Description
Before attempting to respond to this post, refer to the “Social Responsibility and the Supply Chain” Learning Activity. According to the text, there are certain areas that impact supply chain management and policies that should be developed for these areas. Select one of the areas identified in the text and create a short policy for that area. What is important for those who read the policy you created to understand?
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PRINCIPLES OF SUSTAINABILITY AND SOCIAL RESPONSIBILITY
Social Responsibility
and the Supply Chain
Introduction
When managing their supply chains, organizations should comply
with environmental standards and develop codes of conduct. Read this
section about the National Association of Purchasing Agents’
Principles and Standards of Purchasing Practice, upon which the
Institute for Supply Management (ISM) Principles are based.
As part of managing their supply chain, organizations
should not only comply with applicable
environmental and safety standards, but also develop
and follow codes of conduct that address legal and
ethical standards in relation to suppliers,
communities, nongovernmental organizations
(NGOs), and government entities. Codes and policies
vary widely across organizations, but certain matters
that affect supply chain management should always
be included. The three key areas are: (1)
organizational and supply chain safety, (2)
environmental compliance and responsibility in the
supply chain and life cycle, and (3) ethical standards
in the conduct of supply management. Each of these
three areas will be discussed in greater detail in this
competency.
In 1929, the National Association of Purchasing
Agents (NAPA) adopted the “Principles and Standards
of Purchasing Practice,” a code of conduct for
purchasing professionals to ensure that purchasers
apply their professional skills in accordance with
accepted standards of conduct. Since that time, the
Institute for Supply Management (ISM) has drawn on
the NAPA principles and leaders in the profession
continue to develop and refine the standards for
ethical conduct in supply management. The current
ISM Principles and Standards of Ethical Supply
Management Conduct (Global) were updated and
approved in 2012 (ISM, 2012a). The ISM principles are
covered in detail in ISM’s Principles of Sustainability
and Social Responsibility (ISM, 2012b).
The NAPA principles and standards are:
1. Organizational Policies
Organizations and supply management departments
should develop written documents that state clearly
the organizational policies and procedures relating to
ethics, safety and the environment.
2. Industry Codes of Conduct
In addition to the ISM code of conduct, industry codes
of conduct can provide insight into ethical issues as
well as specific rules for members of that industry. For
example, architects have their own professional code
that may impose additional standards beyond ISM
requirements.
3. International Issues
The United Nations Global Compact is a strategic
policy initiative for businesses that are committed to
aligning their operations and strategies with 10
universally accepted principles in the areas of human
rights, labor, environment, and anti-corruption.
Global Compact has over 10,000 corporate
participants and stakeholders in more than 130
countries. It represents the largest voluntary
corporate responsibility initiative in the world (UN
Global Compact, 2013). The Ten Principles, which are
derived from The Universal Declaration of Human
Rights, The International Labor Organization’s
Declaration on Fundamental Principles and Rights at
Work, The Rio Declaration on Environment and
Development, and The United Nations Convention
Against Corruption, consist of the following:
Human Rights
Principle 1: Businesses should support and respect the
protection of internationally proclaimed human
rights within their sphere of influence; and
Principle 2: make sure that they are not complicit in
human rights abuses.
Labor
Principle 3: Businesses should uphold the freedom of
association and the effective recognition of the right
to collective bargaining;
Principle 4: the elimination of all forms of forced and
compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: eliminate discrimination in respect of
employment and occupation.
Environment
Principle 7: Businesses should support a precautionary
approach to environmental challenges;
Principle 8: undertake initiatives to promote greater
environmental responsibility; and
Principle 9: encourage the development and diffusion
of environmentally friendly technologies.
Anti-Corruption
Principle 10: Businesses should work against
corruption in all its forms, including extortion and
bribery.
The antibribery provision is part of a growing
international trend that began in the United States
with its commitment to eliminating corruption in
other countries. The Foreign Corrupt Practices Act
(FCPA) was passed in 1977 (amended in 1988 and
again in 2000) to prohibit bribes of foreign officials as
well as members of non-governmental organizations
(NGOs). Under the FCPA, it is a felony (for both the
company and the employee/manager) to offer any
payment, offer, gift or promise to a foreign or NGO
official with the intent to influence the award of
business. The payment of cash to a government
official in exchange for awarding a contract is illegal
under the act. Also illegal are gifts in kind and the
hiring of a relative of a government official with the
intent of influencing the official’s decision on
awarding a contract.
The FCPA also imposes financial reporting
requirements on organizations so that payments to
foreign officials cannot be disguised in the
organization’s books and records.
The FCPA does not prohibit so-called “grease
payments,” payments made to expedite the
processing of government action. For example, paying
a clerk $5 to move your application to the front of the
pile is not a bribe that violates the FCPA, because
there is no guarantee that the application will be
approved. The $5 only “bought” the right to be heard.
However, many organizations have moved away from
condoning even grease or solicitation payments
because, in hindsight, they give the appearance of
impropriety.
4. Communication and Training to Key Stakeholders
Professionals and organizations are viewing the
importance of communicating and providing training
in the principles, values, goals, ethical standards and
objectives of the organization, as an ethical
responsibility. International Organization for
Standardization (ISO) standards no longer permit just
the statement of objectives (www.iso.org). Those
objectives must be implemented and tracked. One way
to ensure implementation is to provide training to
suppliers, employees and others in the supply chain
about these standards, proper practices and
procedures. That communication may occur through
provisions in contracts, actual in-classroom training
for employees, and required certifications from
suppliers regarding their training for their employees.
Communication and training are important to the
implementation of the standards, codes and
objectives.
In the United States, with the passage of the
Sarbanes-Oxley Act, the adoption of codes of ethics
and provision of training in those codes are critical. It
is no longer enough to state codes of ethics.
