- March 25, 2018
- Posted by: CSR-in-Action
- Category: Insights
The proliferation of Corporate Social Responsibility (CSR) as the most important index of business success in the 21st century is systematically disrupting the way businesses operate. To ensure that businesses conform to CSR best practices, civil society organisations, regulatory bodies and sustainability conscious consumers now go the extra mile to scrutinise and check the practices of corporations and the vendors or suppliers that they do business with.
Vendors are businesses or individuals that provide goods and/or services to other businesses. They primarily deliver the raw materials and resources that a company needs for production and are no doubt very important stakeholders in the organisational structure of businesses. Vendors have an indirect effect on business aspects such as product quality and price. It is therefore axiomatic that multinational corporations and small-scale businesses depend largely on vendors to meet their demand which has increased to dizzying heights owing to a surge in human population and the advent of globalisation.
Cases like the Sodexo and Mattel scandals have made the scrutiny of vendors and their entire production value chain a top agenda issue for businesses. To avoid dangerous scandals that may have debilitating effects on their bottom line and reputation, businesses now take the pain to check and double check their vendors to make sure that the entire value chain conforms to CSR expectations.
Sodexo, a food distribution company headquartered in Paris suffered a big blow to its global financial and reputation capitals in the year 2012 when it was discovered that the frozen strawberry it sourced from vendors in China and supplied to Germany contained norovirus which poisoned 11,000 German school children who ate the frozen strawberries as part of their school lunch. In the same vein, Mattel, the world’s largest toy manufacturing company in 2007 had to recall 19 million toys produced by their suppliers in China because the toys were covered in lead paint.
Corporates are now constantly challenged by prospective investors, shareholders, governments and consumers for the actions and inactions of their vendors; ignorance not being an excuse. As a result, suppliers are more compelled than ever by corporates to act in line with the principles of social responsibility in their businesses. Businesses now set stringent rules and standards for their suppliers to abide with and from time to time conduct vendor audits. Vendors are under increased pressure to espouse ethical and honest business practices and pay meticulous attention on environmental preservation and resource use efficiency. Some multinational companies now compel their suppliers to disclose energy and climate data. Fundamental human right issues like discrimination, gender bias, child labour, employee relations and so on are also not taken lightly in the scheme of things.
The Responsibility Corporates owe Vendors/Suppliers
It is of importance to state that in their quest to conform to the ethos of corporate social responsibility, corporates also owe their vendors certain duties like they expect of them. The relationship between businesses and their suppliers is supposed to be mutually beneficial and not parasitic. Rapid technological advancement and globalisation has stiffened competition and has eaten deep into the bottom line of many vendors and suppliers. Corporates should therefore try as much as possible to ease their burden by supporting them.
Sharing innovation and sustainability knowledge is one of the fundamental responsibilities of businesses to their vendors. This kind of knowledge sharing arrangement will improve the efficiency and competitive advantage of vendors and position them to serve better. In the end, it is a win-win situation for both parties as skilled vendors will offer quality goods and provide sound services that will generate immense value for the company they serve.
Involving vendors in product design and development brainstorming sessions can be a gateway to innovation and creativity. Research has revealed that majority of the companies that carry their stakeholders along in product improvement and development processes are more innovative and record very minimal levels of disagreement with stakeholders. Giving vendors an opportunity to contribute in the product design and development process makes it easy for them to align their strategies with the organisation’s goals and expectations while equipping them to make accurate decisions regarding the products and services they provide.
Moreover, corporates should have open and honest communication channels. Businesses must communicate needs and expectations to their vendors clearly to avoid mistakes. Corporates should be more engaging, more transparent and respond directly to the concerns of vendors. Information on key changes in production and strategy patterns should be passed across in due course so that vendors can make necessary adjustments in a timely manner. Companies that withhold vital information from vendors do so at their own peril.
In addition, the fact that companies pay for the goods and services that vendors provide does not mean such should be used indiscriminately. Corporates should under no circumstance use the materials produced by their vendors inappropriately as such action can soil vendors’ reputation and even push them out of business.
Most importantly, vendors have a need for funds just like the businesses they serve. To stay in business, they need to purchase materials, pay salaries and make a tidy profit. Hence corporates must endeavour to pay suppliers on time and do away with sharp practices that can adversely affect their bottom line.
The tenet of Corporate Social Responsibility will only thrive, and yield expected societal benefits when corporates and vendors work together as partners to create equal value towards the achievement of business success.
- Corporate Social Responsibility in Supply Chains of Global Brands: A Boundaryless Responsibility? Clarifications, Exceptions and Implications. Amaeshi K., Osuji O., & Nnodim P. Journal of Business Ethics, Vol. 81, no 1, pp. 223-234, 2008.
- AA1000 Stakeholder Engagement Standard. AccountAbility, 2015.
- Corporate Social Responsibility in Buyer-Supplier Relationships: Is it Beneficial for Top-Tier Suppliers to Market their Capability to Ensure a Responsible Supply Chain? Leppelt Thomas, Foerstl Kai, Hartmann Evi. Econstor, 2013.
- 3 Tips to Win Over the Corporate Procurement Team. Meghan Ryan. GreenBiz, 2018.