Sustainable supplier procurement

In this article, you will be introduced to the concept of sustainable supplier procurement and learn how businesses develop and implement supplier selection criteria and codes of conduct.

Purchasing power is a license to purchase power.

(Raoul Vaneigem b. 1934 Belgian writer)

Defining the concept of sustainable supplier procurement

The current upsurge of global outsourcing has meant that businesses are being held increasingly responsible not only for their own actions, but also for the actions of their supply chain partners (Jiang 2009a). It is important for a socially responsible business to collaborate with suppliers who operate in a responsible manner and meet basic standards of environmental, financial and social performance.

Sustainable supplier procurement refers to the:

…identification of appropriate supply partners with the most beneficial monetary value and the least effects of their operations on the society and the environment.

(Goebel et al. 2012)

Lamming and Hampson suggested that:

…environmental soundness should become a recognised feature of a supplier’s overall performance.

(Lamming and Hampson 1996)

Through the adoption of minimum environmental standards, businesses want to minimise any environmental liability associated with purchased goods and services (Sarkis 1995).

Responsible supplier selection criteria

To ensure that suppliers’ behaviour complies with the ethical standards of the focal business, purchasing managers can adopt various sets of social, financial and environmental supplier evaluation and selection criteria.

Businesses, nowadays, have become more proactive in environmental management and follow various international standards, such as the ISO 14000 series, to accredit their environmental programmes and show to their customers that they have the required credentials (McKinnon). For example, the United Nations Global Compact initiative (see Step2.5 on Corporate Social Responsibility), one of the world’s largest corporate responsibility schemes (Gilbert and Rasche 2007) suggests that a business should consider the following criteria in the selection of a supplier (Carter and Jennings 2002; Hutchins and Sutherland 2008; Blowfield 2000; Noci 1997).

Social criteria Labour, equity, healthcare, safety, anti-corruption, philanthropy, diversity, human rights
Financial criteria Price, quality, delivery time
Environmental criteria Green competence, environmental efficiency, green image and lifecycle cost

For example, in Johnson & Johnson’s ‘Responsibility Standards for Suppliers’ report (Johnson & Johnson 2017), suppliers are expected to:

  • Comply with applicable laws and regulations
  • Behave ethically and with integrity
  • Integrate quality into business processes
  • Respect human and employment rights
  • Promote the safety, health and well-being of employees
  • Embrace sustainability and operate in an environmentally responsible manner
  • Implement management systems to maintain business continuity, performance governance and continuous improvement
  • Disclose information associated with the supplier’s impact on the environment and social issues

Supplier codes of conduct

A code of conduct is a document, often integrated in buyers-suppliers contracts, that includes a number of social and environmental standards and principles that business’ suppliers must fulfil (Jenkins 1991). These are usually derived from local laws and regulations and international conventions, standards and principles such as the Global Compact (see step on 2.5 on Corporate Social Responsibility) and ISO 14001 (see the previous step).

Businesses use codes of conduct to manage and monitor their suppliers’ ethical and socially responsible practices, to ensure that working conditions are safe and hygienic, working hours are not excessive, child labour is not used and workers are paid living wages (Waddock et al. 2002; Jiang 2009b). In most cases, the codes also stipulate that suppliers have to cascade these principles through their own supply chains.

Often suppliers are encouraged to go beyond legal compliance in order to advance in business ethics and social and environmental responsibility. However, many multinational corporations are struggling to implement their codes of conduct across their global supply chains (Leigh and Waddock 2006). To overcome this difficulty, many businesses apply auditing to assure that their suppliers’ processes and procedures for managing their supply chains in an ethical and efficient way are in place and operate effectively.

Suppliers that are found to violate their codes of conducts are subject to hard penalties such as sanctions, ending of relationships and cancellation of contract; or milder measures such as action plans and fined, dependent on the grade of their violation (Barrientos and Dolan 2006).

Your task

Select a multinational company of your choice and find its supplier code of conduct. Compare its principles against the 10 principles of the global compact framework (see the step on corporate social responsibility). Are they addressed satisfactorily?

Post your thoughts and discuss your findings with your classmates in the comments section below.


References

Barrientos, S., and Dolan, C. (2006) Ethical Sourcing in the Global Food System: Challenges and Opportunities to Fair Trade and the Environment. London: Routledge 204

Blowfield, M. (2000) ‘Ethical Sourcing: A Contribution to Sustainability or a Diversion?’ Sustainable Development 8 (4), 191-200

Carter, C. R., and Jennings, M. M. (2002) ‘Social Responsibility and Supply Chain Relationships’. Transportation Research Part E. 38 (1), 37-52

Gilbert, D. U. and Rasche, A. (2007) ‘Discourse Ethics and Social Accountability – The Ethics of SA 8000’. Business Ethics Quarterly 17 (2), 187-216

Goebel, P., Reuter, C., Pibernik, R., and Sichtmann, C. (2012) ‘The Influence of Ethical Culture on Supplier Selection in the Context of Sustainable Sourcing’. International Journal of Production Economics 140 (1), 7-17

Hutchins, M. J., and Sutherland, J. W. (2008) ‘An Exploration of Measures of Social Sustainability and their Application to Supply Chain Decisions’. Journal of Cleaner Production 16 (15), 1688-1698

Jenkins, R. (2001) Corporate Codes of Conduct. Self-Regulation in a Global Economy. Technology, Business and Society Programme Paper Number 2. New York: United Nations Research Institute for Social Development (UNRUSD)

Jiang, B. (2009a) ‘The Effects of Interorganizational Governance on Suppliers’ Compliance with SCC: An Empirical Examination of Compliant and Non-Compliant Suppliers’. Journal of Operations Management 27 (4), 267-280

Jiang, B. (2009b) ‘Implementing Supplier Codes of Conduct in Global Supply Chains: Process Explanations from Theoretic and Empirical Perspectives’. Journal of Business Ethics 85 (1), 77-92

Johnson & Johnson (2017) ‘Responsibility Standards for Suppliers 2017’.Global Procurement report. Johnson & Johnson. available from https://www.jnj.com/partners/responsibility-standards-for-suppliers [8 July 2019]

Leigh, J., Waddock, S. (2006) ‘The Emergence of Total Responsibility Management Systems: J. Sainsbury’s (PLC) Voluntary Responsibility Management Systems for Global Food Retail Supply Chains’. Business and Society Review 111 (4), 409-426

Noci, G. (1997) ‘Designing ‘Green’ Vendor Rating Systems for the Assessment of a Supplier’s Environmental Performance’. European Journal of Purchasing and Supply Management 3 (2), 103-114

Sarkis, J. (1995) ‘Supply Chain Management and Environmentally Conscious Design and Manufacturing’. International Journal of Environmentally Conscious Design and Manufacturing 4 (2), 43-52

Waddock S., Bodwell, C. B., and Graves, S. (2002) ‘Responsibility: The New Business Imperative’. Academy of Management Executive 16 (2), 132-148

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This article is from the free online course:

Sustainability and Green Logistics: An Introduction

Coventry University