Many companies require their suppliers to accept a code of conduct addressing ethical behavior, human rights and environmental sustainability. For business leaders, the challenge is ensuring the words are put into action.
— By Donna Benjamin
The Supplier Code of Conduct lays out the requirements for responsible sourcing and has become an important document in a number of companies. The purpose of the code is to have suppliers, many in global supply chains, commit to upholding the company’s standards for conducting business in an ethical manner. The typical Supplier Code of Conduct includes principles like always conducting business ethically and lawfully, protecting human rights, using environmentally sound practices, protecting employee health and safety, adhering to governmental regulations and laws, ensuring the supplier’s suppliers also uphold the standards, and not tolerating discrimination.
Suppliers accepting the Supplier Code of Conduct can be required to disclose information about their processes, including origin of raw materials and environmental performance indications. Though this sounds good, how does company management know for a fact their supply chain is meeting ethical expectations?
There have been a number of situations where, despite the supplier commitments, supply chains contained suppliers who were not acting ethically or protecting the environment. Discovering a supplier is using child labor or dumping hazardous waste in waterways can hurt a company’s reputation for years to come because it makes senior management at corporate headquarters appear to be out of touch with the truth – speaking empty words for the benefit of the public.
There are many cases of company leaders being surprised by public complaints about suppliers down the supply chain. It is embarrassing for management to realize their public commitments to ethics, human rights, and environmental protection are not upheld in practice by suppliers. Supply chain activities directly reflect on the purchaser. The following example of the Hershey Company is not to single out the company but to demonstrate the complexity of maintainable ethical and sustainable sourcing in the far corners of the world.
One of the challenges company leaders face is finding a way to identify supplier practices that violate their Supplier Code of Conduct.
The Hershey Company found itself embroiled in a controversy involving cocoa farmers. As one of the largest producers of chocolate and candy products in the world, the company has strived to be a good global citizen through its social, environmental and philanthropic programs. Despite the effort, it found itself accused of not doing enough to stop labor exploitation on a cocoa plantation in West Africa. This demonstrates the fact that the actions of suppliers, including small suppliers, can damage a company’s reputation and lead to people questioning whether the senior leaders are sincere about supplier environmental and social responsibilities.
The company’s social responsibility strategy addresses the integrity of supply which includes ingredients and the “people and processes used to grow, process, and acquire those ingredients (the entire supply chain)." The environmental strategies addressed sustainable sourcing, among other factors. Sustainable palm oil sources in Africa is a particularly controversial topic because of the impact on ecosystems, as is the sourcing of cocoa. The need for growing increasing amounts of cocoa led to suppliers using child labor, slavery and human trafficking to ensure enough labor is available. Hershey committed to reducing the use of this type of labor, invested in the education of small famers, and launched a number of initiatives for sustainable and ethical farming practices, including the ending of deforestation.
Staying in Touch With All Suppliers
Hershey is just one example of a company that stepped up to the challenge and implemented new procedures to ensure their supply chain was always striving to improve. One of the challenges company leaders face is finding a way to identify supplier practices that violate their Supplier Code of Conduct.
An example is the energy company Total, which operates in 130 countries and expects its suppliers to adhere to principles of human rights, corporate social responsibility, and environmental protection. To keep in touch with what is really going on in its supply chain, the company provides suppliers with a single point of contact within their organization. Suppliers undergo regular assessments, like human rights risk analysis, self-assessments and audits. The supplier selection process includes assessing criteria such as resource preservation, waste management and respect for human rights in the workplace.
Another approach is to partner with an organization like the United Nations Foundation. The UN Foundation, along with the Bill & Linda Gates Foundation, Merck for Mothers, and the UK’s Department for International Development launched an initiative – Private Sector Action for Workplace Women’s Health and Empowerment – to work with companies employing millions of women in their global supply chains. The initiative is focused on the health and well-being of women employees. Global companies like Columbian female, Ethical Apparel Africa, Nordstrom, Inditex, Unilever and others have committed to improving the health and well-being of women in their supply chains.
A company commitment in the UN Foundation program means the business will: Ensure women have access to information and services for things like hygiene products, cancer screenings and contraception; offer protection from harassment and violence; provide harassment training to workers and supervisors; promote economic empowerment through skills development, unpaid care support and fair remuneration; and support other UN Foundation elements.
One of the important requirements, per the initiative’s commitment form, is that the commitment must be “measurable, timebound, include specific countries, and list specific interventions.” The actions must be tied to sourcing decisions. For example, Nordstrom committed to, by 2023, sourcing 70 percent of all the company’s products from factories that support women’s empowerment, reaching 75,000 workers in countries that include China, Vietnam, Bangladesh, and India. Specificity is important.
There are two main components to developing and maintaining an ethical supply chain.
First, a company has to put a system in place for identifying deficiencies throughout the supply chain without regard for the size of the supplier. Even the smallest company in an undeveloped country is a major risk for human rights and environmental violations.
Second, there is a need to integrate initiatives into the supply chain to protect human rights, the environment, and social responsibility.
These two components will work together to bring exponential improvement around the world to human lives and the environment.