Watch: The Increasing Pressure to Ensure Ethical Supply Management

Are companies taking their eye off the ball when it comes to monitoring the ethics of their suppliers? A discussion with Bill Michels, vice president of operations with CIPS Americas, and Alessandra Tassini-Negri, senior director of strategic sourcing and procurement with Dun & Bradstreet.

Ethical lapses by suppliers are especially evident in parts of the world with weak economies or individuals engaged in forced labor. Automation further heightens the risk of fraud from multiple sources, Michels says. Asia in particular is a “hotspot” for bribery and fraud, requiring potential buyers of products from that region to undertake a significant effort of education and communication with the supply base.

Procurement professionals need to be “very vigilant,” says Tassini-Negri. “Make sure that you’re agile, are monitoring relationships, and doing risk assessments.” Companies should be employing data and analytics to identify risks and mitigate potential disruptions.

When it comes to ensuring ethical behavior by one’s suppliers, visibility to their activities is key. Both the right technology and talent need to be in place, and it’s crucial to map the entire supply chain, involving multiple tiers of suppliers. “Many companies only work off tier 1,” says Michels.

The rigorous CIPS ethics test, covering environmental, social and governance actions, is a valuable tool for raising awareness and assessing ethical behavior both within a company and among its many suppliers. All affected individuals need to be able to pass the test. Tassini-Negri says it provides users with a constant “refresher” in the ethics of supply management, and enables them to apply high standards at a functional level.

Tassini-Negri says ensuring ethical behavior of suppliers is an essential requirement for protecting brands, clients and revenue. “It’s the basis for what will make you successful,” she says.