Adopt formal purchasing ethics

- If you track news headlines, it's amazing how ethical scandals around the world can lead to supply chain crises. Let me show you how formalizing purchasing ethics can protect your company and keep it from becoming one of those headlines. A business makes money by converting input, like raw materials, into output, their finished products. We tend to define businesses by their output, but it's also important to think about the input and how companies procure the goods and services in their supply chain. When looking at input, leaders naturally focus on ways to lower costs but cost isn't the only thing that matters. By embracing an ethical purchasing approach, you can create additional value for your company. For example, ethical purchasing leads to improved quality, it can reduce the risk of counterfeiting and ensure the safety and reliability of the inputs you buy. Another benefit is sustainability and social responsibility. Purchasing ethics can help you avoid situations that could cause environmental harm or result in the exploitation of workers. And, a third benefit is legal risk. Purchasing ethics can help ensure that your company isn't breaking laws that could result in fines, penalties, legal costs, and even jail time for your employees. So, what are some of the issues that your purchasing ethics policy should address? Let's start with transparency and confidentiality. You should be as transparent as you can with your suppliers but you also need to protect confidential information for you company, and confidential information that your suppliers share with you. Obviously, no company should tolerate corruption, such as bribes, and they need to avoid conflicts of interest, where decisions are made for reasons other than the best interest of the firm. Supply chains are ripe with opportunities for accidents, so purchasing ethics should address how you handle your supplier's mistakes. You should also address discrimination and how you encourage diversity in your supply chain. This includes how your suppliers manage their employees and handle issues, such as wages, working hours, working conditions, employee choice, and child labor. Finally, you should be explicit about the need to comply with the laws of the places in which you do business. Writing a policy for purchasing ethics doesn't need to be hard. Two of the best resources I've found are the Chartered Institute of Purchasing & Supply in the United Kingdom, and the Institute for Supply Management in the United States. Both have research, training, and tools that can help you create and implement your own purchasing ethics policy. A good policy on purchasing ethics will lower your risk for expensive problems and can go a long way toward building trust in your brand, so having a formal purchasing ethics policy and creating an ethical procurement culture are important steps in building a stronger, more sustainable supply chain.