Comment: suppliers Issue 72

November 30, 2005

The recent findings from the Chartered Institute of Purchasing and Supply make salutary reading..

The recent findings from the Chartered Institute of Purchasing and Supply make salutary reading. Less than one in three UK purchasing directors – who between them control a collective annual budget of £1,100 billion – consider the environmental or social impacts of their buying habits as ‘essential’. Over one in five don’t consider these issues at all. So who’s to blame?

The CIPS points the finger squarely at senior management, who need to “recognise both the risks and rewards of responsible purchasing”. With nearly three-quarters of companies already having corporate social responsibility policies in place, however, senior executives aren’t struggling so much with recognition of the challenge but implementation of the solution in the supply chain.

Enter the industrious researchers at the World Bank. Commissioned to investigate the barriers to implementing supplier codes aimed at promoting CSR, they were forced to conclude that the codes themselves were a major stumbling block to guaranteeing better environmental and working conditions. Inconsistent, inflexible and difficult to monitor in increasingly anonymous supply chains, there’s a clear need for fine-tuning the multiple individual buyer codes that now exist. Examples from the toy, garment and supermarket industries of developing a single, commonly agreed base code proves that such fine-tuning is possible. But is it ultimately desirable?

Feedback from the Bank’s study shows that suppliers and their representatives believe this kind of top-down compliance approach, driven from distant buyers, will never bring about the radical transformation that supply chain advocates would like to see. Instead, the study advocates an approach that emphasises local ownership. If purchasers in London feel compromised by the conflicting priorities of pricing criteria and sustainable production, it’s no different for the grower in the field, the trader in the market, the government agent in the port or the processor in the factory.

Building incentives through the supply chain, beginning with the local producer, must become the first step to effective implementation. So the thumbs-up from Procter and Gamble, McDonald’s and Citigroup in favour of sustainable coffee production is welcome. Even more so Kraft, for its partnership with the Rainforest Alliance in providing technical assistance to South and Central American coffee growers.

But investments in supply chain management like capacity building, worker empowerment, environmental protection and price guarantees don’t come cheap – especially when they are costs not being undertaken by competitors. Innovation and experimentation, as in the coffee industry, can result in some cost-saving solutions. But for senior managers, the challenge might start with improving the implementation of individual supply codes, but where it must head towards is collective, industry-specific action that shares costs to help suppliers pursue best CSR practice.

Corporate Citizenship Briefing, issue no: 72 – November, 2003