The COVID wave continues to affect business and the lives of ordinary people, but it has also become an opportunity for companies and citizens to think about what’s important in private and commercial life. As the priorities for business and therefore procurement and supply management, are increasingly being set by the big issues in our society, we are likely to see more significant changes in how we live, work and do business, and the imperative to focus on ethics and sustainability.
Consumers are tightening their purse strings and supply chains are striving to adapt to new demands, so you could be forgiven for thinking that being ethical is the last thing on everyone’s minds. In fact research conducted by CIPS earlier in the year found that as the COVID health crisis hit the UK, 15% of businesses turned away from their sustainability goals as other seemingly more important factors came into view. Supermarkets also reneged on their commitment to reduce plastic bag usage as fears over the pathogen’s pathway had them turning to old habits for convenience and safety.
In recent years as well as during the pandemic, consumers are better informed and more demanding. As an Accenture survey from May discovered, shoppers are becoming ever more conscious about their purchases in an attempt to reduce waste, shop more ethically, more locally and choose sustainable goods. A 2018 survey by the same consultancy found that consumers preferred to buy from companies whose purchasing strategies were driven by the company’s ethical principles. So it’s safe to say that not only are ethics and sustainability back on the agenda they have never truly been forgotten and will only increase in importance.
Ethical procurement is not just about sustainability and the responsible use of scarce resources. It is the treatment of suppliers during the life of the contract and developing strong, open relationships, even offering support during difficult times. That includes paying responsibly. The limited success of the UK Government’s Prompt Payment Code, to encourage fairer payment practices from business, highlights the need for tougher measures, such as fines for larger corporates and more scrutiny of the practices of those signed up to the Code. The decision by UK Government to deny those businesses without a record of responsible payment opportunities to supply the public sector, is certainly a move in the right direction.
Some companies have been more forward-thinking, and more responsible, than others. The supermarket Morrisons paid its SME suppliers early during the pandemic and even redefined its small suppliers, albeit temporarily, as those with a turnover up to £1million rather than £100,000 a year. This improved cash-flow helped SMEs survive and kept the supermarket’s shelves stocked.
Unchecked fraud and corruption in supply chains leeches away billons each year around the world, and takes away much-needed support from the farmers and small businesses that rely on fair treatment for their existence and for the health of local economies. Procurement and supply chain managers are at the forefront of interrogating every tier in their supply chain, so should have full transparency and a macro view of what is going on.
Ethical behaviour should be paramount in every procurement and business decision, so should we now be moving beyond meeting basic expectations towards making a stronger positive impact? Social value in procurement can change people’s lives and many public sector bodies have already embedded this requirement into their procurement frameworks. An example of social value could be choosing a local supplier from an ethnic minority group or supporting local community initiatives. We need the deeper understanding of how taking one decision in one part of the supply chain, has an impact in another area and how the social effects should be factored into procurement decisions.
We must eradicate the scourge of modern slavery from global supply chains. Accountability and responsibility for an exposed supply chain sits with the procurement team. Trained and qualified professionals are best placed to take the initiative; protecting not only individual lives but the reputation of organisations. With full transparency of their supply chains they can expose this terrible practice. Only a few months ago in Leicester, the fashion retailer Boohoo was accused of exploitation. Allegedly workers were paid below the UK minimum wage, working in unsafe conditions and were forced to come to work when sick. Modern slavery is widespread, it affects almost all sectors and general awareness is not where it must be with some big retailers still caught out.
Effective and efficient supply chains are the core of all successful companies’ operations, if they fail as a result of unethical practice, a company fails. With a more positive business environment emerging, this issue sits in the procurement space and that’s why CEOs are right to place their trust in well-qualified procurement and supply chain managers to do the right thing.
by Malcolm Harrison, Group CEO, CIPS