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Ethical purchasing practices

Introduction 2Business-to-business ethics 3Social Responsibility 5Implementing ethical purchasing 7Useful websites 11Further reading 12Appendices 13

Tel +44(0)1780 756777 Fax +44(0)1780 751610 Email [email protected] Web www.cips.org JAN 08

Ethical purchasing The purpose of this booklet is to provide advice andguidance to buying organisations on how to developethical purchasing practices in their supply chains.Although intended primarily for buyers, this guidanceapplies equally to anyone who has responsibility formanaging the supply of goods or services from anexternal source.

Every organisation requires an ethical policy or code ofconduct. Ethical supply chain management is becominga mainstream business issue as questions aboutbusiness practice arise (for example Maxwell and BCCI)and media and charity campaigns highlight poorworking conditions in developing countries. TheMaxwell scandal led to changes in UK legislation andpension practice. Increased public awareness of issuessuch as child labour has increased pressure oncompanies to take responsibility for the welfare ofworkers in their supply chains around the world.

The Chartered Institute of Purchasing and Supply(CIPS) believes that buyers should universally apply thepractice set out in this booklet and should encouragetheir own organisations to include good ethicalbusiness practices in all areas of their work. Buyersshould also involve all stakeholders in this process. It isvital that an organisation's chief executive officer visiblyendorses the organisation's ethical policy. The followingguidance provides a basis which buyers may find ofuse in initiating a change of culture within theirorganisation.

CIPS’ Personal Ethical CodeCIPS has a Personal Ethical Code for use by itsmembers. This code sets out principles of integrity,professionalism, high standards, optimal use ofresources and compliance with legal and otherobligations and offers guidance in relation todeclarations of interest, confidentiality and accuracy ofinformation, fair competition, business gifts andhospitality.

The code is the basis of best conduct in the purchasingand supply profession. The CIPS Policy on EthicalBusiness Practices in Purchasing and SupplyManagement expands on the principles in the code andaddresses business-to-business ethical and socialresponsibility issues within supply chains.

BackgroundAs ethical supply chain issues become more widelyknown, stakeholders are starting to question companiesabout their record. There has been rapid growth inethical investment funds that encourage companies tolook at issues of corporate social responsibility.However, although some companies started work onthese issues in the 1980s, ethical sourcing is still acomparatively new concept for most companies.

Campaigning by pressure groups and the media hasfocussed on poor working conditions of suppliers tothe clothing, footwear and sporting goods industries.These campaigns and the resulting pressure fromcustomers and shareholders have been the main driversfor the introduction of codes of practice on ethicalpurchasing among some manufacturers and retailers.

Governments are increasingly taking an interest in theethical trading agenda. The Department forInternational Development (DFID) provides financialsupport for the Ethical Trading Initiative and hasproduced a report reviewing the codes of conduct ofUK companies concerning ethical purchasing. TheOrganisation for Economic Co-operation andDevelopment (OECD) has agreed guidelines formultinational enterprises which cover a wide range ofethical and social issues

Ethical purchasing practicesIntroduction

2 Tel +44(0)1780 756777 Fax +44(0)1780 751610 Email [email protected] Web www.cips.org JAN 08

Relevant legislation, codes and guidelinesThe CIPS Policy on Ethical Business Practices inPurchasing and Supply Management distills aspects ofcurrent developments in the area, including• the Ethical Trading Initiative (ETI) Base Code (see

Appendix 2)• the Core Conventions of the International Labour

Organisation (ILO)• the UN Declaration on Human Rights• SA8000 (a standard relating to social accountability

developed by the Council on Economic PrioritiesAccreditation Agency in New York ,-now known asSocial Accountability International (SAI) (see:www.cepaa.org)

• the Guidelines for Multinational Enterprisesdeveloped by the Organisation for Economic Co-operation and Development (OECD) (see: www.oecd.org//daf/investment/guidelines/index.htm)

Buyers should not assume, however, that compliancewith the CIPS policy implies compliance with any ofthe above codes or standards, as there are somedifferences between them.

Business-to-business ethics There are complex problems to be resolved whenaddressing ethical and social responsibility issues andmany of these issues are extremely sensitive.Recommended best practice includes developing andunderstanding suppliers’ operations and offeringguidance and support when improvement is necessaryor appropriate.

Buyers should seek appropriate guidance, be openabout concerns, and engage positively with suppliersand internal customers or peers, however difficult thatmay be. The resource implications of addressing theseissues must be balanced against the potential risk tothe reputation of the organisation and, in the publicsector, the organisation's requirement to comply with

the EC procurement rules (where the permittedprimary criteria are solely economic).

