Management

Opening our eyes to supply chain ethics

1 February 2015

Loughborough University's Jacqueline Glass reports on the progress of the Action Programme for Responsible Sourcing - and the distance still to travel.

Ethical scandals caused by shortcomings in labour, safety, management and environmental practices have become an increasingly regular feature of global news reports.

Many of these stories appear to originate in other industries, such as technology, food, fashion and retail, and in countries outside Europe. On investigation, the scandals seem to be buried deep within complex, multi-tiered, worldwide supply chains – as evident in the horse meat scandal – well beyond the daily scrutiny of procurement personnel.

Fearful for their reputation – and probably their share value – retailers are investing heavily in supply chain audits. Some top global construction firms are also exploring this. The risks are a cause for concern amid reports of counterfeit construction products and poor-quality imported materials.

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Yet it is far more common for construction colleagues to say: “It couldn’t happen here” – although it is not always clear whether “here” is the construction industry, their company, or its country of operation.

Our industry is in a state of denial. It needs to take steps to become better informed and prepared. This is a challenge that we have been tackling since 2009, in collaboration with a powerful industry community that believes it is only a matter of time before the media spotlight settles on ethical infringements in the procurement of construction materials and products.

Loughborough University’s knowledge network, the Action Programme for Responsible Sourcing (APRES), has brought together procurement, sustainability and CSR (corporate social responsibility) professionals, and certification specialists to debate the issue. At our fourth conference on responsible sourcing in construction, held last November, we made three key observations on where we are.

Elephant in the room

First, we seem to agree that the ethical sourcing of materials and products makes good business sense. BRE’s standard for responsible sourcing, BES 6001, is now in its third iteration and 92% of UK concrete has a certificate to say it has been audited
by a third party for responsible sourcing.

The materials sector appears to be responding positively – although critics argue this is driven by the marketing opportunity to promote products that contribute towards BREEAM and CEEQUAL ratings. Points make prizes, after all.

Furthermore, a cursory analysis of BES 6001 certificates confirms that not all the main building material types are represented, so the prospect of a 100% responsibly sourced building is not close.

There still appears to be some reticence by contractors to engage. Some suppliers argue: “There’s no demand from customers,” yet we understand that a failure to provide certification to BES 6001 has resulted in some companies being passed over for supply contracts.

"The elephant in the room is complex products - mechanical and electrical plant, and composite products, in particular"

Second, the elephant in the room is complex products – mechanical and electrical plant, and composite products, in particular. This is a big hurdle because of the complicated, global supply chains involved in metals and electronics. As well as having multiple material parts, these products highlight the problem of how to measure risk. A very small component may be made from a material with a very high level of risk.

All electronic smart devices contain rare earths – elements that are useful technologically, but are often extracted in conflict-riven, poorly regulated regions of the world. The industry has yet to address risk assessment and exposure in the sourcing context, which is needed to take our practices to the next level.

Finally, there remains a healthy but unresolved debate about the difference between “responsible” and “ethical” sourcing. Responsible sourcing is about compliance with standards, and ensuring social, environmental and governance matters are appropriately protected and stewarded throughout the supply chain.

Industry expert and APRES member Ian Nicholson, managing director of Responsible Solutions, believes this is both a personal and a corporate responsibility. The revisions to ISO 9001 and ISO 14001, both expected by the end of 2015, are likely to require greater consideration of these issues within any business, including construction companies.

Ethics sense

Ethical sourcing, on the other hand, goes beyond such good practice and places a higher importance on collaborative, supportive and morally robust supply-chain practices. So the way we are using this term foregrounds the social dimension of procurement practices, such as human rights and working conditions.

There is a clear link between the two terms, but my view is that the UK already has a sound understanding of responsible sourcing, a standard in place and a legitimate way forward. The next step is to embed the “ethical” component and effect changes in buying practices. Too often we hear about a “specification gap”, where corporate intention falls down through an ill-informed buying decision, and a certified material is not selected. This is because a company’s ethical values are not being communicated and enacted thoroughly.

We as an industry need to challenge anyone who is still in denial. It’s time to wake up and smell the ethically sourced coffee.

Jacqueline Glass MCIOB is professor of architecture and sustainable construction at Loughborough University

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