The views and opinions expressed in this article are those of the thought leader and not those of CeFPro.
By Laura Simmonds, Supply Chain Risk Thought Leader, Former IHG (InterContinental Hotels Group)
Disclaimer: Opinions are of Laura Simmonds as an individual, not attributed to any particular organisation.
What are some of the risks associated with having a non-ethical supply chain?
Front and foremost, it can do damage to your business. I often use the phrase “you are what you buy” (a play on words of “you are what you eat”), yet oftentimes companies neglect their supply chains when setting out on their responsible business strategy. The supply chain is an integral part of how a company does business – whether that’s through the direct products they produce and sell, or through the services offered. If an element of your supply chain is unethical, not only can it have significant negative effects from a reputational perspective and deter current and future customers, but it can also harm how your own company operates. If it doesn’t feel right, it’s probably because it isn’t.
In today’s cost-pressured environment, it can be all to easy to put pressure on suppliers to reduce cost. But have we taken a step back to think about the repercussions that could have? If your supplier isn’t making much money, then you can bet that the supplier’s supplier certainly isn’t – which in turn can mean un-ethical behaviour being prevalent. When it comes to operating a supply chain responsibly and ethically, there really can be cases where something is too good to be true, especially when it comes to cost.
In your opinion, what are the best approaches to encouraging right behaviour, culture and ethics?
I’d love to say that because this is such an important area, everyone gets it. But unfortunately, that often isn’t the case. For me, the approach is two-fold:
Firstly, you need to inform and inspire. If we want to change behaviour, we need to be clear about what we’re asking for, and why. There’s an element of winning hearts and minds – take people on the journey with you. There will always be some strong champions who embrace the behaviour change; use them to help inspire others. Celebrate their successes.
From a cultural perspective, this comes top down. If it isn’t important to senior management, then it’s going to be an uphill battle getting the majority of people on board.
Secondly, the old adage of what gets measured gets done. By being clear about the objectives and what needs to change, set KPIs and targets to drive the agenda forwards. For example, setting a performance objective for a category manager to have risk assessed x% of their suppliers soon gets the work done.
This two-pronged approach is the carrot and stick approach. But until it becomes a normal way of how a company operates and it is engrained into the culture and ways of working, in my opinion they are the two most effective approaches to take.
What tools can be used to effectively monitor slavery and human trafficking within the supply chain?
To start with, getting a good risk assessment tool is a good place to begin. Start asking questions of your suppliers as to how they manage their workforce. You need to think about how to phrase the questions so that you get useful answers. For example, directly asking your supplier whether they have modern slavery in their business or supply chain is likely to result in a firm “no” response. But asking questions such as how they validate workers’ identities, what their recruitment practices are, where their employees live (on-site or elsewhere), you can build up an insightful picture that might set some red flags waving.
If it can be done, the on-site audit is very important as you can see with your own eyes what is happening. If you can do un-announced audits / visits then all the better, as you then see a very true picture of what happens day to day.
It’s important that when you do find issues – and notice that I say when, not if – that you take action to remediate. Simply walking away from the supplier can do more harm than good. Discuss your findings with the supplier and help them identify what needs to change. Support them on that journey, you’re in it together to resolve.
How does pressure from the public and social media influence supply chains?
There is definitely growing pressure from the public for companies to have ethical supply chains and to be transparent about them. This is far easier said than done. Some companies have done some absolutely fantastic work and should be celebrated. But I imagine for the other 99% of companies, it’s a huge struggle to get the visibility that is needed to be able to build up a picture of their supply chains to know whether or not they are ethical.
But to be honest, I think that’s ok. What is important is that companies take steps to understand their supply chains and set expectations for their suppliers to operate responsibly. The key here is for the organisations who are only just beginning on their journey to speak about that openly with the public. Saying that you don’t know but you’re working hard to find the answer is far better than not saying anything at all.
The question that often troubles me is how much responsibility the company at the top of the chain has to understand and ensure ethical behaviour throughout their supply chain, throughout the tiers. Some people state the case that large organisations should be responsible for it all, other people argue that it is the responsibility of the supplier at each tier. My opinion is somewhat of a hybrid of the two schools of thought. I do think that suppliers at each tier need to understand their own next-tier supply chain as they are closest to it. However, I also believe that larger organisations who have the tools and resources available to them should share this knowledge with their supply chain, to help equip smaller or less progressed suppliers along the journey to creating ethical supply chains.
What advice would you give when managing supply chain across multiple sectors and countries?
Front and foremost, take time to understand local culture and customs. Not every country has the same high standards of living and operating as we have come to expect in the western world. For example, in some countries it can be perfectly normal to find children working in the factory or fields. I’m not saying this is right, but we need to take the time to understand why – is it purely an abuse of child labour, or is the family that the child is from supporting them financially, whereby if they were not working then the family would starve. This is why it is so important to understand local culture and the maturity of the country the supplier is in. We can then focus our efforts on solving for the root cause of the issue. In this example, if we pushed the supplier to stop children working in the factory then yes, arguably we could say we have eradicated child labour in the supply chain – but chances are, that child is going to go work somewhere else; we haven’t actually solved anything. So by working with local organisations or NGOs, we can tackle the real issue sitting behind the situation.
Laura will be speaking at our Global TPRM: Cross Industry, taking place virtually December 8-9. Click here to view the full agenda and register for your complimentary pass to the event.