Business Ethics

Ethics & Supply Chain Management: General Motors and Nike

Whose Responsibility?

Dominant Firm

• in the supply chain should be responsible for the ethical conduct of its suppliers

Why?

• The most powerful value chain member bears the greatest burden of responsibility • ‘With greater power comes greater responsibilities’ • Examples in this case: Nike and GM

How?

• Identify & develop suppliers whose policies & values mirror their own • Able to influence supply chain due to its relative size & buying power • Willingness to end relationships/contracts with unethical suppliers or repeat offenders • Move from traditional SC sustainable SC • Includes environmental, social & ethical issues

Reference: Phillips & Caldwell, Value Chain Responsibility: A Farewell to Arm’s Length

Sustainable Supply Chain Management Environmental Issues Social Issues Ethical issues

• Natural resource use • Emissions, waste • Energy loss • Use of biodiversity & deforestation • Nuclear radiation • ozone depletion • climate change • • • Role & responsibility with local community Direct & indirect employment in developing countries Investment in education & training • • • • • Labour practices (child labour, discrimination, wages, unions, working hours, health & safety) Irresponsible marketing (marketing to children, misrepresentation) Supporting oppressive regimes Honesty, trust, respect & fairness in corporate relations Bribery & corruption

Source: www.shef.ac.uk/uni/companies

GM’s Gift Policy Positives:

• Minimizes opportunities and sets expectations • Facilitates unbiased business decisions • Provides guidelines and examples • Outlines process to handle exceptions • Applies universally across the company

Negatives:

• Grey areas: Applicability not always clear • Makes exceptions in certain cases depending on business interests • Adopts a relativist stance – leads to inconsistency • Difficult to distinguish expected social courtesy from bribes

GM’s Gift Policy

Does this policy do enough to Ensure ethical conduct?

• It is an important means of promoting ethical conduct, but… • A policy by itself cannot ensure ethical conduct. • Other aspects are essential: Training, education, culture, environment, leadership • Ultimately, each employee is entrusted with the responsibility for ethical conduct

Nike Goes Green

• Starting in 1993, Nike has made big efforts to “green” its supply chain.

• It began using best practices and demanded the same from its suppliers. It educated them on: – Corporate environmental policy – A master substances list – Legislation concerning products and packaging – Executive summaries on all programs so factories know which programs apply to them – A sustainability assessment – Labor practices programme information

Questionable Labour Practices??

• Although Nike educates its suppliers, it has had to contend with allegations of at least one account of a subcontractor using sweatshop labour.

• This has sparked much controversy and large boycotts of Nike’s shoes • But, Nike has made huge strides in environmental awareness…

Does one Good Act Balance a Bad One?

• There is no way one “right” can make up for a “wrong” this is a form of rationalization.

• Nike has had to deal with issues facing many MNCs and it needs to lead by example.

• Inappropriate labour practices can

never

be balanced by a sound environmental policy.