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Putting Business Ethics on the Frontline - Realities Behind the Ethical Supply Chain

In this article, Gerard Chick uncovers the realities behind the ethical supply chain and why it is time for a change of approach to ethical supply.

In the aftermath of so many recent corporate scandals, managers have once again turned their attention to questions of ethics management. Through my procurement outsourcing and consulting work, I have found that many businesses misconceive what business ethics in the supply chain is really about. For example, paying lip service to published ethical codes is common, which undermines a business’s operational decisions and commitments in this area. Moreover, some still see ethical purchasing and supply as the preserve of left-leaning collectives and small traders, rather than the domain of big brands.

And yet ethical trading is becoming more mainstream as businesses consider the benefits of ensuring the positive ethical profile of each link in their supply chain. Some companies regard ethical trading as a way of distinguishing themselves from the competition and tapping into new markets and ideas, while others recognise distinct financial rewards from factors as simple as raising employee morale or customer loyalty or indeed reducing their exposure to risk.

By establishing a common ethical framework for your organisation’s supply chain you can proactively determine the ethical behaviour of you, your employees, and your suppliers via clear leadership and conscious management of the organisation’s culture.

One question about ethics that immediately jumps out in supply chains is: ethical to whom? Are there common ethical principles, or do values and ethical behaviour vary across different cultures? How much flexibility do we need to factor into our attitude to acceptable behaviour in supply chains, such as taking kickbacks? How should we look at corruption from the supply and demand side in terms of both ‘those who make’ and ‘those who demand and accept’ corrupt payments? What are the differences here between established and emerging economies?

It’s fair to say that the ethical focus of purchasing and procurement managers is likely to vary in different countries in the same way that it would with other professional groups such as engineers looking at the environmental impact of products and processes they design and manage.

For some time we have seen the limited and somewhat ‘patchy’ success of ethical sourcing in many sectors, observed recently amongst UK food and clothing retailers. Supply chains are already highly globalised, but as innovation may push increased accountability and responsibility out to suppliers across the globe the need to make a clear ethical code part of those business relationships is more critical than ever.

Moreover, pressure for ethical improvement from end-consumers, such as increasing interest in fair trade products, can also be pushed back up the supply chain, putting very public pressure on brands to demonstrate their societal and social commitment across the supply chain.

There are several key factors to the success of ethical supply. These include: raising awareness so that purchasers can make ethical choices; giving consideration to how far along the supply chain ethical responsibility extends; educating consumers and producers on ethical issues; identifying key supply chains most at risk and regulation and policing of supply chains to ensure compliance.

Changing the way we approach ethical supply will help to improve the systemic nature of sustainability and innovation. Today, many stakeholders such as consumers, regulators and pressure groups can influence how firms innovate in response to the sustainability agenda. Senior management commitment and cultural change are enablers too in developing the adoption of ethical and sustainable supply practices.