With the recent revelation about VW installing software to falsify diesel emissions test data in the US, criminal prosecutions for its executives have already been mooted.
Putting aside the obvious damage that’s already been done to the company’s reputation and trust, there are many other issues that both senior executives and those in other parts of the business need to address to ensure there is not a repeat. Root-cause analysis is essential. A sample of the questions I have – all of which concern supply chain - are:
• Who came up with the idea for the device? I doubt this was in VW annual business/procurement plan
• Where did the device come from? Was it made or bought?
• How was the device procured?
• Did those involved follow the procurement process or circumvent it?
• Did the paperwork describe the true purpose of the device?
It is crucial these are investigated thoroughly since it will help determine the number and seniority of those potentially involved in the software manipulation and highlight areas needed for change.
Another key question is, how likely is it that people within the organisation were aware of what was going on? And if they were aware, why was it not reported? There are many scenarios but the most common one we encounter in similar situations is that paperwork has been falsified to hide what is going on. In such cases procurement departments are processing paperwork that they don’t know is false. In other words, people are given an instruction to place orders and get on with it.
I have spoken to a number of people globally who were aware of ethical issues but felt unable to report them for fear of losing their jobs, or worse. Is there an ethical culture within the organisation where people are encouraged to report concerns? In this case, the procurement and supply chain departments are a part of the organisation’s ethics programme.
I’m not suggesting the role of procurement professionals is to investigate concerns (nor should I, they are busy enough already) but trained professionals who are aware of how the process should work could be in a good position to identify whether something seems amiss. If so, they need to feel able to report concerns to risk, ethics or fraud/compliance departments who can investigate if required.
It's not just about having a company ethics policy or programme in place, that policy needs top-level sponsorship and support. Taking such an approach will help to address ethical issues promptly before they can become a much bigger problem.
☛ Paul Guile is managing partner at Gulf Vigilance based in the Middle East and head of CIPS Global Procurement Fraud Advisory Services