Organizations must show that employees have
received training in those codes and that their
provisions are enforced, which is a way to
communicate high ethical standards. Compliance with
these basic requirements provides an indicator of the
efficacy of internal controls, another area in which
Sarbanes-Oxley requires certification. This topic is
covered in greater detail in Communication and
Training about Social Responsibility to key
stakeholders.
5. Laws Governing Issues in Ethics
Certain areas of law and standards delineate or affect
the ethical conduct of supply management
professionals. These areas include libel, slander,
disparagement, bribery, and extortion.
Libel is a tort claim based on making defamatory
statements about others in writing (Flynn et al.,
2009). A good reputation is a precious commodity. In
business, the reputation of an organization may
determine whether a deal closes. Supply management
professionals possess information about a variety of
organizations, and they have an obligation to use that
information in a fair and forthright manner.
Defamation is speech or writing that diminishes an
organization’s or person’s reputation. Defamation
consists of false statements about another that
damage the individual’s reputation for honesty,
integrity, business capability, competency or conduct.
Libel is the written form of defamation. If a statement
is true, it is not, by definition, an instance of
defamation. A false statement about a supplier written
by a supply management professional in a letter to
another supply management professional, such as,
“This supplier was indicted last year for pure food
laws violations,” is defamatory and entitles the
supplier to recovery for any damages, such as
canceled contracts or lost business. If the statement is
true, however, it is not a case of defamation.
Slander is a tort claim based on making oral
statements of a defamatory nature (Flynn et al.,
2009). The same standards apply as those of libel, but
proof of the oral statement is more difficult. Both
slander and libel must be communicated to a third
party for defamation to occur. A thought that you keep
to yourself is not defamation.
Disparagement is making malicious or false
statements of fact as to the quality or performance of
an organization’s products (Flynn et al., 2009). A
disparaging statement would be, “Supplier X cannot
deliver goods on time,” assuming Supplier X is an
organization that actually delivers promptly. The
result is that customers will not give their business to
Supplier X because the statement has harmed its
reputation.
Commercial bribery is giving cash, gifts or other types
of favors in exchange for the award of business or
favors. Commercial bribery is a felony in many U.S.
states, and both the giver and the recipient can be
prosecuted. Bribery thwarts free market forces and
prevents decision-making on the basis of quality and
price. The FCPA, discussed earlier, prohibits
commercial bribery by U.S. organizations in their
operations in other countries.
Extortion refers to the unlawful act of obtaining
assets through coercion. Because extortion has
received limited attention in current legal frameworks
against corruption, the International Chamber of
Commerce, Transparency International, United
Nations Global Compact, and the World Economic
Forum Partnering Against Corruption Initiative,
developed RESIST. RESIST stands for Resisting
Extortion and Solicitation in International
Transactions. Based on real-life scenarios, RESIST is
designed as a training tool to provide practical
guidance for an organization’s employees on how to
prevent and/or respond to an inappropriate demand
by a client, business partner or public authority in the
most efficient and ethical way, recognizing that such
a demand may be accompanied by a threat
(International Chamber of Commerce, 2013).
6. Customer-Driven Requirements
Often, the organization may be subject to contractual
terms stipulated by customers. These requirements
may be related to their social responsibility initiatives
or interests and may be applicable to subcontracts
that the supply management department initiates.
From the NAPA principles are derived 10 ISM
principles of sustainability and social responsibility.
ISM firmly believes the supply management
profession is a strategic contributor in the
development and implementation of sustainability
and social responsibility programs and behavior. It is
therefore part of the mission of ISM to foster and
drive sustainability and social responsibility
excellence across the supply chain through the
development and communication of principles and
the sharing of tools, information and best practices.
Within this context, ISM defines sustainability as the
ability to meet current needs without hindering the
ability to meet the needs of future generations in
terms of economic, environmental and social
challenges. Social responsibility is defined by ISM as a
framework of measurable organization policies and
procedures and resulting behavior designed to benefit
the workplace and, by extension, the individual, the
organization, and society. Against this background,
ISM has developed the following Principles of
Sustainability and Social Responsibility (2012b):
1. Anti-Corruption: Corruption in all of its forms,
including extortion and bribery, will not be tolerated.
2. Diversity and Inclusiveness—Workforce and
Supply Base: Workforce diversity and inclusiveness is the
attraction and retention of a workforce that
reasonably represents the customer and communities
in which the organization operates. Supply base
diversity is the attraction and retention of a diverse
supply base, which should be the responsibility of
each supply professional.
3. Environment: Supply management promotes
protection, preservation and vitality of the natural
environment.
4.Ethics and Business Conduct: Every supply
management professional is responsible for behaving
ethically and actively promoting ethical conduct
throughout the supply chain.
5. Financial Integrity and Transparency: Financially
responsible supply management is characterized by
integrity and transparency in all supply-related
dealings and decisions.
6. Global Citizenship: Global citizenship is the ethical
and moral obligation to act for the benefit of society
locally, globally and virtually.
7. Health and Safety: Health and safety is the
condition of being protected or free from the
occurrence of risk of injury, danger, failure, error,
accident, harm and loss of life.
8. Human Rights: Human beings have universal and
natural rights and status regardless of legal
jurisdiction and local factors.
9. Labor Rights: Supply management is committed to
protecting and respecting labor rights globally.
10. Sustainability: Sustainability is the ability to meet
current needs without hindering the ability to meet
the needs of future generations in terms of economic,
environmental, and social challenges.
Note. Adapted from C.P.M. Study Guide, by Institute for
Supply Management, 2001. Copyright 2001 by
Institute for Supply Management.
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