Buyers have a responsibility for the supply chains fromwhich goods and services come into their organisationor directly to their customers. CIPS believes this shouldinclude ethical as well as commercial and technicalguidance and support.

The CIPS Personal Ethical Code is the starting point fordeveloping a code of practice for business-to-businessethics. The issues include the following:Transparency, confidentiality and fairness• All suppliers should be treated fairly and even-

handedly at all stages of the procurement process.

This means being open with all those involved, so thateveryone, especially suppliers, understands theelements of the process, that is, the procedures, time-scales, expectations, requirements, criteria for selectionand so on. Supplier confidentiality should besafeguarded, and unsuccessful suppliers should bedebriefed with as much transparency about theprocurement process as can be provided, for example,on the weaker aspects of their tender.

Use of power• Buyers should discourage the arbitrary or unfair use

of purchasing power or influence

Power is a key element in supply relationships. Theexertion of undue influence or the abuses of power, aswell as being unprofessional, may contravene relevantlegislation and are unlikely to achieve long-term bestvalue for money.

It is important to ensure compliance with all applicablelegislation, such as restraint of trade and anti-trustlegislation, the Competition Act 1998, in particularChapter II, Abuse of Dominant Position, and the Treatyof Amsterdam, Articles 81 and 82, which address anti-competitive practices and abuse of dominant position.

Ethical purchasing practicesBusiness-to-business ethics

JAN 08 Tel +44(0)1780 756777 Fax +44(0)1780 751610 Email [email protected] Web www.cips.org 3

Ethical purchasing practicesBusiness-to-business ethics


Corruption• Buyers must not tolerate corruption in any form.

Buyers aware of any corrupt activity have a duty to theprofession and to their employing organisations to alerttheir senior management. Bribery is a criminal offencein the UK (and in most other countries) and the law isbeing strengthened to include offshore bribery. CIPSfully supports the Organisation for EconomicCooperation and Development (OECD) convention oncombating bribery of foreign public officials ininternational business transactions.

Declaring an interest• All personal interests should be declared

Buyers should encourage colleagues to declare anymaterial personal interest which may effect, or be seento effect, their impartiality, or judgement, in respect oftheir duties. Examples include owning a significantshareholding in a supplier or close family membersbeing employed by a key supplier.

Business gifts and hospitality • There’s no such thing as a free lunch

The offer and receipt of business gifts andentertainment are sensitive areas for buyers, despitebeing recognised as standard business practice.Organisations should have a clear policy on acceptingbusiness gifts and buyers should encourage colleaguesto comply with any such policy.

Payments from suppliers• Suppliers should not have to pay to be included on

an approved or preferred supplier list.

Suppliers should be selected on the basis of meetingappropriate and fair criteria and should only be invitedto contribute towards the costs of joint projects orinitiatives where there are clear and tangible businessbenefits to the supplier.

Payment terms• Late payments undermine an organisation's credibility

Buyers should ensure that their suppliers understandand agree to the buying organisation's payment terms.Buying organisations should try to ensure that validinvoices are paid in accordance with the agreed terms.Buyers should work with colleagues to ensure thattheir employer's business processes enable payments tobe made promptly.

Barter and reciprocal trading• Where appropriate, barter is acceptable business

practice, but reciprocal trading may not be

Barter is trade by exchange of goods or services forother goods or services. There is no exchange ofmoney and, as barter is not usually a condition ofcontract between two parties, coercion is not an issue,provided both parties have a current business need forthe goods/services of the other party.

However, reciprocal trading which is conditional onsuppliers also being customers of an organisation, isunacceptable business practice. Reciprocal trading isacceptable only when there is no coercion, both partiesare in agreement and there is mutual benefit andtransparency.

Supplier relationships and competition• Relationships with suppliers, regardless of duration,

should be managed professionally

Buyers should manage suppliers, and supply networkscomprising multiple tiers of suppliers, in a professionalmanner. Both short- and long-term contracts have theirplace, but from time to time longer-term contractsespecially should be subject to open and transparentcompetition. Where there is only one supplier capableof meeting the requirements, established internalbusiness controls should be respected in the quest forthe best value for money solution.

Ethical purchasing practicesSocial responsibility


Encouraging small businesses• Buyers should, wherever possible, be aware of

opportunities to support the local community andSMEs, whilst maximising opportunities for globalsourcing

It is good practice to balance the risk of awardingcontracts to new or small suppliers with the opportunityof encouraging new business to flourish. It is not goodpractice to exclude suppliers simply because they aresmall or new to the market. Capability and experienceare examples of relevant supplier selection criteria.However, buyers should also consider the magnitude ofbusiness they award to a supplier, the impact on thatsupplier, and the level of dependence that may becreated. Serious consequences for the supplier canresult if business is removed at a later date.

