Ethics and the Organisation

The impact of ethical standards on procurement and supply has  never been more important in todays challenging environment. Social accountability, ethical behaviour and integrity are key for both the organisation and its employees to ensure sustainable and socially responsible procurement practice. 

Below we discuss everything from Organisational Culture, Integrity and Ethics for the Individual to What Are Human Rights?  By exploring Ethics and the Organisation, you can expand your knowledge and start implementing a more ethical workplace today. 

1. Organisational Culture, Integrity and Ethics for the Individual

When you are looking to buy products or services, the ability to deliver at the right price and the right quality are the most obvious considerations. But it is also important to take into account how a supplier conducts its business and the reputation it has in the community.

Today there is much discussion about ethics in business. What are ethics? They are a set of moral principles or values about what constitutes ‘right’ from ‘wrong’.

Ethics should be at the centre of your own organisational culture, becoming ‘the way we do things around here.’ The values and beliefs of the organisation should be reflected in how the people in the business behave towards one another.

Organisational culture

Your management and employees should understand the importance of professional integrity. This means being honest and trustworthy, adhering to ethical principles and values. They must know that they are expected to meet the highest standards with regard to issues such as bribery and corruption, modern day slavery, the environment and equal opportunities, regardless of age, gender, faith or race. It is important for senior managers to lead by example, being held to the same high standards that are expected of employees.

Remember that all those who work within your organisation will be influenced by the behaviours, attitudes and beliefs they bring from outside their work. Religion, native language, socio-economic status, educational and work background all have an impact on how a person behaves as well as how others view them. This is why it is important to have an open and continuous dialogue at work about what your organisation expects of them. This can be reinforced by having a written Code of Practice for all employees.

Primary and secondary characteristics of diversity which will influence an individual’s ethics

Employees must be able to trust their senior managers to support them in making positive ethical choices, such as refusing to be party to fraud; not discriminating in the award of tenders; or refusing gifts or hospitality which might be perceived as an attempt to influence a buying decision. They should be able to say: “This is not the way we do things here,” without fear of being penalised or victimised.

It is important to consider your suppliers’ organisational culture. Do they do business in a way that is acceptable to you? Does it meet the same ethical standards expected of your own employees? Are their business practices acceptable to your own end-customers?

These are important questions, because if your suppliers’ organisational culture is not acceptable to any party in the supply chain, it can lead to the loss of business and damage to the reputation of your organisation. For example, if one of your suppliers is investigated for making illegal payments, this could have an impact on your own organisation.

Putting ethics and integrity at the centre of your organisational culture is the right thing to do but it is also good for your business.

2. What is a Code of Practice?

Many organisations have a Code of Practice, a written set of rules which explains how people in an organisation or profession should behave. Codes of Practice are adopted from institutions like CIPS who set a benchmark and standard of professional behaviour and integrity. They complement laws and regulations and provide practical guidance on how to comply with legal obligations.

A written Code can be a positive resource to inform and educate employees from different cultures and backgrounds. It helps to create and reinforce one, single organisational culture and identity which brings everyone together. It should promote an understanding of diversity and widen knowledge to make sure that all employees appreciate each other’s behaviours.

A Code of Practice is important to support those who work in Procurement because they engage with external organisations that may have different standards and their decisions can affect outcomes with a high monetary value. A written Code will give procurement teams an indication of how they should behave and the professional integrity they should practice. It will also give them confidence that being open and transparent will be valued by their organisation.

Each organisation’s written Code of Practice will be different, depending on their own circumstances. But there are likely to be common aims and expectations.

For example, the CIPS Code of Practice includes the following commitments:

• Comply with the law, in spirit and practice
• Be alert to the risk of fraud, bribery and corruption
• Always raise the alarm when fraud or bribery is discovered
• Respect everyone’s human rights

A Code of Practice should be written by somebody with authority in your organisation. It is likely to be well-received across the organisation if it is written in partnership with employees at all levels and from different parts of the business.

New employees should receive a copy of the Code of Practice when they join the organisation. This will give them the knowledge they need to act ethically, in line with your organisational culture.

3. Modern day slavery

Modern day slavery is the act of forcing people to work in poor conditions for little or no money.

Modern slavery is all around us, but often just out of sight. More than 40 million men, women and children were victims of modern slavery on any given day in 2016. Of these, 70% were women and girls.

Examples of forms of modern slavery include:

• Forced labour: any work or services which people are forced to do against their will under threat of some form of punishment.
• Debt bondage or bonded labour: when people borrow money, they cannot repay and are required to work to pay off the debt.
• Human trafficking: transporting, recruiting or harbouring of people for the purpose of exploitation, using violence, threats or coercion.
• Descent based slavery: where people are born into slavery because their ancestors were captured and enslaved.
• Child slavery: child slavery occurs when a child is exploited for someone else’s gain. It can include child trafficking, child soldiers, child marriage and child domestic slavery.
• Forced and early marriage: when someone is married against their will and cannot leave the marriage.

