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?
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.