Social responsibility Some of the worker welfare issues which a sociallyresponsible buying organisation should address whenreviewing its supply chains include forced labour,freedom of association, health and safety, child labour,wages, working hours and discrimination. The CIPSPolicy on Ethical Business Practices in Purchasing andSupply Management distills aspects of currentdevelopments in this area and the mainrecommendations are summarised as follows.

Forced labour• Suppliers should not use forced, bonded or

involuntary prison labour.

Forced labour is described by the ILO as work carriedout under the threat of penalty, the most common typesbeing bonded labour and use of prisoners. Buyersshould ensure that suppliers’ employees are free tochoose to work for the supplier and free to leave thesupplier after reasonable notice is served.

Employment relationship• Employees should have legal contracts

Suppliers should establish recognised employmentrelationships with their employees that are inaccordance with their national law and good practice.Employees should be provided with an easy to readcontract of employment, with particular clarity inrelation to wages. In the event that employees areunable to read, the contract of employment should beread out and explained to them by a unionrepresentative or another appropriate third party.

Suppliers should not do anything to avoid providingemployees with their legal or contractual rights.

Freedom of association• Right to collective bargaining

Workers’ rights may be compromised by constraints onunionisation. To guard against this, buyers shouldcheck that suppliers do not prevent or discourageemployees from joining trade unions, nor discriminateagainst employees carrying out representative functions.

Where the law restricts freedom of association andcollective bargaining, suppliers should positivelyfacilitate alternative means of representation.

Wages and working hours• Living wages are paid

Low wages raise ethical, economic and social problemsin all countries. This is of particular concern in countriesthat produce low-value goods, where low rates of paymake these products competitive in the global market.Governments are not always able to enforce the localminimum wage, and in some countries the minimum isnot enough to support workers and their families. Someaid agencies recommend that workers should instead bepaid a living wage.

Ethical purchasing practicesSocial responsibility


Wages and benefits should at least meet industrybenchmarks or national legal standards. As a minimum,the wages paid to suppliers' employees should meettheir basic needs. Working hours should also complywith national laws or industry standards. Suppliers'employees should not be expected to work more than48 hours per week on a regular basis and overtimeshould be voluntary and not be demanded on a regularbasis.

Treatment of employees• No harsh or inhumane treatment is allowed

Under no circumstances should suppliers abuse orintimidate employees, in any fashion. Suppliers shouldhave a grievance/appeal procedure that is clear andunderstandable and this should be given to the employeein writing. In the event that suppliers' employees areunable to read, the grievance/appeal procedure shouldbe read out and explained to them by a unionrepresentative or another appropriate third party.

Law• Suppliers should always work within the laws of

their country.

Health and safety• Working conditions are safe and hygienic

Occupational health and safety is covered in mostcountries by laws and regulations, which requireemployers to provide a safe working environment andemployees to abide by safety procedures. However, incountries where the laws are not adequately enforcedstandards of health and safety are low in many factoriesand work sites.

Buyers should work with suppliers to introduceappropriate health and safety policies and procedures,which should be demonstrable in the workplace.Suppliers should assign responsibility for health andsafety to a senior management representative.

Working conditions should be comfortable and hygienicand employees should be provided (at the supplier'sexpense) with any necessary health and safetyequipment, such as gloves, masks and helmets. Specifichazards should be identified and risks minimised.Suppliers' employees should have access to clean toilets,be allowed regular breaks and have access to cleanwater as a minimum.

Child labour • Child labour shall not be used

Child labour is a very emotive issue. In principle, CIPSis against the use of child labour and believes its long-term elimination is ultimately in the best interests ofchildren. However, the elimination of child labour mustalways be undertaken in a manner consistent with thebest interests of the children concerned.

Buyers should seek to ensure that their organisation'ssuppliers comply with the following:• Suppliers shall develop or participate in and

contribute to policies and programmes whichprovide for the transition of any child found to beperforming child labour to enable her or him toattend and remain in quality education until nolonger a child.

• Suppliers shall not employ children and youngpersons under 18 at night or in hazardous conditions.

• In any event the course of action taken shall be in thebest interest of the child, conform to the provisions ofILO Convention 138 and be consistent with theUnited Nation's Convention on the Rights of the Child.

Discrimination• No discrimination is practised

Suppliers should have a policy of equality for all in theworkplace, with no discrimination on the basis of race,caste, religion, nationality, age, gender, marital status,sexual orientation, disability, union membership orpolitical affiliation.

