Simple Techniques to Extend Policies Through Your Supply Chain
Written by Shelley Stewart, Jr, Vice President DuPont Sourcing & Logistics and Chief Procurement Officer, DuPont
Ethics make good business sense. This is certainly no surprise to the readership of this publication, and most major companies have a robust ethics program, most likely as the cornerstone of their core values. The challenge is in trying to expand your influence on ethical behavior outside the boundaries of your company to your stakeholders.
As a Chief Procurement Officer, the most important stakeholders I must influence are suppliers. It’s often the case that the further the supplier is from the company headquarters—whether geographically or culturally—the harder it is to have any impact. So, the question becomes: How can companies extend their ethics and compliance programs to third parties and suppliers, especially when they are not within our daily span of control? These three words are key: Expectations, Commitment and Alignment.
Set Expectations Early
I’ve found the best solution is to set clear expectations up front. Doing so will make ethics issues significantly easier when they arise. Companies have several tools available to communicate expectations around ethics and compliance. I talk about the limits of a strictly compliance-based approach below, but clarity around expectations is the foundation of a strong ethics program with your suppliers.
At DuPont, we have our Supplier Code of Conduct. Officially rolled out in 2013, it clarified, for the first time in one place, DuPont’s expectations of suppliers in four areas, each corresponding to one of our core values: Safety, Environmental Stewardship, Respect for People and Ethics.
The section on ethics begins very simply: “DuPont is committed to conducting our business affairs to the highest ethical standards and in compliance with all applicable laws. We work diligently to be a respected corporate citizen worldwide and expect our suppliers to do the same.” It continues by detailing requirements for legal compliance, includes a strict prohibition on paying bribes or accepting gifts, addresses conflicts of interest and protects intellectual property.
It’s important to establish the “bright line” with ethics early in a relationship. A document akin to a Supplier Code of Conduct helps establish that line. It helps eliminate suggestions that we operate in the gray areas. For example, a bribe paid by your customs broker is still a bribe paid by your company. It’s essential to make it clear that certain practices don’t have gray areas.
Another example is when local customs may conflict with policy, such as gift giving. A consistent response on the part of every employee and agent of your company is necessary to keep that bright line visible, which means your internal organization must understand your expectations as clearly as your suppliers. Certainly there will be areas of different understanding, but these can be resolved with open dialogue, backstopped by the Code of Conduct.
Commitment Versus Compliance
While establishing “the rules” is essential, compliance is only part of the picture. If you want your core values to resonate with your suppliers so those values can seep down to their suppliers, a mindset based strictly on compliance isn’t enough.
For years, the tagline for DuPont’s core values was “The Goal is Zero”: zero violations, zero injuries, zero ethics incidents. Then we had a change in approach; instead of having a “goal” of zero, we have worked to establish a “commitment” to zero. This difference may seem subtle in wording, but it’s huge in mindset. Over time, every single person has grown to own this commitment. We know our role in achieving zero, and that it extends beyond what we say and do to what we see and hear. We act accordingly, because it’s intrinsically the right thing to do, not because it’s mandated.
This has been a successful approach to safety and we’ve shared this mindset with our suppliers. Thinking “I want you to go home safely tonight” instead of “that’s an OSHA violation” demonstrates a successful switch of mindset. Ethics can be, and is being, managed like safety so people are committed, not merely compliant, with the highest standards of ethical behavior.
Common Goals Create Alignment
Many outside our line of work have a skewed vision of procurement. They think we demand lower prices, suppliers resist, we threaten, someone “gives in” and the other party “wins.” This may have been true in the past, but it’s not how true value is realized.
Without writing a white paper on “The Win-Win of Procurement,” know that there are many aspects of complicated deals that allow both parties to achieve a winning result. Additionally, suppliers can be a major source of innovation—if their customers let them. They bring you a new idea; you bring them a new market. Mutual goals create alignment. Similarly, a shared dedication to core values reinforces a relationship, creating more shared value. Violations change from being a breach of terms, with defined penalties, to a breach of mutual trust.
Engagement Requires Repeated Exposure
None of this works as a one-and-done proposition. Every encounter with suppliers is an opportunity for further engagement, an opportunity to model our commitment. Internal DuPont meetings begin with a “Core Values Contact,” a brief discussion about one of our core values. Within the Sourcing & Logistics organization, we now have a global ethics team whose objective is to increase ethics awareness internally and externally. We are developing a portfolio of Core Values Contacts for supplier meetings that emphasize elements in our Code of Conduct. They not only reiterate our expectations, but also show that this shared commitment is important to us.
So, to summarize, to extend your ethics program to your suppliers, be clear about expectations, create alignment, and most importantly, repeatedly show your own commitment. When it’s clear you “walk the talk” and live your core values every day, others are more likely to be committed as well.
