Business ethics in procurement

Nowadays having the business ethics concept in place directly impacts the perception of the company in the eyes of stakeholders. The impact can be both positive and negative. This also impacts the behavior of the consumers at large. Year over year the demand for sustainable products increases dramatically. Implementation of the ethical approach in procurement plays an important role in this context.

Ethics in Procurement

The use of eco-friendly products, sustainable components, and materials, as well as the development of corporate social responsibility influence the purchase decision of end consumers. The importance of having an ethical approach in procurement signifies that procurement plays a critical role not only in terms of ensuring the timely availability of certain goods or services but also in ensuring environmental friendliness and ethical principles.

What are the points of ethical procurement?

The key aim of the ethical procurement concept is to ensure that the business is creating additional value by selecting only those suppliers who are oriented towards the main principles of ethical business development. In order to achieve this goal, the SRM strategy should be based on selecting those suppliers that provide environmentally friendly products and fits the company’s CSR requirements.

Companies across all industries incorporate the ethical procurement concept into their operations standards and company policies. In addition to the process of purchasing goods and services, ethical procurement also includes the development of convenient sourcing and supplier relationship management strategies.

More than just a brand reputation

Ethical procurement reduces operational risks associated with brand reputation and helps companies gain a competitive advantage. Therefore, many companies on their own follow the main principles that facilitate ethical corporate culture and encourage managers to follow CSR policies. A great example of such an approach is the “Mission for Responsible Actions in the Economy”, initiated by the Wittenberg Center for Global Ethics that was later adopted by a wide range of companies. Another great example is the Bangladesh Fire and Safety Accord which was signed by such well-known brands as H&M, Zara, and Puma, as well as IndustriALL Global Union and UNI Global Union. The key point of this agreement is enhancing workplace safety by implementing fire safety rules and regulations during the construction phase of the business units located in Bangladesh (a major textile and industrial hub).

Implementation of the ethical approach

There are many ways to implement an ethical approach to the procurement strategy of the company. The available business information can be used to assess the ethical risks of the supply chain. This data can be collected from the organizations involved in the evaluation of trends in the economy and risk management. Arrange the inspections beyond formal scheduled visits and inspections. Ask suppliers to allow the company to audit its business processes without prior approval.

Consider utilizing social media channels for face-to-face communication with the employees of the suppliers. For example, some companies encourage employees of their suppliers to send their complaints via social media anonymously. Also, consider the implementation of new technologies that will enable the managers to consolidate the audit of the supplier capabilities and business processes. Implement a convenient e-sourcing tool, which will help the purchasing team to create a list of preferred sustainable suppliers.

Today, every company must have a code of ethics for best business and procurement practices. In addition to improving the efficiency and effectiveness of purchasing activities, ethical purchasing enhances the brand image and increases end-consumer loyalty and social recognition.