Ethical purchasing practicesImplementing ethical purchasing practices


Implenting ethical purchasing practices StrategiesWhen first addressing ethical issues in the supply chainthe sheer scale of the problems to be solved can be off-putting. It is important to devise a strategy to prioritizeissues and put them in a manageable perspective. Theflowchart at Appendix 1 outlines the process asfollows:

i. Review supply chains The first step towards drawing up an ethicalpurchasing code is to review your supply chains.Sending questionnaires directly to suppliers asking fordetails of manufacturing units and subcontractors is thenormal method. Information can also be gatheredfrom existing quality or technical audits. It may takesome time to track long supply chains down to sub-subcontract or primary source levels, but this is essential ifyou are to build up an accurate picture of yoursuppliers and their subcontractors. Focus first uponyour strategic suppliers, but remember it cansometimes be a non-strategic supplier that has thegreatest potential to damage a company’s reputation.Promotional goods, for example, are not usually classedas strategic, but their suppliers may be exploiting childlabour.

You may also already be contacting your suppliers onhealth and safety and environmental issues, sowidening your enquiry to cover ethical issues may notin practice be as large a step as it first appears.

ii. Identify problem areasThe next stage is to analyse the returns and identifypotential problem supply routes, such as areas of riskassociated with specific countries, human rights abusesor production processes. By identifying high-riskcountries and commodities in your supply chains youcan concentrate efforts in these areas. Focus first onsuppliers in areas which are known to have a record ofabuses and your major strategic suppliers. Individual risk assessments can be carried out on other

suppliers by scrutinising responses to specific questionsfrom the supplier review questionnaire.

iii. Consult othersIt may be useful to consult others buying in the samearea, with a view to pooling information. Consultationwith local and international experts may also be helpfulat this stage, as well as with other organisations thathave helped companies to implement solutions.Countries that adhere to the OECD guidelines formultinational enterprises have set up National ContactPoints (NCPs) to help and advise businesses operatingin their area. (See where to get more help at para 6below).

iv. Construct policyOnce potential problems have been identified, you canthen construct your ethical sourcing policy by identifyingwhich issues your company can take responsibility forand which issues you want to prioritise.

Senior management buy-inAs stated previously, public concerns about theincreasing power of business mean that there isincreasing pressure on businesses, especially largeones, to demonstrate good ethical business practiceand many organisations are actively seeking to addressthese concerns. This is part of what is sometimes nowcalled reputation management. Further pressure iscoming from the quality side, since implementing theenvironmental quality standard ISO 14001 also requiresa knowledge of subcontractors’ sources. Developmentsin ideas on corporate governance, such as the TurnbullCommittee’s guidance that companies identify andcarry out risk audits, are also relevant. There is nodoubt that suddenly being identified in the media as anorganisation that exploits for example child labour, is arisk CEOs would wish to avoid.

However, if senior management is not alreadyconvinced, the buyer may need to present a businesscase for the introduction of an ethical purchasing



policy. As indicated at the start of this booklet, the scaleof the full implications of introducing successfulbusiness-to-business ethical purchasing are such that itis vital that CEOs visibly endorse the policy. If you havealready drawn up a picture of your supply chainsgathered from your supplier reviews as above, areas forconcern can be highlighted to senior managers,together with recommendations for action.

Such a case could include the following points: • Government and EU interest in the ethical trading

agenda• Customer perceptions• Media campaigns• Shareholder interest• The desire by employees to ensure company

activities are socially responsible• Increasing awareness of factory conditions• A need to combine social responsibility with

competitive operations• Safeguarding the company’s reputation • How improvements in conditions will be funded

Increasingly organisations need to be aware of ethicaltrading issues in their supply chains. In the US, if notyet in the UK, the high cost of legal action if acompany is seen to have been negligent in this area isspurring organisations to act. Acting voluntarily, aheadof any legislation, puts the organisation in a strongposition and guards against unforeseen costs. If yourorganisation does not wish to be directly involved infunding improvements (and a little Western seedmoney can go a long way), then maybe an NGO orcharity would be interested in taking a lead.

Culture, awareness trainingEveryone responsible for purchasing and supplymanagement in an organisation should be aware of theorganisation's policy on ethical purchasing and shouldbe actively encouraged to support its principles. Thesame applies to suppliers.

All staff should be given training to make them aware ofethical issues and how the organisation plans to addressthem. Practical examples of the policy in action shouldbe introduced into all internal (and external) trainingprogrammes as well as induction courses. Staff shouldbe given a copy of the ethical code of practice andmade aware of their responsibilities under the code.

