Ethics is increasingly important throughout the procurement industry and the entire supply chain.
Two of the most pressing issues affecting UK public procurement are social value and ethical supply chains. These themes have the potential to reshape how procurement is practised across the country as the UK is introducing new measures to promote ethical procurement.
New measures to strengthen the Modern Slavery Act
On 22 September, the government introduced new measures to ensure that large businesses and public bodies tackle modern slavery risks in supply chains.
On the government website, it states that:
“The government is committed to harnessing the spending power of the UK’s public sector, accounting for around £250 billion of spend, to ensure responsible practices in supply chains and bring it in line with businesses…
“Moving forward, public bodies which have a budget of £36 million or more, including local authorities in England and Wales, will be required to regularly report on the steps they have taken to prevent modern slavery in their supply chains.”
The government has committed to mandating the key topics that modern slavery statements must cover (e.g. due diligence to risk assessment), to encourage suppliers to be more transparent about the work they are doing to ensure ethics and social value are part of the procurement process.
Safeguarding Minister Victoria Atkins said:
“Sadly, we know that no sector is immune from the risks of modern slavery, which can be hidden in the supply chains of the everyday goods and services we all buy and use.
“We expect businesses and public bodies to be open about their risks, including where they have found instances of exploitation and to demonstrate how they are taking targeted and sustained action to tackle modern slavery.”
Ethical supply chains
It is important that organisations consider not only their practices when it comes to social value and ethics, but also their entire supply chain, and how it addresses – or does not address – moral issues such as modern slavery and corruption.
CIPS CEO Malcolm Harrison stressed at Procurex National 2019 that “choosing an ethically responsible supplier is incredibly important” – to end users, stakeholders, and even potential employees. “People are thinking about who they’re going to work for based in some part on the ethical reputations of those organisations”, said Mr Harrison. Ensuring ethical procurement is more than just ‘good PR’ for companies – it can contribute to the amount of business companies receive.
Given that procurement exercises can involve complex relationships between many different organisations, there is potential for many unethical practices to become involved somewhere in the supply chain. These can range from illegal activities such as modern-day slavery and corruption to broader issues such as disregard for the consequences of climate change.
Even if a company is ensuring good practice themselves, their supply chain may involve an organisation engaged in unethical working practices. These issues are as relevant to exclusively UK-based supply chains as those that work internationally – for example, the Government estimates around 13,000 people are working in slavery-like conditions in the UK.
The public sector must lead by example
The Government has pledged that by 2022, a third of Government spend by value will be with SMEs either directly or as part of the supply chain. However, simply contracting SMEs is not enough – buyers need to show that they are treating smaller companies fairly.
Mr Harrison claims that certain large organisations “balance the books” by deliberately delaying payments to some of their smaller suppliers, something he says is quite simply “ethically wrong”. Therefore, the Government is doing more to lead by example, aiming to pay 90% of its undisputed invoices to SMEs within five days.
Since September 2019, processes have become much stricter. Large suppliers that bid for government contracts valued at above £5m a year who cannot demonstrate that they are paying 95% of their invoices within 60 days stand to be excluded from future government contracts.
Ensure you are managing your supply chain effectively
Organisations need to ensure that they are taking social value seriously – but also that they are seen to be working with companies that take it equally seriously. Serious reputational damage and a loss of custom may be consequences of including ‘unethical’ companies in your supply chain.
Delta is an all-in-one solution allowing buyers to manage every stage of the procurement process and supply chain. The Tender Management tool facilitates sharing and storing information throughout the entire tendering process, meaning it can be easier to specify social value requirements in tenders and cross-reference responses.
Meanwhile, Delta’s Supplier Management tool allows for closer and more detailed interactions with both new and existing suppliers from a central hub – meaning more transparent work with local suppliers. All of this makes it easier to check suppliers’ credentials and to ensure the local economy agenda is being fulfilled. Above all, Delta aims to make managing the supply chain from end to end easier – meaning greater clarity on the issues that are important to buyers and service users.
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