The Benefits of Creating a Company-Wide Ethics and Risk Management Framework


The Benefits of Creating a Company-Wide Ethics and Risk Management Framework

There are many benefits to this type of formal, enterprise-wide approach to ethics and risk management. A formal written policy, dedicated resource, and high-level sponsorship all help to create a framework for differentiating between acceptable and unacceptable behavior, and for demonstrating to employees, suppliers, investors, and customers the company s intentions to require their suppliers to behave in an ethical way. It also ensures that company employees understand the importance of corporate ethical values and are actively encouraged to identify potential risks in the supply chain as they arise. -

In short, this type of formal ethical framework is a company s best opportunity for early identifi-cation of risk, and its first line of defense against accusations of indifference or unethical behavior. After all, employees, particularly in the procurement and sourcing functions, are a company s closest contact with suppliers and business partners , and need to understand that as front-line employees they have a responsibility to identify social or environmental issues in the supply chain.

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Intel s Ethical Supply Chain Framework

Intel provides a good example of this type of ethical supply chain framework. The company s board and senior management have been actively engaged in the development and implementation of their CSR program, and they have a dedicated CSR Manager to coordinate and champion all ethical supply chain activities. The company has had various longstanding environmental, health, and safety programs, and has already been completing some form of compliance auditing for some time, including some 200 assessments done each year worldwide on their suppliers. They already maintain control of waste products, and ship these back from their various sites in developing countries in order to avoid having to burn the materials. Their Product Ecology group looks at all issues concerning manufacturing, use, and disposal of products, and these efforts are coordinated with their Issues Prevention and Management group, which serves as the company s risk management function, providing both the early alert and incident management activities for the company. That group is also tied directly into Intel s customer service centers, which screen for any social, environmental, or ethical issues, and forward those issues on to the Issues Prevention group and other appropriate departments. These several departments then meet with the Corporate Social Responsibility department on a regular basis to coordinate activities company-wide.

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Let s turn now to the specific elements of this ethical framework.



Chapter Eight: Choosing an Aspirational Code of Conduct

Overview

As an early step to the development of an ethical supply chain, most companies will want to consider adopting one of the several aspirational codes of conduct that have become so widely accepted globally. As appropriate, a company will want to become a signatory of an active compact, or may simply want to adopt the principles as part of their own company ethical policy, incorporating it into the current company code of conduct.

Over the past two decades, as growing globalization trends and pressures have emerged, a variety of NGOs, churches , and international forums have proposed a number of codes of conduct for companies, particularly with regard to labor rights issues in developing countries . The best known of these early codes included the Rutgers Principles, the Global Sullivan Principles, the OECD Guidelines for Multinational Enterprises, and the Interfaith Center on Corporate Responsibility, all of which set the initial tone and quality standards for the more formalized codes of conduct that were to follow.

These codes did not require any formal certification (although the Global Sullivan Principles now requires companies to complete a yearly, unaudited performance report), but encouraged companies to aspire to work toward common goals of human rights, social justice , and economic opportunity. And although these early codes of conduct came about far too early in the development of the global SEAAR movement to have widespread influence, they nonetheless had some notable successes. One of these was the Global Sullivan Principles, lead by the Rev. Leon Sullivan in South Africa, which helped persuade 11 major corporations, including General Motors, to withdraw from South Africa in protest against the government s policy of apartheid.

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Aspirational Codes of Conduct

These include the many forums and international codes for labor rights and environmental sustainability that serve as pledges ” to which companies aspire to adhere . These codes usually reflect similar values ” protection of human rights, outlawing bribes, providing safe and healthy working conditions for employees , or actively protecting the environment. Although seldom enforceable, and often based on elastic clauses such as a living wage or do no harm to the environment, they nonetheless provide a loose but growing coalition of willing companies with broad guidelines for behavior.

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Today, five of these important aspirational codes of conduct have become dominant, each more or less reflecting the same social and environmental principles ” support for human rights, protection of the environment, promoting equal opportunity employment, respecting employees freedom of association, and providing a safe and healthy workplace ” but each with its own separate emphasis or approach.