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