Managers should sign-off on the code regularly and areview mechanism should be established. Ensure asuitably senior manager is appointed as the ‘owner’ ofthe code.

Having a code of ethics with an implementationprogramme is the minimum requirement for reputationmanagement. It is a kind of prevention medicine:without such a programme an organisation isvulnerable simply because it has neglected to takebusiness ethics seriously.

It is important also that suppliers and their staff arefully informed of the policy as it relates to them.Suppliers should distribute the code of practice to theirstaff, translated into the appropriate language.

Buyers have a responsibility to determine what isacceptable behaviour between suppliers andcolleagues, irrespective of their role or status in theorganisation and to influence policy makers to definestandards. Suppliers often liaise directly with end usersand other internal customers. The buyer should notnecessarily discourage such liaison; indeed, maintainingproduct development awareness amongst users maywell make it essential, but should develop organisation-wide policies and educate colleagues aboutunacceptable or unethical relationships with suppliers.

Corporate codes of practiceCodes of practice set out an organisation’s policy withreference to ethical issues. Many companies, mainlyretailers and their suppliers, have introduced specificcodes for supply chain issues. (See examples atAppendix 2). These codes indicate that the companiesare aware of the issues and want to ensure that poorconditions do not exist in their supply chains. A codehelps organisations to be clear about their prioritiesand identify those issues for which they are preparedto take responsibility. It also acts as a guide for buyersand other staff as well as suppliers.

However, not all organisations endorse the use of ablanket code of conduct. Some have chosen instead tofocus on specific issues on a country-by-country basis.There is a growing consensus that the standardsoutlined in codes represent aspirations for workingconditions, rather than reflecting the current reality.For instance B&Q have chosen to work with suppliersin selected supply chains.

Other practical actions for practitionersEncouraging suppliers to comply with an organisation’sethical policy can take place in parallel with thedevelopment of monitoring procedures, and may needto take place over a period of time, or be introduced inphases. As this may be a long process, it is important tokeep focused on what you are trying to achieve.

You should consider the effect on suppliers ofcompliance costs, which in many cases can make smallsuppliers unviable. A further consideration is thepotentially debilitating effect on suppliers, especiallySMEs and those in the developing world, of having towork to a number of apparently conflicting codes. Thisis an area where it can be counter-productive to insistupon precise compliance with the minutiae ofparticular interpretations of documentation.

Rather than creating new codes, it can be morepracticable to revise existing codes that already applyto their business. This may well require helping theorganisation confront long-standing custom andpractice in developing countries, often of dubiousethical standing.

Don’t try to do too much too soon; keep it simple andprioritise. Permanent change to long-standing poorworking standards is more likely to come from a policyof coordinated incremental continuous improvementthan from major one-off actions, which are notfollowed up.



Ten years ago B&Q decided to take fullresponsibility for the environmental and socialaspects of their own and their suppliers’ operations,launching a programme for continuousimprovements.

Taking a country-by-country approach, B&Q firstfocused on India. There they worked with factoryowners to make brassware casting safer for theworkers, helped set up a health clinic for 800weaving families and became the first retailer tostock Rugmark rugs, made without the use ofexploited child labour.

Monitoring what has been doneA code of practice is a statement of intent. Like anybusiness strategy, it needs adequate policies andprocedures to ensure implementation. This processincludes effective monitoring of compliance with theexisting codes and remedial or corrective action whenconditions fall short of the stated standard.

This can be done in a variety of ways:• Internally by company staff (such as buyers or QA

staff when visiting factories)• Independently by an outside organisation (for

example specialist monitoring staff)• Externally by NGOs, unions and others involved in

implementation, both nationally and internationally• Through a combination of the above, but it is often

better to have on the ground local involvementwherever possible.

VerifyingExternal verification and public reporting of findings isseen as an integral part of the ethical trading processby NGOs and trade unions. However, there is nogeneral consensus amongst firms on whether this is

necessary at present. When choosing an externalverifier there are various options such as:• International accountancy, consultancy and

certification firms – the most widely used at present• NGOs based in the developing world, such as

Oxfam• Combination of local resources from NGO, academic

and trade union backgrounds

Many organisations see verification as potentiallyproblematic. Some of the issues to resolve in this areainclude:• Who pays for verification – buyers or suppliers?• Some companies fear that public perception would

demand a good report on all issues, without takinginto account the difficulty of dealing with complexissues and progress made towards resolving poorworking conditions

• Possibility that unannounced visits by externalverifiers may disrupt the relationship of trustbetween the supplier and the purchasing company.

