Ethical Supply Chains

Lift & Tilt Podcast – Episode 003 :  Ethical Supply Chains
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Date: 2/18/20

Host: Robert Dennard & Kurt Guntner

Overview: Robert and Kurt sip a chocolate milk stout from a local brewer while discussing ethical supply chains and their value to businesses. Does your company have a corporate responsibility to the communities in which it operates? Outsourced manufacturing and low supply chain visibility (labor practices, social injustice, and environmentally friendly practices) has become a much bigger topic for consumers and organizations alike.

Question & Answer from anonymous procurement professional.

1) The article alluded to corporate cost reductions being prioritized over social/ethical responsibility.  How do managers at the upper echelon’s of organizations balance their sense of duty to business stakeholders with their responsibility of corporate citizenship?

I imagine it’s different, depending on the organization your work at, in terms of how they prioritize profitability over corporate citizenship.  That being said, over the last few decades it’s become abundantly clear that social and ethical responsibilities can have a huge impact on a company’s bottom-line – whether that be due to sustainable practices like Starbucks C.A.F.E. program which ensures ethical and sustainable sourced coffee and being view positively by their customers while still being extremely profitable; to the cautionary tales like Nike in the late 90’s where their stock tumbled 40% and they lost 15% market share over unfair labor practices.

Ultimately, it comes down to the corporate culture of the organization, and understanding that we’re here to optimize the supply chain for all of the stake holders involved – customers, vendors, stock holders, employees, and the communities your business impacts.

2) Beyond ethical concerns about environment, health, and safety – how do companies weigh/protect against the potential theft/adoption of proprietary technology?

This is definitely topical with the current trade war between the U.S. and China.  In the past the Chinese government has been very lax in policing and enforcing intellectual property rights and I think this falls right inline with an ethical supply chain discussion because companies need to know that the trade secrets that provide them differentiation or a competitive advantage aren’t being negated.  Losing proprietary technology or other intellectual properties could mean that business stakeholders are impacted – lower stock prices, layoffs, or in some cases even national security.

It’s a very complex issue, and I think most companies are taking a wait and see approach, because most outsourcing is done in locations like China where the government has so much leverage that organizations have few options if they want access to sell in those markets.

3) For smaller organizations who may just be getting started in outsourced supply chains, what recommendations do you have for managing an ethical supply chain (vetting new suppliers, verifying compliance, etc.)?

Definitely think that every organization should start by building a vendor compliance document that focuses on labor (health, safety, wages), environmental (sustainability, safety, legal), and upstream compliance; meaning their vendors.  Get a group of your organizations stake holders around a table and highlight issues that are important to your business or that could be potentially harmful and start drafting a document.  Also, you should develop an SOP for vendor vetting and on boarding process to get the ball rolling.  The most difficult part is probably in identifying a compliance regimen, whether it’s is an in-house department or an independent third-party to audit vendors, it’s necessary to ensure that suppliers maintain their commitments.  Your organization should also consider how transparent they wish to be with their supply chain programs.  Some companies, such as Patagonia, utilize their efforts in their marketing and openly list their suppliers on their website to act as a social check/balance for their suppliers.

Source Articles:
Forbes | Building Sustainable & Ethical Supply Chains
https://www.forbes.com/sites/dougguthrie/2012/03/09/building-sustainable-and-ethical-supply-chains/#20ddf5c44179

The Brew & Tasting Notes:

True Vine Brewing – Chocolate Milk Stout

“Aptly and creatively named “Chocolate Milk Stout”, this beer brings together the natural chocolate flavors of roasted malts, the silky smoothness of milk sugar, and the perfect sweetness of real chocolate.”

Original Gravity: 0
Bitterness: 40 IBU
Alcohol Content (ABV): 6.0%

Produced by LTS Studios, an in-house division of Lift Truck Supply, Inc. – a full-line provider of Toyota forklift equipment, service, parts and rentals. LTS – Your Forklift Accessory & Parts Headquarters