There are many challenges to creating an ethical supply chain. Nearly all multinational companies are currently embroiled in making decisions on how to manage operations in the face of the Russian invasion of Ukraine, the threat of global warming and the need to ensure fair labor standards and guard against corrupt practices.
Around 88% of consumers say ethical standards for business are important, according to Forbes. Companies looking to achieve ESG reputability while protecting profits need to adopt this philosophy from the top down, and be consistent in their efforts. Following are five ways of addressing the modern-day ESG challenge:
Take a political position when it can make an impact. While carriers such as FedEx and UPS stopped delivering to Russia back in February, others such as McDonald's, Coca-Cola, Starbucks and Heineken found themselves under pressure from shareholders to stop business in that country altogether. In response, many have taken a political stance that they won’t support Russian aggression against Ukraine. This is a departure from the traditional ESG path, but it can be effective at times when the political climate is unstable.
Create a code of conduct, and demand it from suppliers. A code of conduct is a statement that serves as a framework for ethical decision-making within an organization. It’s a communications tool that informs internal and external stakeholders about what’s valued by the organization, its employees and management. The statement should also address the need for regulatory compliance. Going back to the Sarbanes-Oxley Act of 2002, individuals serving on boards and organizational leaders of public companies must comply with laws and regulations against illegal activity. Companies should use marketing methods to clearly communicate their code of conduct to consumers as well to suppliers and others. They should also encourage employees to use the code of conduct as the base from which they operate.
Use suppliers who can back their labor practices. Suppliers must support their employees from a health and wellbeing standpoint, while also ensuring that they’re not employing child labor, have safe and hygienic working conditions, and pay equitable wages. Suppliers should respect the right of employees to freedom of association and collective bargaining. They should have grievance procedures for resolving disputes and employee complaints, and promote transparent communication with employees and their representatives.
Reduce the company’s carbon footprint. Carbon reduction amid global warming is a constant topic today when pursuing ethical supply chains. New software applications and reporting procedures have made it easier than ever to manage and reduce carbon emissions. A company can now track, measure and optimize CO2 and energy consumption across warehousing and transportation. Routing can be adjusted to reduce mileage and conserve fuel. Other activities that affect a company’s carbon footprint include employee business travel and waste disposal, by the company itself as well as by third parties. It is becoming increasingly essential to track and track and report a company’s total carbon footprint.
Train employees about the Foreign Corrupt Practices Act (FCPA). Illegal payments and corruption occur around the globe. The FCPA is a federal law, enforced by the U.S. Department of Justice, which prohibits U.S. persons or companies’ from offering payments, gifts or other items of value to a foreign official in exchange for gaining or maintaining business. Employees need to be trained on acceptable business behavior based on the company’s code of conduct, and companies could be subject to huge penalties for non-compliance. Goldman Sachs paid more than $2.9 billion to settle SEC charges that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA in connection with the 1Malaysia Development Berhad scandal. Basic training in ensuring ethical practices is clearly worth the investment.
Julie Gibbs is director of BPE Global.
Read more of SupplyChainBrain's 2022 Supply Chain ESG Guide here.
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