PartnershipsThe pressure on companies to consider ethical issues intheir supply chains initially focused on largeorganisations, but as their clients, customers andstakeholders demand improvements, SMEs now alsohave to consider these issues. There are several areas ofbusiness where organisations now work in partnershipto solve difficult ethical problems; and SMEs find thispartnership approach the most practical way of workingtowards improving conditions in their supply chains.

One example of this partnership approach is theEthical Trading Initiative (ETI), an organisationcomprising companies, trade unions and non-governmental organisations (NGOs), which was set upto encourage companies to adopt codes of conduct andhave these codes monitored and independentlyverified. The ETI’s base-code on ethical trading is atAppendix 2.



The Tea Sourcing Partnership (TSP) is a group of 12UK tea producers that have joined forces to checkconditions on 1,500 plantations around the world.The TSP’s long-term aim is to create a continuingcycle of audits and it wants to demonstrate that itsproducers comply with the local laws andagreements in five areas: employment conditions,health and safety, education, maternity provisionsand housing.

The supplier fills in a questionnaire and this isfollowed by an initial meeting, a site check by anindependent auditor, a final meeting and a report.If all the criteria are met the site is certified, if not, adialogue begins about what actions to take.

There are drawbacks to the partnership approach. Forinstance, it can take longer to reach a consensusbetween all parties. Companies in the same sector mayalso find it difficult to establish a working relationshipwith their competitors. Some companies have chosennot to take on all the conditions of the ETI base-code,as they believe that they will not be able to effectchange in all areas.

PitfallsSome of the problems involved in introducing a policyof ethical purchasing have already been highlighted.Many organisations have found that introducing codesof practice across the board is impractical and can becounter-productive in some business areas. Althoughsome companies aim to make SA8000 a condition ofcontract for suppliers, few factories in the developingworld currently meet this standard. The commercialrealities of global businesses, where competitioncreates price pressure, and production can be quicklyshifted to new locations, make such standards difficultto achieve.

Rather than boycotting suppliers that fall short of theproposed standard, NGOs and other interested partiesrecommend that organisations work with suppliers toimprove conditions and work together towards anacceptable standard.

As the experience of B&Q and others has shown, theintroduction of a pragmatic continuous improvementpolicy, working with suppliers to gradually raisestandards in specific areas of the supply chain, and findsolutions that fit the wider environment in which thesupplier works, may be the best approach.

Useful websitesOther relevant organisations with useful websites arelisted below: • The Chartered Institute of Purchasing & Supply

www.cips.org

For more information on how to implement supplychain ethics in your organisation ring CIPS on:01780 756777

• Institute of Business Ethicswww.ibe.org.ukTel: 020 7798 6040

• The Small Business Servicewww.businessadviceonline.org/bis

• International Labour Organisation (ILO)www.ilo.organd www.ilo.org/childlabour

• Oxfam, World Development Movementwww.oneworld.org

• TUCwww.tuc.org.uk

• Save the Childrenwww.savethechildren.org

• The Ethical Trading Initiativewww.ethicaltrade.org

• Worldaware www.business-worldaware.org.uk• UN Global Compact

www.unglobalcompact.org

Further readingMany of the following publications also contain contactand website details for those wishing to explore theissues in greater depth:• Institute of Business Ethics report “Where does that

come from” (ISBN 0 9524020 9 2) a study of ethicalissues in the supply chain.

• The FCO booklet “Global Citizenship” is a source ofuseful links.

• FTSE4Good ethical index• “Visions of Ethical Business” issues 1,2 and 3. A

series of free vision papers from Financial TimesPrentices Hall

• “Corporate Citizenship – successful strategies forresponsible companies” by McIntosh, Leipziger,Jones and Coleman (ISBN 0-207-63106-3)

• “Terms for endearment – business, NGOs andsustainable development” by Jem Bendell (ISBN 1-874719-29-2)

Ethical purchasing practicesUseful websites


• “Human rights guidelines for companies” AmnestyInternational UK Business Group, a free booklet

• “Big business, small hands – responsible approachesto child labour” Save the Children. Outlines a“genuinely ethical approach to child labour – wherechildren’s best interests are the key to businessdecisions”.

• “Human rights – is it any of your business?”Amnesty International and Prince of Wales BusinessLeaders Forum (ISBN 1-873328-43-5)

• “Ethical Performance – the independent newsletterfor socially responsible business” published byAlistair Townley, Dunstans Publishing.