Awareness is growing and new laws are being introduced to protect the victims of modern slavery and to penalise those who hold people against their wishes. Risks are also growing for organisations who fail to ensure that they are not encouraging modern slavery by doing business with, or buying products or services from, organisations engaged in modern slavery. These risks may be both operational, in terms of being fined or even shut down, or reputational. Procurement teams can play an important role against modern slavery by acting on suspicions of suppliers who they believe may be guilty of forcing people to work against their will or under unsafe conditions. They should also be aware that under some circumstances, failure to inform the authorities may leave them open to prosecution.

4. Challenges of Corporate Alignment

Adopting an ethical approach to procurement should be about more than just the message. Corporate and social responsibility should be at the centre of your organisational culture. A message of responsible sourcing must be backed up by actual facts. This is what is known as ‘corporate alignment.’

For example, an organisation may say it supports human rights. But this potentially positive message will have a negative impact on its business and reputation if people find out that the organisation buys products manufactured by child labour. Similarly, an organisation that says it is working to protect the environment will not be excused for using packaging that cannot be recycled.

Corporate alignment on ethical standards is particularly important if you supply products and services to health organisations in the public sector. Today, such organisations are likely to have tough policies on issues such as modern slavery and harm to the environment, and are accountable to taxpayers.

5. What are Human Rights?

Human rights are the basic rights and freedoms that belong to every person in the world, from birth until death. They must be respected and supported in the workplace, just as in every other aspect of our daily lives.

Most countries have national and/or regional bodies committed to ensuring that human rights are protected at work. Broadly, these bodies take their lead from the International Labour Organization (ILO), which form part of the United Nations.

The ILO has set minimum standards for workers’ rights. These include:

• Freedom of association and the right to collective bargaining
• Elimination of forced labour
• Abolition of child labour
• Equal pay, regardless of gender, age, race or faith
• The right to a living wage
• Humane working hours with no forced overtime
• Safe and healthy workplace free from harassment

Your organisation’s Code of Practice should reflect these minimum standards.

Organisations are subject to laws, standards and codes regulating corporate conduct which have human rights at their core. These include:

• International Bill of Human Rights
• Regional protection and institutions
• Domestic measures and legislation

The increase in cross-border business means that procurement specialists need to be aware of international legislation affecting human rights in the workplace.

6. Legislation around Ethics and Human Rights

Teams responsible for sourcing products and services for your organisation must be aware of the laws under which they are working in their job. It is important for them to have access to training on legislation around ethics and human rights. They must also be assured that the organisation will support them in applying these laws in their work.

Countries have different laws so it is good practice to research relevant legislation before working with suppliers who are based in different countries. Contract law varies, so buyers must be aware which country’s legislation applies. If the country does not have a relevant law regarding the procurement activities they are required to undertake, the CIPS Code of Practice should be applied and followed.

Global treaties and policies around ethics and human rights include:

• Human Rights Law, Standards and Codes

The International Bill of Human Rights lays down obligations which States are bound to respect. By becoming parties to international treaties, States assume obligations and duties under international law to respect, to protect and to fulfil human rights. Through ratification of international human rights treaties,

Governments undertake to put into place domestic measures and legislation compatible with their treaty obligations and duties. The Bill comprises the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and its two Optional Protocols, and the International Covenant on Economic, Social and Cultural Rights.

• Fraud, Bribery and Corruption
  • Inter-American Convention Against Corruption
  • African Union’s Convention on Preventing and Combating Corruption
  • Council of Europe’s Criminal Law Convention on Corruption
  • European Union’s anti-corruption policy, outlined in Article 29 of the Treaty on European Union and carried out via two main instruments:
    • The Convention on the Protection of the European Communities' Financial Interests (1995) and
    • The Convention against Corruption Involving European Officials or Officials of Member States of the European Union (1997).

7. What to do if you suspect procurement fraud

Organisations should have plans in place to respond to a suspicion of fraud, bribery or corruption. All staff need to be made aware of these plans.

A response plan can be part of your organisation’s overall approach to fraud and bribery, alongside policies on ethics and your Code of Conduct.

Key principles must underpin the response plan.

They are:

• Independence
• Honesty
• Training
• Support for whistle-blowers, including protection from internal sanction and/or intimidation

There are a number of steps your organisation can take to prevent and combat fraud, bribery and corruption. These include:

• Training and awareness programme
• Sharing a reporting hotline number
• Anti-corruption contract clauses
• Joint review of supplier performance and corruption risk
• Implementation of audit requirements
• Management of suppliers’ use of sub-contractors
• Sharing anti-corruption policies
• Monitoring quality assurance
• Sound financial processes including separation of duties

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