supply chain too. If purchasing locally within the UK you can check a supplier’s environmental policy and many companies have third party accreditations, such as ISO 14001, for environmental management. Purchasing from a global supplier it can be increasingly difficult to check and monitor their environmental compliance. See the Sustain Chain from the Institute of Supply Chain Management for more information.
Remember: Any profit through exploitation is always a loss.