Ethical Procurement Case Studies

Two case studies are presented which demonstrate how healthcare organisations are dealing with ethical trading issues.[1]

Guy’s and St Thomas’ NHS Foundation Trust is responsible for three hospitals, and various community centres and services, in the Lambeth and Southwark area of London. One of the largest Trusts in the UK by revenue, it spends circa £600m on goods and services each year.

WHAT WAS BEING ADDRESSED?
Some surgical instruments have been traced to unsafe and unethical manufacturing environments. Workers in these environments are at risk of injury and labour rights violations, such as sexual harassment, poor conditions and unfair wages.

WHAT ACTION WAS TAKEN?
After learning about the issues, Guy’s and St Thomas’ embarked on a programme of activities, working with key suppliers to ensure they understand the impact they have and to establish clear operating standards.

Using the Ethical Trading Initiative’s (ETI) Base Code as a foundation, the Trust developed a Supplier Code of Conduct, which incorporates ethical as well as environmental standards. This code establishes more accountability between suppliers and the Trust:

A dedicated Sustainability Manager was appointed by the Trust to manage this process and work directly with suppliers to improve working conditions in the supply chain. Guy’s and St Thomas’ aims to work with its tier one, tier two and tier three suppliers to understand and improve its entire supply chain.

The approach is supported by the Sustainability Governance Committee, chaired by Trust Chairman Sir Hugh Taylor, and comprising the Medical Director and Chief Procurement Officer, as well as other organisational leaders.

WHAT WAS THE IMPACT OR RESULT?
The Trust now has greater visibility of its supply chain and is confident that it has robust mechanisms in place to tackle potential abuses. Through collaborative working with key suppliers, it has engaged with several medical instrument suppliers to improve transparency, safety and human rights within supply chains.

Guy’s and St Thomas’ will lead an assurance review to ensure that the code is being used and enforced, and will also report on the progress made in working with key suppliers in the medical instrument and supplies market.

WHAT WAS BEING ADDRESSED?
The NHS SC Framework Agreement for Examination and Surgeons’ Gloves was due for renewal. The existing framework contract covered approximately 1000 glove products, used in a range of procedures by the NHS. Examination and surgical gloves supply chains have known and documented labour standards risks. In line with the Ethical Procurement for Health commitments, NHS SC set out to put a framework in place that met customers’ needs and efficiency targets, whilst adding value and integrity to the supply chain.

WHAT ACTION WAS TAKEN?
NHS SC requires all suppliers to sign up to its Supplier Code of Conduct which includes provisions for the protection of labour rights.

In response to increasing scrutiny and interest in labour rights issues in healthcare supply chains, NHS SC (working closely with the Department of Health) developed a bespoke approach that effectively manages ethical and labour risks in supply chains, whilst keeping in line with public procurement requirements.

The Labour Standards Assurance System (LSAS) is a risk management tool that relies on early engagement and communication with the supply base. Similar to a maturity matrix, it comprises four levels of organisational performance in relation to labour standards assurance. Suppliers are made aware that ethical issues are important to the procuring organisation and will become part of contract management. This is done early on, when the Prior Information Notice (PIN) is issued.

As part of contract performance, the successful suppliers have to demonstrate that they have achieved certain requirements at each stage of contract management. For example, 6 months into the contract, all suppliers have to provide independent audits to demonstrate that they meet the requirements of Level 1 of LSAS. NHS SC contract managers ensure that help is at hand when needed; webinars are held to support suppliers.

When the gloves framework was launched, NHS SC applied the LSAS. Labour requirements were articulated in the PIN and webinars were held to support suppliers before and after the contract was awarded. Suppliers now have to demonstrate that they meet each milestone of this 4-year contract.

WHAT WAS THE IMPACT OR RESULT?
The webinar sessions proved extremely useful in raising awareness of the issues, gauging market readiness, sharing useful materials, and preparing suppliers for contractual requirements, as well as providing a forum for discussion with the market on topical issues such as the requirements under the UK Modern Slavery Act 2015.

Despite the strong ethical element of this contract, it does not mean price has been compromised. In fact, £782k (or 1.4%) of savings have already been achieved whilst NHS SC’s procurement team anticipate further price reductions in the future. This is because ethical and labour issues were not ‘bolted on’ but rather they were considered from the outset, as an integral part of the products required and as an expectation of responsible suppliers. In addition to up-front price reductions, further savings are expected throughout the lifetime of this contract through initiatives such as price ranking, developing a core list of products, Trust collaboration deals and product innovation.

[1] https://www.ethicaltrade.org/resources/ethical-procurement-health-workbook