In the wake of the recent spate of corporate scandals, many of us associate the unethical behavioral offenses with accounting departments. Yet, there's more to it than that. Companies are realizing that honest business practices reach as deeply as their supply chain network.
Confronted with the need for efficiency, increased productivity, and profits, manufacturing companies often go overseas to cheaper labor markets to establish supplier relationships. The reputation of the organization becomes subject to the reputation of the suppliers as an extension of their own business practices. "You might not think that the behavior of another organization half a world away is your responsibility, but when your name is on the product, you'd better believe that demanding good supplier practices is in your business's best interest," writes author Dale Neef, in describing how the issue has permeated into an organization's supply chain network by putting more focus on the principles and business practices of individual suppliers.
Neef encourages managers to adopt a formal framework of accountability to provide a focus and ownership for codes of conduct. Chapters cover the basics such as creating awareness and support for the initiative, developing a supplier program and audit process, and dealing with compliance issues.
There is an entire chapter devoted to SEAAR (Social and Ethical Accounting, Auditing and Reporting), a movement rapidly being adopted worldwide. In addition to the U.S., organizations in Japan, Europe, and Australia now publish reports detailing their policies and actions on social and environmental activities. The more these performance principles and process standards for the global supply chain community are shared and accepted, the less likely a company will have to worry about "broken links" in their supply chain.
Neef is a strategic management consultant specializing in corporate responsibility and supply chain issues.—S. J. Johnston