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Procurement Ethics - 10 Components of Ethical Procurement

Learn the fundamentals of ethical procurement

Components of ethical procurement

Every organisation requires an ethical policy or code of conduct. Ethical supply chain management is becoming an important issue, as questions around ethical practice is increasingly being highlighted in the media and through campaigns run through charities and other bodies.

Below are 10 common components for ethical procurement

Below are 10 common components for ethical procurement

1. Transparency, confidentiality, and fairness

All suppliers should be treated fairly at all stages of the procurement process. This means being open with all those involved, so that everyone, especially suppliers, understand the elements of the process. This includes the procedures, timescales, requirements, and criteria for selection amongst others.

2. Use of power

Buyers should discourage the unfair use of buying power or influence. Power is a key element in supply relationships. The exertion of undue influence or the abuses of power, as well as being unprofessional, may go against legislation. It’s also unlikely to achieve long-term strategic relationships.

3. Corruption

Buyers must not tolerate corruption in any form (direct or indirect). Buyers that are aware of any corrupt activity have a duty to the profession and their employing organisations to alert their line manager immediately. Bribery is a criminal offence in the UK (and in most other countries) and the law is being strengthened to include offshore bribery.

4. Declaring an interest

All personal interests should be declared. Buyers should encourage colleagues to declare any personal interest which may affect, or be seen to affect, their impartiality or judgement. Examples include, owning a significant shareholding in a supplier or family/friends being employed by a key supplier.

5. Social responsibility

Some of the worker welfare issues which a socially responsible buying organisation should address include, forced labour, freedom of association, health and safety, child labour, excessive working hours, and discrimination.

6. Forced labour

Suppliers should not use forced, bonded or involuntary prison labour. Forced labour is work carried out under the threat of penalty. The most common types being bonded labour and use of prisoners. Buyers should ensure that suppliers’ employees are free to choose to work for the supplier and free to leave should they wish to.

7. Employment relationship

Employees should have legal contracts. Suppliers should establish recognised employment relationships with their employees that are in accordance with their national law and good practice. Employees should be provided with an easy-to-read contract of employment, with clarity in relation to wages. If employees are unable to read, the contract of employment should be read out and explained to them by a union representative or another appropriate third party. Suppliers should not do anything to avoid providing employees with their legal or contractual rights.

8. Health and safety

Working conditions must be safe and hygienic. Occupational health and safety are covered in most countries by laws and regulations, which require employers to provide a safe working environment and employees to abide by safety procedures. However, in countries where the laws are not enforced, standards of health and safety are low in many factories and work sites. Buyers should work with suppliers to introduce appropriate health and safety policies and procedures, which should be demonstrable in the workplace. Suppliers should assign responsibility for health and safety to a senior management representative

9. Law

Suppliers should always work within the laws of their country.

10. Wages and working hours

Low wages raise ethical, economic, and social problems in all countries. This is of particular concern in countries that produce low-value goods, where low rates of pay make these products competitive in the global market. Wages and benefits should at least meet industry benchmarks or national legal standards. Working hours should also comply with national laws or industry standards.

 

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Ethical procurement

Ethical procurement is key to ensuring organisations mitigate the risks involved when sourcing goods/services globally. It is also an opportunity to promote good labour and environmental practices within their supply chain which customers are increasingly demanding.

Ethical procurement practices

The purpose of this booklet is to provide you with advice and guidance on how to develop ethical procurement practices in your supply chain. Although intended primarily for buyers, this guidance applies equally to anyone who has responsibility for managing the supply of goods or services from an external source.

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