Ethical business has to be second nature

Procurement teams are uniquely placed to safeguard their organisations' reputations – and the time for action is now, says Malcolm Harrison, group CEO, CIPS

A Happy New Year to you all. As we look ahead to 2019 and the challenges that procurement and supply professionals may face, the need to be transparent and ethical seems to be a running thread through everything we do; whether that be Brexit conversations with suppliers, addressing modern slavery or risk management strategies.

When I talk about the ethics agenda, I mean it in the broadest sense to include modern slavery and sustainability, but more than anything transparency in everything we do – ethics+ if you like. Ethics needs to be incorporated into all day-to-day business decisions, almost without thinking. It has become second nature to consider the implications of holding personal data or blocking fire doors, so how do you ensure that ethics has the same impact? 

In a world where everything is connected, understanding the impact of our sourcing and buying decisions has never been so important. Ethical and responsible procurement is now an economic and reputational imperative, and in some contexts a legal requirement too. The opportunity is there for the taking for procurement and supply to show the rest of the business that these issues sit firmly with us – and that we are not just about savings. Too often issues such as sustainability fall through the cracks, or they are the political hot potato that teams pass around. Procurement and supply teams need to grab these opportunities with both hands, accept the responsibilities and own this space. 

Working in partnership with suppliers we can demand better governance of procurement with the goal of creating an environment intolerant to criminal conduct, such as any form of modern slavery, corruption or bribery, and minimising or eradicating harmful environmental and social impacts. We must ensure that labour conditions for workers in our supply chains are improved and human rights are safe-guarded. The bigger picture is to ensure a better result for all, including increased business returns for the buyers, suppliers and workers.

There is no reason why commercial and sustainability goals can’t go hand-in-hand. In fact, tying the initiatives back to commercial benefits often helps with the case for change. Technology has improved so much over the past 20+ years, costs have often reduced and the right option from a sustainability perspective is often now clearly a saving not a cost in the short term and the long term.

A report this month from Carbon Brief saw an increase in the use of renewable energy sources, making up a third of all energy production. They also report the lowest use of electricity per capita since 1994. A lot of this is put down to energy-efficient lighting and appliances, and better labelling and information to consumers. A and A+ rated appliances can use up to 50% less electricity than older B or C rated appliances. The roll-out of smart meters has given consumers much more visibility of this and therefore making the upgrade to more efficient appliances a much easier investment decision.

Not everything can be linked back to an obvious ROI. The overall winner of the CIPS Australasia Awards 2018 was furniture supplier Winya, whose bold mission is to design Australia’s most socially inclusive business. Winya believes 50% of the company’s growth –and new contracts it has won – is a direct result of its socially responsible ethos.

Reputation has always been important and now there is a growing number of people who feel so strongly about ethical issues that they will choose to buy from, work for or invest in those organisations with the right reputation.

Whilst change has so far not been rapid, the expectations from consumers and investors are growing and whilst incremental changes can make a difference, this may not be fast enough in all situations. The biggest obstacle is often internal resistance; but resistance falls when the benefits or penalties are real. The time for action is now. Improving supply chains is exactly what good procurement and supply professionals do and the cost of doing nothing is clear when your organisation is not the first choice of customers.

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