Business ethics final: ch 17 business and its suppliers

monitors supplier's performance to determine if it is in compliance with relevant code of conduct

audit

occurs when supplier factories must endure audit after audit conducted by different buyers

audit fatigue

companies are working together to

audit major suppliers and share reuslts

lead firms can provide a variety of rewards or incentives to suppliers that collaborate to build

capabilities

lead firms decide to engage in this because the cost of switching suppliers is too high

capability building

private regulation often takes the form of company and industry-wide

codes of conduct

advantage of internal audit

company controls and manages the process

most audits turn up at least some instances in which a

company's global operations are not in compliance

Common industry-wide standards: common standards improve

compliance

firms invest in supplier social responsibility in order to reduce

costs

a company may decide to capability build because a supplier may have

critical capabilities

gathers information about factory conditions directly from workers using mobile phones

crowdsourced audit (Laborvoices)

firms invest in supplier social responsibility in order to create a positive

customer image and enhance brand equity

Reasons for private regulation: weak regulatory capacity in

developing countries

low wages are one of the main reasons that brands contract with suppliers in

developing countries

firms invest in supplier social responsibility in order to avoid

disruptions

suppliers may have both

economic and informational power

arise when a supplier of raw materials contributes to climate change, dumps toxic chemicals, emits air pollution, or reduces biodiversity

environmental issues

drawbacks of audit: on-site inspections are

expensive and time-consuming

also called a third-party audit; hire another organization to carry out the audit and report back

external audit

transnational companies that depend on resources that are ________,___________, or _________ are at risk for human rights abuses by suppliers

farmed, extracted, or mined

as the manufacturing supply chain has become increasingly globalized, its regulation has become more

fragmented and ineffective

capability building initiatives work best when interactions between buyer and supplier are

frequent and ongoing

firms invest in supplier social responsibility in order to satisfy

government regulations

private governance is most likely to emerge in global supply chains under several conditions, with large lead firms

having leverage over smaller suppliers

seen as the most important social and environmental responsibility issue in supply chains

health and safety

private governance is most likely to emerge in global supply chains under several conditions; firms and products have

highly visible brands

Reasons for private regulation: lack of jurisdiction of

home country governments

companies that run operations in countries with anti-democratic, repressive regimes can be caught up in

human rights violations

modern-day slavery--the illegal recruitment and movement of people against their will, usually for economic gain

human trafficking

drawbacks of audit: workers sometimes distrust auditors, not knowing

if they represent the supplier, brand, or independent party

disadvantage of external audit

information delays and no control

suppliers provide critical

inputs

rate suppliers on multiple dimensions

integrated supplier scorecards

company hires and trains its own staff of auditors whose job is to inspect factories to determine if they are in compliance

internal audit

choices in carrying out an audit

internal or external audit

companies have developed organizational mechanisms to resolve differences in priorities

internally

a company may decide to capability build because the lead firm may feel morally obligated to workers and local communities and does not want to inflict

job loss

seeking to to source from nearby suppliers where practical to improve supply chain effeciencies

local sourcing

some companies have responded to environmental concerns by

local sourcing

most suppliers share an interest in obtaining orders that will enable them to

make money, use their productive capacity efficiently, build long-term, stable relationships with business customers

Common industry-wide standards: reduce the costs of

monitoring since brands can share audit results

advantage of external audit

objective and credible

technology makes supply chain transparency possible at

point of purchase

non-governmental institutions that govern, enable, and constrain economic activities

private regulation

firms invest in supplier social responsibility in order to allay

public criticism

a company may decide to capability build because other suppliers may not be

readily available

if a company's customers believe its products are made in sweatshops

reputation can be harmed

private governance is most likely to emerge in global supply chains under several conditions: civil society is exerting pressure for

responsible practices

determine the underlying cause of repeated violations of particular code requirements or standards

root cause analysis

firms invest in supplier social responsibility in order to increase

sales

suppliers often manufacture inputs that companies then

sell to customers under their own brand

research shows that when companies invest in suppliers and their employees, exchange knowledge, and collaborate on improvements, they create

shared value that benefits both parties

private governance is most likely to emerge in global supply chains under several conditions, a strong business case can be for

social and environmental responsibility

global supply chains have many

social impacts

three key issues in global supply chains

social issues, ethical issues, environmental issues

suppliers are more likely to engage in capability building when lead firms are prepared to offer them

stable and long-term contracts

disadvantage of internal audit

stakeholders see reports as less credible

some governments require foreign firms to partner with

state-owned companies

organization that provides goods or services to another organization

supplier

activities undertaken by companies to improve the performance of firms in their supply chain

supplier development

the multiple steps involved in the movement of a product or service from the most distant supplier to the customer

supply chain

in the absence of effective public regulation, many companies and industries have established rules for their suppliers through their own voluntary

supply chain codes of conduct

what happens in a company's supply chain is fully disclosed to stakeholders--as if seen through a clear glass window

supply chain transparency

because of the complexity of supply chain systems, firms sometimes refer to them as

supply webs or networks

a derogatory term referring to factories where workers toil long hours, at low wages, and under unsafe conditions

sweatshops

if an audit reveals a gap, most companies will

terminate a supplier

lead firms often categorize their suppliers according to

tier (level)

hired to manufacture products and provide them directly to the company

tier-1 suppliers

may work with even more distant suppliers

tier-2 suppliers

supplier development can take several forms

training, joint problem-solving, investing in equipment

Reasons for private regulation: limited enforcement power of

transnational institutions

drawbacks of audit: audits are not always

unannounced

suppliers are also known as

vendors/contractors

prominent among the social impacts of global supply chains are

wages, working conditions, and health and safety of employees