Being an ethical company isn’t enough anymore. These days, leading brands are judged by the company they keep. Consumers, investors, business partners, regulators, and media organizations now expect a company and its entire supply chain to be ethical. Sooner or later, every company is bound to find itself part of a supply chain that experiences a significant ethics or compliance violation. When this happens, chances are great that the biggest brand in the chain will get stuck with most of the blame.
The supplier-generated ethics scandal is probably one of the biggest (and least foreseen) business risks most leading companies face today. The damage can be great, and protective measures can and should be adopted immediately. The good news is that feasible, affordable solutions exist and can be implemented relatively quickly and painlessly.
What is the ethics problem in the supply chain?
Almost every company (in its role as “purchaser”) buys unfinished inputs provided by many other companies (called “suppliers”), before refining them and sending them downstream toward their ultimate end-users (known as “consumers”). Simply put, the ethics problem in the supply chain is that consumers often blame purchasers for ethical lapses that were actually committed further upstream by suppliers. Blame attaches to the purchasing company even though its suppliers are legally (and factually) distinct and independent corporate entities. The ethics problem in the supply chain is a lot like a phenomenon many people first encounter in grade school: getting blamed for something you didn’t even do!
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