Insights for Procure-to-Pay and Finance Leaders


Questioning the ethics in ‘ethical’ supply chains

Have some CSR initiatives become just a tool to palliate threats to public image?

A few weeks ago, I participated in a panel about supplier responsibility and discovered that my views may be somewhat different from the general perception.

When you think of CSR and supplier responsibility together, the meaning that naturally comes to mind is that our suppliers need to be held accountable, and that our procurement practices are fair, transparent, and open to local and minority businesses.

I don’t think anyone would disagree with this. Companies can easily find themselves with a public opinion problem if they don’t behave ethically. But I’m somewhat bothered by the possible motives for behaving politically correct. I get the sense that some CSR programs stem from non-altruistic motives. We’re very concerned about public opinion, and we focus on how a CSR program can support our brand. For example, “holding suppliers accountable” can work very favorably for companies that are not sincere in their pursuit to improve workers conditions.

Some companies seem to be more concerned with public opinion and profit maximization than working conditions in their supply chain. They may have CSR programs and make their first-tier suppliers aware of required business standards. But then they turn a blind eye to how that supplier operates in the second tier of the supply chain. Their programs are simply a defense against disasters like the tragic factory collapse at Rana Plaza in Bangladesh, consumer boycotts, and other threats that can tarnish their “virtuous” reputations.

In light of this, there are a couple of questions we should ask ourselves: Are we truly concerned about the welfare of our strategic suppliers? Do we truly care about the working conditions of their employees? Does our supplier have similar high standards for the behavior of their suppliers? Are we negotiating from a position of power in a zero-sum game? Do we care about the profitability of the suppliers business and our long term relationship? Do we understand how our business decisions impacts the viability of their business?

Candid answers to these questions will reveal the extent to which you are acting from a position of altruism, or using the most convenient, low-cost CSR program that you can muster to tip public opinion in your favor.

Moreover, a lot of what you’d do for supplier responsibility would actually never show up in a CSR report. The saying, “a true test of a man’s character is what he does when no one is watching” is fitting here. There is no gold star for ensuring that you mandate a supplier code of conduct or support suppliers with education and training around their CSR initiatives.

Such hidden activities may not improve your public image (at least directly), but they would convey genuine concern that would improve your relationships with suppliers and translate into a healthier overall business ecosystem.

Related reading:

Top supply chain disasters and how to avoid them (blog)

The two sides of supplier responsibility (blog)

Driving a Supplier Responsibility Agenda that Your CEO Would be Proud Of (on-demand webinar)