Negotiating the ethical maze

16 July 2003
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17 July 2003

London purchasers have been told their suppliers must adhere to employment standards set by the city. David Arminas looks at what this means for buyers

Not many purchasers enjoy questionnaires. Even fewer enjoy those that ask about social responsibility issues. Many purchasers still question whether their role can really affect the corporate social responsibility (CSR) of their company.

Yet CSR, including forced labour, freedom of association, health and safety, wages and working conditions are issues that purchasers must face, according to the CIPS policy on developing ethical purchasing practices.

CSR often benefits workers in low-paid jobs, such as some cleaning and catering services. As our news stories show, purchasers are increasingly being drawn into these issues.

London's mayor, Ken Livingstone, has told purchasers in the Greater London area that their suppliers on outsourced service contracts must adhere to employment standards set by the Greater London Authority, which he leads. Otherwise, the suppliers could face the possibility of not pre-qualifying for contracts.

The GLA has already successfully tested the process, with catering and services contracts let for the high-profile Trafalgar Square development, Livingstone says.

At the same time, the Commission for Racial Equality (CRE) has put purchasers on notice. Their guide for procurement should be welcomed by the profession. But purchasers must also accept that there is nowhere to hide from the wrath - often public - of the CRE if there appears to be any backsliding on social responsibility.

The key question for many purchasers is whether they are living up to their social responsibilities. This raises some issues for purchasers as they develop what they think is a worthwhile and profitable corporate social responsibility programme.

Social responsibilities can conflict, according to Andrew Wilson, director of the research and consultancy Ashridge Centre for Business and Society. "It is one thing to establish a CSR policy, another thing to foresee its consequences," he says.

The GLA's policies on employment rights and its desire eventually to cascade these down their supply chain is commendable, notes Wilson. But it could reduce the number of suppliers that meet the criteria and most of these could be local suppliers. "This would then affect another policy to buy local and support the community. It's about getting the balance right," he says.

Child labour in a supply chain is the CSR nightmare of most purchasers. In some countries, this is normal. The issues may be about what conditions children work under, rather than whether they should work at all. If by withdrawing a contract a supplier goes out of business, the children may be forced to beg on the streets.

Purchasers will face the issue of monitoring a policy. This is where exceptional client-supplier relations are required. To what degree do purchasers take it as an article of faith that their supplier in Britain is not using a European supplier whose own Asian supplier has a factory employing child labour?

This raises the spectre of purchasers creating their own CSR "cops" to be sent on international raiding missions and fact-finding tours. These can be expensive and eat up any savings generated by engaging the suppliers being monitored.

What will be needed is more transparency down the supply chain. More information about the companies involved will have to be shared among the various parties.

CSR policies are not the sole responsibility of procurement, of course. As human resources departments are likely to be involved, purchasers and HR professionals should be indivisible in their approach to CSR policy development. In this respect, purchasers should take note of the recent study on how well HR and procurement get along. Much headway has been made over the past five years with more co-operation in buying services. But there is still room for improvement.

There is scepticism that CSR is just a public-relations ploy. Wilson suggests that some companies produce CSR reports as a reactive measure, taking a defensive position against bad public relations.

This may not give enough credit to public authorities and private-sector companies that lead the way with CSR policies.

As CSR becomes more important, it will have to be purchasers who define its priorities. Compromises will have to be made, mistakes are inevitable and lessons will be learnt.

The real test of CSR effectiveness will be in how companies react to problems such as child labour in their supply chain, a third-tier supplier polluting the environment or employees on less than a legal-level income.

SMjul2003

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