It's harder than ever for organizations to get away with unlawful or unethical supply chain practices. Today's consumers and job applicants are more discerning and socially engaged than any previous generation. What's more, they're increasingly vocal about issues related to the environment, human rights, animal cruelty, and corruption. They're increasingly connected too. Thanks to the advent of social networking, even an isolated incident can quickly evolve into an internet-wide scandal.
A new study from EcoVadis suggests that organizations still have a lot of work to do when it comes to meeting consumer expectations and weeding out unethical practices. Titled "The Fight Against Corruption: Insights Into Ethical Performance in Global Supply Chains," the survey of 20,000 global companies found that the world's average business ethics score is 42.4.
This figure, EcoVadis writes, "indicates most organizations are taking a reactive, unstructured approach to fighting corruption risks." On the report's 1-100 scale, any score below 45 presents businesses with a "medium to high" risk of corruption and the resulting consequences. That the average business falls within this zone is troubling, but that's just the beginning.
The study also found that organizations are unlikely to track and report on ethics KPIs. Across the globe, a paltry 10% of organizations make a point to do so. While the figure is slightly higher (12%) in North America, it's clear that far too few organizations give business ethics the attention it deserves.
Over the last decade, Procurement groups have accepted an increasingly essential and strategic role within leading organizations. The best refuse to take a reactive, unstructured approach to anything. There's no reason the function's duties should not evolve to include anti-corruption efforts across the supply chain. With visibility into supplier relationships, purchasing practices, and all manner of activities at the site-level - Procurement is better positioned than any business unit to identify corruption and demand change.
EcoVadis employs a broad definition of corruption. Their methodology identifies a corrupt practice as "any kind of abuse of entrusted power in the workplace for private gain, taking the form of bribery, conflict of interest, fraud, and/or money laundering." Procurement, too, should operate with a comprehensive understanding of the term. If anything, they should aim for an even broader definition and look to address any and everything that a consumer might identify as corrupt or unethical.
Procurement can start by helping organizations refine their methods for mitigating corruption. Whistleblowing, anti-corruption training, and internal audits are common, but comprehensive risk assessments are shockingly rare. Ecovadis reports that just 4% of companies currently implement this best practice. Evolving security threats and uncertain global markets are already making risk a more and more important consideration for Procurement. Corruption and its consequences are a risk like any other. If they haven't already, Procurement professionals need to introduce ethics and responsibility to their conversations around risk management. An earthquake or cyber-security attack might present a more obvious danger, but unchecked corruption could have even greater consequences down the road.
While it's difficult to quantify the cost of a tarnished brand, it's easy to recognize that public perception matters. This year alone has seen giants like Uber, Facebook, and Wells Fargo devote considerable resources to repairing their image and winning back consumer trust. All three might have avoided these costly re-branding campaigns if they had taken extra steps to identify and address ethics concerns head-on.
Is your business doing everything it can to eliminate corruption and build an ethical supply chain?