Dealing with supplier ethics

In my recent post about supplier ethics, I wrote about how suppliers whose ethics are not in alignment with those of their customers pose a real supply chain risk. This risk can come in the form of fraudulent products, unethical treatment of the workforce, and generally breaking the law. Any way you look at it, ethics problems can pose health, safety and legal problems. Dealing with supplier ethics, however, is not always straightforward.

Some companies create a procurement code of ethics to address these problems. One such company is the internet security firm, Symantec. Not only have they created and published a Global Supply Chain Manufacturing and Fulfillment Code of Conduct, but have committed to auditing all of its direct suppliers in 2013 to determine compliance with this code of ethics. Symantec clearly states that it will discontinue doing business with any supplier found not in compliance with the Code or who are in violation of any laws.

A number of purchasing organizations have created codes of ethics. Examples of ethics codes include big corporations such as Apple, IBM, Walmart, EADS and HP. An example of a non-profit organization is the NAEP (National Association of Education Procurement).

Creating supplier codes of conduct are a first and essential step. Enforcing these codes is a challenge. While some large companies perform audits to ensure compliance, not all do. Also, the behavior of sub-tier suppliers poses additional challenges. Subtier suppliers are only indirectly subject to these codes. Will sub-tier suppliers who violate these codes cause their customers who are subject to them to be terminated by their customers? It’s a tricky problem, as unknown sub-tier suppliers or criminals can often be the root cause of fraud, abuse and breaking laws.

Addressing supplier ethics is more than the right thing to do. It’s painkiller, not just a vitamin.

-Sherry R. Gordon

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