Meeting the Public's Demand for Supplier Information with Electronic Systems

Recent headlines around Nestlé's confirmation that there is forced labor in its fishing supply chain will not come as a surprise to people in global procurement. Procurement professionals know that a key element of managing today's supply chain includes ensuring that the production of goods and services is not hampered by unethical or environmentally damaging practices. A consumer boycott or legal action in response to bad practices are as damaging as an earthquake or hurricane which takes a key supplier out of the chain.

In most global companies, a "responsible sourcing" director or "sustainability" vice president is tasked with ensuring that no short cuts are taken. Given the global scale of many operations in terms of number and location of suppliers, the management of these suppliers and their supporting data – a supplier's practices, degree of awareness and training – is a challenge. This is because in countries where the rule of law and education are in short supply, and where people look for work to lift them from rural poverty, abuses are almost bound to occur. The abuses include not only forced labor, but also unsafe working conditions, economic ties to armed groups, environmentally damaging mining or agriculture practices, and unchecked pollution of air, land and water. The complexities of the challenge – bringing goods from across the world to market, balancing on-site and HQ-based inspection and buying decisions, leveraging the power of globally known brands in intensely local supplier systems – were spelled out in a Roundtable Report by the Guardian newspaper in 2014.

With globalization a fact of life, money for goods in ignorance of how the goods are produced can last only so long. Phones, computers, fashion clothing, sneakers, and chocolate each have been transformed from status symbols to emblems of injustice when reporting has uncovered unsafe or unfair practices associated with producing them. Consumers become aware of abuses and demand that companies vouch for the production practices of their suppliers as well as their own.

Suppliers, in turn, should also do their own investigation, establish their own standards, and monitor compliance with those standards. Corporations often make the case that bringing the work of poor laborers to market worldwide creates the very leverage and awareness needed to improve their conditions. Supermarket company Tesco's responsible sourcing director Giles Bolton has argued that with their involvement as buyers, businesses can be part of the solution.  Additional options include third-party organizations that offer both training and certification to suppliers, acting as trusted certifiers of good conduct by producers in countries where government authority is weak and regulation non-existent. A recent IACCM Americas Forum presentation featured such a third-party organization, EcoVadis, which has devised an analysis system covering environment, fair labor practices, ethics/fair business practices, and supply chain.

Some fair trade advocates skeptically view these cooperative actions as a way that businesses try to forestall new laws and international conventions. The goal of corporations, they argue, is to avoid having their hands tied by more explicit regulation. Other observers believe that cooperative efforts have a better chance of immediate success than attempting to hammer out a one-size-fits-all international framework. Indeed, private action is sometimes a first step toward legal standards that can be enforced. These observers argue that as more companies find themselves spending money to regulate their own suppliers, legal standards and adequate enforcement across the board are seen as a way of leveling the playing field. As happened in the United States a century ago, media attention, consumer leagues, labor action and corporate responsiveness may lead to increased global regulation.

Regardless of the path that reform may take, the need for global buyers and their associated suppliers to manage their supply chain – in terms of ethically and environmentally sound practices – is paramount. The retailer or manufacturer who needs to answer for their supply chain needs ready access to information. A supplier's certifications of fair practices or non-polluting production, however arrived at, need to be displayed in the supplier's electronic record, along with its financial standing and records of insurance. These evidences need to be kept up to date as one would insurance policies. And, where ethical and environmental standards are specified contractually, electronic contract management software can help organizations stay on top of such standards in their suppliers.

Global buyers need to ensure that their suppliers are not only making the appropriate representations, but that they are also providing the necessary supporting documentation – including origin of raw materials, contributing manufacturers, certifications of fair practices or non-polluting production, etc. – to satisfy their contractual commitments. Electronic systems of supplier management such as Contracts 365's Supplier Management App for SharePoint, or SM[.app], can help effectively manage this process. Systems like SM[.app] have the necessary flexibility, scalability, and the potential to integrate with other electronic systems, that global organizations need in this environment.

Some may consider such monitoring by retailers and manufacturers unnecessary, or beside the point economically. These businesses, it is argued, have enough to do keeping suppliers to agreed prices, product specifications, and standards of quality. But the public, with whom global companies like Nestlé are sharing the facts, may think otherwise. They are creating a demand for more supplier information. Electronic supplier management systems are a key to meeting that demand.

Dermot Whittaker works with Contracts 365's technology and contract management partners to keep the company focused on current business needs.