Ethics and Purchasing: Importance and Impacts

I do agree with the emphasis Johnson & Flynn (2015) put on the relationship between the organisation's reputation risk and supply chain ethics (Johnson & Flynn, 2015, p. 30). It is easy to recall a number of occasions in which negative publicity about bribery, reciprocal arrangements, improper quality, improper environmental practices, dealings with unethical suppliers, and so on, has resulted in negative consequences for companies. Such publicity can be extremely damaging.

I cannot forget the purchase manager who was looking only for vendors who are willing to pay bribes. While he called it a commission, I called it a bribe. Even recently, I refused to pay a bribe to a different purchasing manager, who asked me for a "commission", instead I told him that this commission is illegal since you work with the buyer side, and realistically, it is a bribe, not commission. Unfortunately, even when companies apply ethical standards in their workplace, we still find some unethical people who convinced themselves that these standards have no value. Thus, I believe that applying ethical practice in organisations, comes first from the personal ethical behaviour and traits of the individuals working there. Organisations should ensure that their standards are firmly enforced and structured in a way that prevents individuals from taking personal advantage, if they are predisposed to do so.

Introduction

Moral values and principles advising avoidance of impropriety are "ethics" (Monczka et al., 2016,p.601). With globalisation, purchasing-ethics are imperative for protecting reputations, economic benefit (Johnson & Flynn, 2015,p.469), and legal obligations. Thus, buyers and sellers must adhere to ethical standards and principles, moderating their behaviour and interactions, providing decision-making guidance (CIPS, 2013,p.2). Decisions and actions must be above-board to avoid perception and suspicion of unethical behaviour. Buyer and Seller staff are at risk, being exposed to greater pressures and temptations, with studies demonstrating ethical decision-making abilities grow with experience, due to experienced individuals having a better contextual view (Husser et al., 2014,p.335).

The Importance of CIPS and ISM Standards

Ethics requires individuals to show professional loyalty and integrity in actions and decisions (ISM, 2012,p.ii). The Institute for Supply Management (ISM) and the Chartered Institute of Purchasing & Supply (CIPS) created standards providing guidance when organisations do not (Monczka et al., 2016,p.606). Analysis indicates differing foci: ISM deals with buyer and supplier behaviour and impact on the company, while CIPS focuses on company-scale ethical behaviour and sourcing. For CIPS, ethics requires companies and individuals to adhere to international standards for illegal activity and human rights abuses, ensuring improvements in the lives of individuals in the supply-chain (CIPS, 2013,p.3). ISM stipulates buyers and sellers must protect their organisation's reputation, ensure fairness and positivity in relationships, plus social responsibility in the supply-chain (ISM, 2012,p.ii). Failure to adhere to ethical behaviours damages reputations (organisational and individual), supply-chain workers well-being, and organisation and industry income (Johnson & Flynn, 2015,p.466).

The ethical impact of the standards

Buyers and Sellers must be aware of their behaviour and interactions, ensuring they avoid improper activities, creating conflicts of interest and undue influence, or exposing confidential information. This includes not offering or giving gifts or favours, avoiding personal gains, behaving respectfully, honestly, and professionally to others (Monczka et al., 2016,p.601), including being punctual, asking for quotations when the seller has can succeed, and avoiding personal obligations (Johnson & Flynn, 2015,p.470). Strong communications and maintaining professionalism supports ethical buyer and seller relationships (CIPS, 2013,p.4). ISM standards moderate personal interactions between buyer and supplier staff, while CIPs standards moderate the interactions between companies, through the staff. Thus, staff are encouraged to consider cultural barriers and behaviours such as concepts nonexistent in other cultures, expected behaviours like gift-giving, or inability to say no and show uncertainty, when interacting with buyers and suppliers abroad (CIPS, 2013,p.5). Buyers especially, should be aware of supply-chain sourcing and conditions, avoiding doing business with suppliers who do not adhere to ethical standards in workforce treatment, or must impose requirements on suppliers. Suppliers who breach standards must be encouraged and required to improve, with buyer and supplier working together to prevent further problems, or with the buyer terminating the relationship in extreme circumstances (CIPS, 2013,p.19). Thus, all buyer and supplier interactions at all levels from personal to organisational are impacted, guided, and controlled by the existence of ethical standards.

My Experiences

Sharp Practices cover several unethical behaviours, including using misinformation, inappropriate information, exaggerating problems, lying, misleading, or using unfair advantage (Monczka et al., 2016,p.603). I have worked on some projects where buyers were unethical, including refusal to work consider quotations offered without personal advantages, such as additional training or trips abroad. Reciprocity is also a problem I have experienced, where businesses accept working only with specific suppliers who buy from them. This damages entire sectors (Johnson & Flynn, 2015,p.469), I worked on a governmental procurement project designed to control and manage purchasing to prevent such activity.

Conclusion

Buyers and Suppliers must ensure interactions and relationships are built on trust through honest and fair treatment, avoiding actions which are or appear unethical, remaining aware that perceptions are as important as actions (ISM, 2012,p.1). Buyers and sellers must create professional relationships through building trust by developing an understanding of mutual organisational goals and objectives (Johnson & Flynn, 2015,p.468) to ensure brand/personal reputations, societal, organisational, and economic benefits (CIPS, 2013,p.3).

References

CIPS, 2013. Ethical and sustainable procurement. [Online] Available at: https://www.cips.org/Documents/About%20CIPS/CIPS_Ethics_Guide_WEB.pdf

[Accessed December 2018].

Husser, J., Gautier, L., Andre´, J.-M. & Lespinet-Najib, V., 2014. Linking Purchasing to Ethical Decision-Making: An Empirical Investigation. Journal of Business Ethics, 123(2), p. 327–338.

ISM, 2012. Principles and standards of ethical supply management conduct with guidelines. [Online] Available at: https://www.instituteforsupplymanagement.org/files/SR/PrinciplesandStandardsGuidelines.pdf

[Accessed December 2019].

Johnson, P. F. & Flynn, A. E., 2015. Purchasing and Supply Management. 15th ed. New York: McGraw-Hill Education.

Monczka, R. M., Handfield, R. B., Giunipero, L. C. & Patterson, J. L., 2016. Purchasing and Supply Chain Management. 6th ed. Boston, USA: Cengage Learning.