18 January 2001
Ensuring your suppliers behave in an ethical manner has never been more vital for procurement professionals. David Arminas reports
The ethical winds of change are blowing through buying and the announcement of a new CIPS policy on the subject shows procurement professionals that they ignore the subject at their peril.
It could be seen as self-serving that GoodCorporation.com, an Internet site accrediting company, believes 80 of the FTSE 100 companies will produce social responsibility reports within 10 years.
But a business leader need not look far to find ignorance of a supplier's activities damaging a corporation's image. Nike and Gap recently faced a media blitz over accusations that Asian suppliers were using child labour. Brand image is the name of the game and procurement professionals are squarely in the front line of protecting it.
So how can a purchaser know about all a supplier's dealings? And will the cost of keeping up to date be worth it? GoodCorporation.com, for example, begins its annual subscriptions at £2,000.
One way is to seek suppliers that are signed up to well-known accreditation companies. But Peter Smith, chairman of the CIPS management board and leader of CIPS's business ethics group, is cautious. He says purchasers should find out who polices verification for such seals of approval, especially if the accreditor is profit-making.
"I would feel more comfortable if it were a not-for-profit organisation," said Smith, former group purchasing director at NatWest. "If I were a supplier, I wouldn't spend the money just for a tick and a seal of approval. The fee should bring some sound advice."
One solution is for purchasers to find suppliers that are accredited by long-standing companies. But all those supplying ethical or social responsibility qualifications are pioneers, said Rosey Hurst, director of Impactt, a social and ethical management consultancy. She argues that it's hard to judge the quality of independent verification standards because few of the firms have been around more than two years.
Nonetheless, purchasers will have to overcome this, especially when sourcing overseas. Globalisation makes the need for social responsibility credentials more pressing.
Procurement professionals using a UK supplier that sources from overseas should be aware that values differ from country to country, Hurst said. Low wages, lesser health and safety standards and long working hours are examples of where a UK supplier could fall foul of its major client's wishes to present a squeaky clean supply chain image.
For the retail trade the problem is acute, according to Dan Rees, manager of the secretariat for the UK-based Ethical Trading Initiative. The ETI attempts to identify problem companies and change their conditions, explains Rees. He sees the ETI as an example of how globalisation can benefit developing economies. Nonetheless, Rees says ETI's work is still in the experimental stage even two years after it was founded.
Trusting the verification process remains a problem for purchasers as well as companies such as GoodCorporation.com. "It's key to our credibility," said the firm's managing director, Leo Martin. "If verification is no good, we have no product."
Martin has signed up KPMG and will be using accredited social auditors from Bureau Veritas and Intertek.
As social responsibility issues come to the fore, purchasers should start to use companies offering ethical behaviour services and get to know who does the verification and what criteria are used.
The real issue for procurement professionals is not the price of building a roster of socially accountable suppliers, but how much it will cost to maintain brand image. It's a boardroom issue and senior management will want to see those responsible for the supply chain being proactive about it.