Supplying Good Values

Holiday shopping habits in 2007 suggest that consumers are making socially responsible choices and retail supply chains should follow suit.

The National Shopping Behavior Survey conducted last year by Montvale, N.J.-based KPMG revealed consumers have become increasingly discriminating. The majority are eager to become eco-friendly shoppers but will shun products from suppliers they feel may be unreliable or have questionable practices.

“Fifty-five percent of the respondents indicated they make a special effort to patronize retailers with a green reputation and that take actions to reduce the company’s carbon footprint,” explained John Rittenhouse, KPMG retail partner and national leader for operations risk management.

An even higher percentage of consumers, 88%, said they were concerned about the environment; 74% said they buy environmentally friendly products and, most surprising, 60% were willing to pay more for green products.

Many socially conscious shoppers also chose not to purchase products based on country of origin. Forty percent of consumers checked a product’s country of origin before making a purchase, and 31% of those consumers decided not to buy.

Not surprising, given the recent problems with lead-tainted Mattel toys, 79% of the decisions not to buy involved products from China, and toys were involved in 52% of those instances.

Richard Cellini, VP of Waltham, Mass.-based Integrity Interactive, advised that consumers are using the country-of-origin judgment to address a “more fundamental issue.”

“Consumers don’t care if products come from America, Europe or India. The issue is that they want to know the products passed a seal-of-approval test,” he suggested.

In Cellini’s estimation, the majority of suppliers are ethical, but, when there are multiple problems reported from a single area, such as recent cases involving some suppliers in China, then all suppliers from the region get boycotted.

“When consumers are left to their own devices to determine who has an ethical supply chain,” observed Cellini, “both good and bad suppliers can get tarred with the same brush.”

Integrity Interactive works with companies around the world to develop programs that address ethics, compliance and corporate responsibility. Historically, its customers have focused on internal ethics programs and compliance, primarily for their own employees. In recent months, Integrity Interactive has seen a significant spike in requests from existing customers, as well as from newcomers, for assistance in establishing ethics programs that extend beyond a company’s internal infrastructure.

To help define the current role of ethics in global supply chains, Integrity Interactive conducted a survey of 108 Global 2000 companies, each with a minimum of 5,000 employees and operating on at least two or three continents. The survey, which was completed in October 2007, revealed some alarming challenges.

For instance, 88% of the companies did not have a communications portal for their suppliers; 86% did not include suppliers in their primary code of conduct; and 78% did not include their suppliers in the company’s broader ethics and compliance programs. Only 42% regularly assessed ethics risk in their supply chain.

It is not that global corporations want to ignore ethical risks, and certainly they recognize the potential liabilities of partnering with suppliers that fail to exercise due diligence. The roadblocks are often as simple as logistics decisions or language barriers—but the sheer volume of communications can be daunting.

“We found the Global 2000 companies we work with could have anywhere from 10,000 to 150,000 suppliers,” explained Cellini.

Establishing and executing ethical standards across such a diverse and massive network are more than most companies are equipped to manage.

However, by grouping ethical issues into four “values” categories—product, processes, people and politics—Cellini said his company has created a technically and economically feasible solution that will enable retailers to communicate universal ethics standards to all the partners in a global supply chain.

Several retailers that Integrity Interactive works with are expected to have ethics programs in place across their global supply chains by April.