‘Be ethical or be targeted’ warning

9 May 2001
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10 May 2001 | Robin Parker

Companies will increasingly be forced to adopt a more transparent supply chain to prove they have an ethical trading policy if they wish to avoid being targeted by activists.

Clashes between police and angry crowds in Oxford Street in London last week highlighted the growing importance of ethical credentials, Peter Smith, the head of the working group that developed CIPS’s recently published ethical trading policy, told SM.

“Any company in the public eye should now think very hard about putting an ethical supply chain in place,” said Smith, a consultant at Shreeveport Management Consultancy and a former group purchasing director at the National Westminster Bank.

A spokesman for the Co-operative Bank agreed. “Companies have to be transparent,” he said. “There is a widespread feeling among the public of powerlessness against multinationals and a feeling that they’re secretive.”

But transparency is not cheap. In the first cost benefit analysis of its ethical vetting system, the bank found that turning away business on ethical and ecological grounds cost over £2 million last year. The bank declined 105 of the 270 referrals to its vetting group on ethical grounds.

“We expect our suppliers to have the same ethics as we do, and we do as rigorous a check on them as we would on potential business clients,” a spokesman told SM. “Because of our honest approach, we find suppliers want to be associated with us.”

Renewable-energy premiums forced the bank to part with over £500,000 in 2000, but the results are encouraging. A target to reduce carbon dioxide emissions by 60 per cent by 2010, by purchasing electricity from the Renewable Energy Company, has already been met.

According to the cost benefit analysis, 18 per cent of the bank’s £96.3 million pre-tax profit is due to its ethical and ecological policies, making it a more socially responsible company, he added.

Social responsibility is increasingly an issue for investors. The Financial Times and the Stock Exchange are to launch a list of socially responsible corporations. The FTSE4Good index aims to promote and improve ethical investment, according to the FT.

Initial consultations for setting up the index discovered that less than half of the around 700 firms in the All-Share index would qualify.


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