Failure to ensure supply chain ethics may be risky

Many large companies have implemented ethics and compliance programs, but few seem to have extended such programs to include their global supply chain partners.

Despite a spate of publicity about tainted products from overseas suppliers, a survey of 108 "Global 2000" companies conducted in 2007 by Integrity Interactive Corporation found little evidence that global companies are paying attention to ethics throughout their supply chains. Integrity Interactive, based in Waltham, Massachusetts, U.S.A., develops programs to improve compliance, ethics, and corporate responsibility.

For instance, 78 percent of the survey respondents said they do not require suppliers to comply with their codes of conduct. Nearly 58 percent were not sure if their companies regularly assessed ethics-associated risks in their supply chains.

The report suggested that companies could ensure compliance with corporate standards by implementing supplier ethics management programs, which align suppliers' conduct with purchasers' standards in three areas: compliance, ethics, and corporate responsibility. It also recommended maintaining historical profiles of suppliers and assigning "ethics officers" to monitor supply chain relationships. These officers could assess suppliers' ethics and segment them on that basis; doing so would allow companies to make ethics and compliance a factor in supplier selection.

Failing to monitor suppliers for compliance with ethical standards poses a "significant risk" to companies' financial health and reputation, said Integrity Interactive Vice President Richard J. Cellini. "Enterprises are being judged by the company they keep, which means the whole supply chain must be ethical," he said when releasing the survey results. "If a dishonest supplier 6,000 miles away disregards manufacturing standards to make more profit, it reflects on the … company that hired that supplier. The public holds the vendor accountable, not the outsourced supplier."

[Source: Integrity Interactive Corporation, www.integrity-interactive.com]