| Consumers are looking beyond company practices to | | | | Once an investigation is complete, suppliers submit a |
| ensure consistent ethics and compliance | | | | report requesting approval of the corrective action |
| throughout a company's entire supply chain. When | | | | taken. This allows managers to review the actions |
| organizations conduct risk assessments, be sure to | | | | taken and the measures established to prevent the |
| include an evaluation of suppliers, vendors and any | | | | action from happening again.i-Sight makes it easy to |
| other points of contact within the organizational | | | | communicate performance targets and results to |
| network. | | | | suppliers. In seconds, managers can compare the |
| To decrease the risks associated with suppliers, | | | | performance of each supplier over time and track |
| examine the culture, ethics and compliance practices | | | | improvements using up-to-the-minute data. |
| adopted by the candidates. This helps companies | | | | Communication throughout the supply chain is |
| make informed decisions to select suppliers that "fit" | | | | improved, as all parties are aware of faulty products, |
| with their existing culture and practices. | | | | responsible for taking corrective action and can view |
| Supplier Risk | | | | issues in real-time. |
| Many organizations rely on suppliers to | | | | Collaboration and Policy Development |
| acquire resources needed for creating the | | | | If a desired supplier happens to lack effective ethics |
| product. Companies purchasing parts from suppliers | | | | and compliance policies, work with them to develop |
| need to ensure parts are inspected and | | | | policies and encourage ethical actions. Here are two |
| manufactured in accordance to the same safety | | | | examples of organizations working together with |
| standards they would face if manufactured by the | | | | companies in their supply chain to make ethical |
| purchasing company. For example, last week HP | | | | changes: |
| announced a battery recall, as there were two | | | | - Patagonia- Patagonia maintains a factory list, which |
| instances where batteries overheated and caught | | | | can be found on the company's website. This list |
| fire, resulting in property damage. HP receives laptop | | | | includes the name and address of each location used |
| batteries from a supplier. However, in the eyes of | | | | to manufacture Patagonia products. At Patagonia, |
| consumers, HP is held responsible for the recall and | | | | they use third-party auditors to conduct social audits. |
| any damages done, as it was a link in the HP supply | | | | The report published by the auditor is sent for |
| chain that caused these problems. | | | | review and given to the company's social |
| In the article "Building an Ethical Supply Chain," authors | | | | responsibility manager, who determines if the factory |
| Michael R. Levin and Richard J. Cellini state: | | | | review meets the requirements outlined in Patagonia's |
| "Consumers, investors, business partners, regulators, | | | | code of conduct. As outlined under company |
| and media organizations now expect a company and | | | | information and social responsibility on the Patagonia |
| its entire supply chain to be ethical. The | | | | website, they write: |
| supplier-generated ethics scandal is probably one of | | | | "If necessary, the social responsibility manager works |
| the biggest (and least foreseen) business risks most | | | | with the factory to develop a corrective action plan. |
| leading companies face today. The damage can be | | | | The plan lists the problems and corrective actions. It |
| great, and protective measures can and should be | | | | includes a timeline for compliance. At that stage it's |
| adopted immediately." | | | | incumbent upon the factory to take ownership of its |
| During risk assessments, many companies fail to look | | | | shortcomings and embrace the fact that rectifying |
| beyond internal controls. In the article "Building an | | | | them is good for its business. Because the goal of |
| Ethical Supply Chain," results from a study conducted | | | | our program is to safeguard and improve workers' |
| by Integrity Interactive Corporation demonstrate: | | | | rights, it's our policy to work with factories to correct |
| "In a survey of 108 Global 2000 companies, it was | | | | social problems and promote better practices. |
| concluded corporate ethics and compliance programs | | | | Furthermore, the Fair Labor Association advises |
| and controls do not extend to their global supply | | | | against ‘firing' noncompliant suppliers unless the |
| chains. The survey found that 86% of respondents | | | | supplier is unwilling to work toward improvement." |
| concede that their primary ethics code does not | | | | - Texas Instruments (TI)- TI begins supplier selection |
| address the conduct of suppliers, and 59% of | | | | by consulting Transparency International's Corruption |
| respondents do not include suppliers in their analysis | | | | Perceptions Index to determine the level of risk |
| when assessing their company's own ethics and | | | | associated with operating in certain parts of the |
| compliance risks." | | | | world. The SHRM article "Monitor Ethics, Compliance in |
| Mitigating Supplier Risk | | | | Supply Chain," discusses a speech given by TI's VP |
| There are several actions organizations can take to | | | | and ethics director, David Reid, at a business ethics |
| help reduce supplier risk and protect their brand | | | | and compliance conference presented by The |
| name. | | | | Conference Board, stating: |
| Case Management Solutions | | | | "Collaboration if key between us and our supply |
| Implementing a case management solution, such as | | | | chain—it's really important to be working with |
| i-Sight Corrective Action Software allows for | | | | them in a proactive way. The ‘value of ethics at |
| improved communication throughout the supply chain. | | | | Texas Instruments,' a document on the company's |
| i-Sight enables companies to register suppliers, | | | | web site, is translated into a dozen languages. The |
| providing them with access to all or specific sections | | | | company encourages suppliers to adopt something |
| of the quality and corrective action software. | | | | like it or to use it as a template. I have a pretty high |
| Reports can be filed to draw attention to defective | | | | bar, I want to see that they operate their factory |
| shipments and other supplier issues requiring | | | | similar to the way we would have a factory |
| corrective and preventative action. i-Sight holds | | | | operated at Texas Instruments. |
| suppliers accountable for their actions. | | | | |