There’s never been a better time to engage in ethical trading within your supply chain if you want to realise your commercial objectives, says Paul Williams.
As someone who has worked under the pressures of procurement at both a retailer and a supplier, I understand the rationale for having objectives and key performance indicators linked to cost, quality and service levels.
It’s only when I moved into an ethical trading role that I realised the important link between improving workers’ lives in our supply chain and supporting my procurement colleagues in not just hitting, but exceeding, their commercial targets.
It is widely acknowledged that purchasing practices, which can include aggressive price negotiations, inaccurate forecasts, late orders and last-minute changes to specifications, put suppliers under pressure and can directly influence working conditions.
The business case for understanding the challenges faced by workers in supply chains has been well communicated, such as in the Ethical Trading Initiative’s Guide to buying responsibly, which highlights that by improving purchasing practices, organisations can avoid poor quality products, delayed deliveries, additional costs or industrial action affecting supply.
Improving purchasing practices is not simply about having a policy or undertaking a modern slavery training course. It’s about truly embedding ethical trading standards throughout the procurement lifecycle and within the business.
At the various forums, outreach events and meetings I attend in my current role with customers, suppliers or industry professionals, there is a great deal of knowledge and expertise in the room and a clear desire to make long-term improvement to supply chains. But there is something vital missing – their commercial personnel.
Without the procurement team in the room with the leverage and power to affect real change, we risk creating an ‘echo chamber’, where responsible sourcing personnel continue to talk about the need to make positive change for workers in supply chains, without it filtering into purchasing practices that truly make a difference.
Within my own organisation, we have worked hard to address this. By working with the buyers we have ensured supplier meetings and visits – that historically would have only discussed market conditions, service, quality and cost – now include human rights and supply chain due diligence. This benefits us as it builds our own understanding of supply chains and also helps to grow knowledge, confidence and transparency from our suppliers.
Commercial teams engaged in understanding how workers’ lives can be improved could uncover small improvements, such as a request for better facilities in on-site dormitories. In turn, by implementing these it could also mean workers are more likely to stay with the business for longer, lowering the costs of recruitment and perhaps decreasing the cost of the finished product.
Aside from the moral and legal obligations of workers in your supply chain having basic freedoms and standards when they go to work – which sadly too many workers today still don’t enjoy – embedding ethical trading and improving purchasing practices can positively impact your ability to hit – and hopefully exceed – your commercial targets.
My top recommendations are:
1. Take ownership of your procurement area – not only in commercial negotiations, but also when understanding all areas of your supply chain, so you’re at least aware of the approach of each of your suppliers with regards to ethical trading. Are they genuinely engaged or is it just ‘lip service’?
2. Consider the impact your purchasing practices may be having: ask yourself how the way you’re tendering this piece of business will potentially affect workers further down the supply chain. If you’re not sure, ask your supplier this question until you get the reassurances you’re looking for. If they don’t have the answers, find out why.
3. Trial innovative ways of hitting both your commercial KPIs and your ethical ones – such as seeing if having longer-term supply contracts can guarantee greater financial security to workers in the supply chain.
Paul Williams is head of ethical trading & human rights at international food and drink group Princes.