• Being a Better Trading Neighbour: DIY guide toimproving working conditions in developingcountries, B&Q September 1999

• A review of UK company codes of conduct, DFIDSocial Development Division, 1998

• SA8000: Setting the Standard for CorporateAccountability, CEPAA (www.cepaa.org)

• Taking Stock – How the supermarkets stack up onethical trading, Christian Aid, 1999

• “Learning from Doing” Review: a report oncompany progress in implementing ethical sourcingpolicies and practices, ETI – prepared by IDS andPriceWaterhouseCooper, April 1999

Ethical purchasing practicesFurther reading


Ethical purchasing practicesAppendix 1


BEGIN IMPEMENTING YOUR POLICYKey issues will have been identified in the steps taken so far.Your company will have a platform from which it can beginto raise awareness with suppliers and to participate in the

debate on how to move ethical purchasing forward

GET TO KNOW YOUR SUPPLY CHAINMap your suppliers as far as possible

Check where suppliers might be using subcontractorsIdentify strategic suppliers

IDENTIFY SPECIFIC HIGH RISKS TO YOUR SUPPLY CHAINThese can be risks associated with specific countries,

human rights abuses or production processes

CONDUCT INITIAL ANALYSIS OF WORKINGCONDITIONS IN YOUR SUPPLY CHAIN

This can be done through supplier visits, questionnaires,investigation by local non-governmental organisations

(NGOs) who are seen to be independent

RESEARCH OTHER COMPANIES IN YOUR SECTORAre there any lessons to be learnt?

Are there any possibilities of working together?

CONSULT WITH LOCAL AND INTERNATIONAL EXPERTSInclude NGOs and National Contact Points (NCPs) to find out whatsolutions they would suggest. Talk to other organisations that have

helped companies to implement solutions

CONSTRUCT YOUR COMPANY’S ETHICAL SOURCING POLICY Identify which issues your company can take responsibility for

and which issues you want to prioritise

ISSUE A PUBLIC STATEMENT OF INTENT /CODE OF CONDUCTThis will help suppliers and the general

public to understand your position

1 Extracted from “Where did that come from?” A study of ethical issues in thesupply chain published by the Institute of Business Ethics

How to get started1

Sample codes of conductETI BasecodeThe following is the base-code recommended by theEthical Trading Initiative (ETI) and outlines the keypoints to consider when drafting a code of conduct forethical purchasing: 1. Employment is freely chosen2. Freedom of association and the right to collective

bargaining are respected3. Working conditions are safe and hygienic4. Child labour shall not be used5. Living wages are paid6. Working hours are not excessive7. No discrimination is practised 8. Regular employment is provided9. No harsh or inhumane treatment is allowed

These are minimum and not maximum standards andthis code should not be used to prevent companiesfrom exceeding these standards. Companies applyingthis code are expected to comply with national andother applicable law and, where the provisions of lawaddress the above issues, to apply whichever offers thegreater protection.

C&A: Code of Conduct for the supply ofmerchandiseThe key aspects of C&A’s code of conduct for thesupply of merchandise are:

Supplier relationshipsWe seek to develop long-term business relationshipswith our suppliers who should have a natural respectfor our ethical standards in the context of their ownparticular culture. Our relationships with suppliers arebased on the principle of fair and honest dealings at alltimes and in all ways. We specifically require oursuppliers to extend the same principle of fair andhonest dealings to all others with whom they dobusiness – including employees, sub-contractors andother third parties. For example, this principle also

means that gifts or favours cannot be offered oraccepted at any time.

Legal aspects and intellectual property rightsWe will always comply fully with the legalrequirements of the countries in which we do businessand our suppliers are required to do likewise at alltimes. The intellectual property rights of third partieswill be respected by all concerned.

Employment conditionsIn addition to the general requirements that allsuppliers will extend the principle of fair and honestdealings to all others with whom they do business, wealso have specific requirements relating to employmentconditions based on respect for fundamental humanrights. These requirements apply not only toproduction for C&A but also to production for anyother third party.

• The use of child labour is totally unacceptable.Workers must not be younger than the legalminimum age for working in any specific countryand not less than 14 years, whichever is the greater

• We will not tolerate forced labour or labour whichinvolves physical or mental abuse or any form ofcorporal punishment

• Under no circumstances will the exploitation of anyvulnerable individual or group be tolerated

• Wages and benefits must be fully comparable withlocal norms, must comply with all local laws andmust conform with the general principle of fair andhonest dealings

• Suppliers must ensure that all manufacturingprocesses are carried out under conditions whichhave proper and adequate regard for the health andsafety of those involved



Environmental aspectsThe realisation of environmental standards is acomplex issue – especially in developing countries. Ittherefore needs to be continuously reviewed within thelimits of what is achievable per country. We will workwith our suppliers to help them meet our jointobligations towards the environment.

