12 Ethical Questions to Ask in Supplier Pre-Approval

In procurement, ethical practice is the key to a positive organisational image. Knowing the right ethical questions to ask can make a real difference.

phloxii/Shutterstock.com

Increasingly the corporate world is focusing on social issues in supply chains such as slavery, forced labour and human trafficking, typically referred to as “modern slavery”. Procurement professionals have an important role to play, by sourcing in a manner that enables and rewards suppliers for good ethical practices.

Local governments and consumers are increasingly aware of such issues and are supporting, if not demanding, that businesses act to implement ethical standards in their procurement processes. Organisations will suffer reputational damage if they are found to be sourcing from suppliers using exploitative labour.

Companies may also face legal sanctions if suppliers are found to be involved in corruption or bribery. Organisations naturally want to avoid negative impact.

The issue of modern slavery has highlighted issues in countries where:

• Workers have fewer or no protections.
• There are high levels of poverty.
• There is widespread use of migrant workers.
• Because of the industry and use of raw materials, there are high risks.
• The supply chain is labour intensive, because the end product is cheap. 

Codes of Conduct

Many companies have a Code of Conduct. This is a great way to start out, but can seem ‘non-actionable’ when on its own. So instead, a company can also introduce initiatives such as:

• Collecting and providing all parties with the information they need to plan more effectively (for instance by sharing audit reports).
• Creating processes which ensure efficient communications and formalised, streamlined buying and production processes.
• Empowering procurement professionals to reward good practice and leadership amongst suppliers.
• Encouraging buyers and suppliers to collaborate with organisations who have expertise in addressing systematic problems within the supply chain.
• Enable the supplier to collaborate with others who are purchasing from the same supplier.

Your Role as a Procurement Professional

Typically, a procurement organisation will establish some firm processes to ensure the ethical practices. In addition, you can, as a procurement professional, also make yourself aware of some of the most essential ethical questions that you can ask during a sourcing activity, within the supplier pre-approval part of the process.

I would recommend that you, as part of your pre-approval process, get inspired to use some of the following ethical questions and observations in your process:

You want the supplier to have good labour standards, a positive impact in the community, and actively work to improve standards.

You should be looking for:

• Staff turnover at production sites
• Good human resource management systems
• Good labour standards audit results
• Sharing of good practice with other suppliers
• Willingness to discuss issues such as pressures on working hours and pay
• Retrospective comparison of planned vs. actual timings and volume outputs, measured against overtime worked at site

You want the supplier to demonstrate improved working conditions at all times.

You should be looking for:

• Sites with initiatives such as active trade union representation
• An existing recognition agreement and collective bargaining agreement
• Number of workers with long term agreements
• Analysis of working hours

You want the supplier to demonstrate stable relationships with own suppliers and subcontractors.

You should be looking for:

• Average length of relationship with individual production sites
• The dialogue they have with their suppliers/subcontractors on labour conditions