The leather industry has been identified as a priority sector of Bangladesh based on its considerable growth and investment potential. Bangladesh has major advantages in developing its leather industry. Within a globalized context, leather industry supply chains of products and services extend multiple countries and continents. This globalization and accompanying decisions of firms to outsource raw materials, accessories, soles, components etc. brought competitive advantage and economic growth. The downside of this evolution is that the extension of supply chains and continuous pressure to lower production prices have caused detrimental effects on the environment and communities in other parts of the world. As companies are increasingly held responsible for the way they treat their suppliers, it is becoming clear that the focus on ethical and sustainable behavior surpasses the organizational level and extends to the level of the supply chain. Therefore, in order to become more sustainable, individual companies need to collaborate with their supply chain partners. It is believed that businesses can be leaders for making positive social and environmental impacts and improving the standard of working conditions for people working in global supply chains.
Are we sourcing ethically & responsibly?
In leather industry it is a common practice to ensure ethical & responsible aspect of sourcing either by visiting supplier base or pre-qualifying the suppliers based on some pre-set criteria. But it is difficult to visit global suppliers to ensure this. On the other hand, pre-qualification of suppliers is not so robust that can ensure requited criteria. Some MNCs of leather industry conduct audit to ensure ethical & responsible aspect of sourcing. Drawback of auditing process includes no guarantee that suppliers are following required standard during the time between two audits. To source responsibly, a business needs to be able to trace a product through each stage of their supply chain, and work with their business and suppliers to ensure working conditions are fair, and environmental practices are sustainable. These practices are followed by very few companies of leather sector in Bangladesh.
What is Ethical & Responsible Sourcing?
The Ethical and Responsible Sourcing includes the identification of legal and possible ethical implications for the final selection of external suppliers. In any organization, the selection of the correct external suppliers is a vital contributor to overall business success. Ethical & Responsible Sourcing enables a selection criterion as well as sourcing strategies to ensure that the organization will make the correct choice of external suppliers. It explains options for sourcing and examines the key processes that can be used to analyses potential external suppliers to ensure the development of ethically and socially responsible sourcing agreements.
Ethical & Responsible Sourcing includes understanding the following:
- Human Rights
- Modern Slavery Equality
- Environmental Issues
Bribery and corruption
Individuals or entities abuse a position of trust, authority or power for their own interests. Bribery and corruption – the negative effects
- Markets do not function effectively
- Competition being eroded
- Reduction or the lack of transparency
- Suppliers lost out of business unfairly
- Buyers’ decision does not add-value to the business (often at higher price)
Bribery and corruption – risks to organizations
- Long drawn and costly legal investigations
- Direct criminal liability
- Interruption to supplies
- Loss of reputation and business (exclusion from tendering)
- Loss of other business opportunities
Fraud is criminal deception designed to give an individual or an organization a financial benefit Examples of fraud
- Kick-backs – in the form of commission
- Invoicing fraud
- Substituting products
- False claims etc
To prevent bribery, corruption & fraud most MNCs of leather industry ensure strong corporate governance. It is done by code of ethics, conflict of interest declaration, terms & conditions of employment etc. These practices are not observed significantly by local companies of leather industry. Adherence to these by both local & MNCs needed to make the industry sustainable.
Sheikh Nafiz Ahmed
MBA II Certified Supply Chain Analyst II
Experienced Leather Sector Supply Chain Professional