Elaine reviews the procurement section of the Ethical Corporation’s latest research publication on How to embed Corporate Responsibility across different parts of your Company and how issues of sustainability and ethics are embedded in the supply chain.
We have already covered embedding CSR in the Finance Function… this time I will take a look at the procurement section of the Ethical Corporation’s latest research publication on How to embed Corporate Responsibility across different parts of your Company. This is a 100 page report published at end September 2009. It provides an analysis and case studies covering 5 organizational functions: Human Resources, Finance and Accounting, Communications, Procurement and Logistics and Operations. This time, being an ex Supply Chain executive (8 years in Supply Chain function with P&Gin Europe, including several years of Purchasing), I will cover csr in the buying office.
The Ethical Corporation guide highlights examples of how companies address CR challenges in supply chain activities and procurement operations, and how sustainability and ethics are embedded in the supply chain, with reference to codes of conduct and even data sharing and collaboration with competitors (anti-trust regulators permitting!). The section is full of fascinating case studues from HP (target setting in the supply chain), Green and Black’s (engaging NGO’s to develop supply chains), Innocent drinks (contract terms) ,Sedex (supply chain goals) and Pepsico (cooperating with competitors). The report lists some conclusions – guidelines which all buyers should heed – i cannot list them all (you know why!) , but the first one is be transparent about your suppliers. That’s an interesting point, not something the average buyer thinks about, i suspect. Certainly one which i never considered when i was buying tens of millions of $ of raw materials for P&G products many moons ago.
Think about it. You are the buyer for your Company. Everyone knows who your suppliers are. How risky is transparency ? It’s less risky if you manage it. What if your suppliers are exploiting children in their supply chain? What if they are abusing human rights? What if they are releasing tons of contaminants into a local river ? What if they are involved in bribery and corrupt business dealings ? What if they have been involved in discriminatory behavior? What if they are using illegal raw materials, or operating with unsafe practices in their plant? I could list hundreds of cases in which corporations have been penalised or incurred cost penalties because of the actions of their suppliers – Mattel and Hasbro due to illegal practices by Chines toy manufacturers, Nestle’s issues in sourcing milk from Grace Mugabe at the expense of local farmers, issues for Primark on child labor in the supply chain and many more. What is the risk that these issues come back to haunt you, because this is part of your responsibility for your supply chain. How do you safeguard against this risk? It’s one thing to have such issues in your supply chain, it’s another if you never even talked to you suppliers, made your expectations of ethical business clear, or inspected them in some way.
As the buyer for your Company, what questions do you ask of your suppliers ? How do you manage the issues that your suppliers can potentially create for your business? This is part of buying CSR due diligence. Transparency is decidedly less risky if you have a policy and practice designed to identify and reduce risk.
This question is not new for the apparel industry, and Levi Strauss was the first apparel brand to establish a supply chain sourcing code and publicly disclose all its suppliers. Since then, many other apparel brands have followed, but other industries such as toys, electronics, computer hardware etc are slow to follow. CSR in the supply chain is a frequent section in CSR reports. Gone are the days when corporations can plead ignorance of what is happening in their supply chains, and gone are the days when stakeholders accept “We didn’t know” as a viable response. So if you are a Purchasing Manager, and you aren’t aware of the risks in your supply chain, my advice is do something about them before they do something about you!
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