Freedom of associationC&A recognises and respects the freedom of employeesto choose whether or not to associate with any groupof their own choosing, as long as such groups are legalin their own country. Suppliers must not prevent orobstruct such legitimate activities.

Disclosure and inspectionWe require suppliers to make full disclosure to us of allfacts and circumstances concerning production and useof sub-contractors. All C&A suppliers are obliged tomake their sub-contractors aware of, and comply with,the C&A Code of Conduct.

Additionally our suppliers are required to authoriseSOCAM, the auditing company appointed by C&A, tomake unannounced inspections of any manufacturingfacility at any time.

BT: Ethical trading and principlesBT has split their ethical purchasing code in two parts:generic Purchasing Principles on ethical businesspractices and a separate Sourcing with Human Dignity(SWHD) standard covering working conditions in theirsupply chains. More information on BT's Sourcing withHuman Dignity standard (working conditions in thesupply chain) can be found at www.selling2bt.com/html/working/humandignity/default.asp

BT have set targets and principles for implementingtheir ethical trading initiative as follows:

Ethical trading Society expects the products bought from and by BT tobe manufactured under working conditions consistentwith international guidelines. Chief among these arethe UN's Universal Declaration of Human Rights andthe International Labour Organisation conventions.

To ensure that we meet this expectation, in April 2001we launched Sourcing with Human Dignity, a supplychain initiative which seeks to ensure that the workingconditions in our supply chain really do meet acceptedstandards.

Although the promotion of these standards is commonpractice in the retail sector, it is a relatively newdevelopment for the communications industry.

Of course, BT alone cannot commit to Sourcing withHuman Dignity - it is a collaborative undertaking thatrequires the active support of all our suppliers.

We will try to win this support through a phasedapproach. In 2001/2002, we will focus on gaining thesupport of our key network and IT suppliers.

We will do this through supplier forums dedicated tothis issue and by seeking their written support.

We will also prioritise industry sectors where webelieve that the risk of falling short of our Sourcingwith Human Dignity standards is at its highest.

Principles of implemetationThe following Principles will guide BT in theimplementation of Sourcing with Human Dignity. Theywill govern the manner in which we aspire to achievethe core international ethical standards set out in ourSourcing with Human Dignity Standards.



Principle 1: Working TogetherBT will:• work collaboratively with suppliers in pursuit of

these standards.• guide relationships by the principle of continuous

improvement.• welcome rather than penalise suppliers identifying

activities that fall below these standards (undertakenby themselves or sub-contractors) and who agree topursue our aspirations.

• review and, where appropriate, revise theseprinciples in the light of experience.

• consider a similar ethical trading standard as areasonable alternative where suppliers are alreadyworking towards this alternative.

• not hold a supplier to a higher standard than BT'sown policy on these issues.

Principle 2: Making a DifferenceBT and its suppliers should:• use a risk-based approach to the implementation of

these standards.• focus attention on those parts of the supply chain

where the risk of not meeting these standards ishighest and where the maximum difference can bemade with resources available.

BT's suppliers should:• be prepared to share with BT the basis of their

approach with regard to the above.

Principle 3: Public ReportingBT will:• report publicly our performance and practices with

regard to the implementation of Sourcing withHuman Dignity.

Principle 4: Awareness Raising and TrainingBT and its suppliers should:• ensure that all relevant people are provided with

appropriate training and guidelines to implementthe standards.

BT's suppliers should:• ensure that employees whose work is covered by

the standards are made aware of this document,utilising appropriate and effective communicationsmechanisms

• translate these standards into the local language anddisplay them prominently at the place of work.

Principle 5: Monitoring and IndependentVerificationBT will:• recognise that the implementation of these

standards may be assessed through monitoring andindependent verification, and that these methodswill be developed as our understanding grows.

BT's suppliers should:• recognise that the implementation of these

standards may be assessed through monitoring andindependent verification, and that these methodswill be developed as our understanding grows

• provide BT, or its representatives, with reasonableaccess to all relevant information and premises andco-operate in any Sourcing with Human Dignityassessment - using reasonable endeavours to ensurethat sub-contractors do the same

• use reasonable endeavours to provide workerscovered by the standards with a confidential meansto report to the supplier failure to observe thestandards.

Principle 6: Continuous Improvement BT and its suppliers should:• apply a continuous improvement approach in

agreeing schedules for improvement plans withsuppliers not meeting these standards

• base improvement plans on individual casecircumstances

• not use this project to prevent suppliers fromexceeding these standards



BT will:• following an escalation to BT’s Chief Procurement

Officer, consider terminating any businessrelationship with the supplier concerned whereserious shortfalls of these standards persist.



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