Ethical Standards in Supply Chain and The Responsibility of Companies

The increased importance that is being given to outsourcing is making many companies to outsource a major part of their operations to other companies. This results in long supply chains for the supply of raw materials and components that are required for running their business operations. The performance of these third party companies that supply raw materials and components impact the performance and reputation of businesses. As a result of the dependence of firms on other smaller businesses, they have now realized that their supply chains’ policy and processes say a lot about the kind they are and the values they hold (Walker, Sisto, and McBain 2008).

Lack of a ethical standards in a firm’s supply chain can result in severe public relations backlashes against them. The public relations disaster that the big names in the fashion industry faced when the Rana Plaza garment factory of Bangladesh collapsed is one of the instances which highlight the importance of maintaining proper ethical standards in a company’s supply chain (Girotra 2014). The increased dependency on suppliers makes it imperative for companies to come out with the right supply chain configurations which will make it possible for them to create a network that is not only effective in meeting the business objectives but also in projecting a right image of the firm among the public. But maintaining the right balance is a challenge between profitability and maintaining an ethical supply chain remains a key challenge for businesses around the world.

The first challenge in taking up the responsibility of ethical practices is that even though businesses have long term contacts with their suppliers they often have very limited impact on their business operations. The second challenge is the uncoordinated nature of the global supply chains. Many operations managers now agree that the diversity of fowarders and suppliers which supply inputs is reducing the visibility of supply chain practices. Many firms use a hodge podge carrier tracking systems, spreadsheets, etc. which makes it difficult to understand the business practices followed by each of the supply chain partner is practicing ethical business practices or not. The last challenge in companies taking up responsibility for ethical standards in supply chain are socio-cultural. What is considered to be ethical in one country is not considered to the ethical in another country. The global supply chains on which many companies rely make it imperative for companies to rely on suppliers from countries where alleged human rights abuses take place. For e.g. many analysts allege human rights abuses in China from where many countries source their inputs. Challenges like the ones elucidated make it difficult for companies to take responsibility for ethical standards in their supply chain.

 

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