Resolving dilemmas around decent work
The Risks and Benefits
Many buyers are caught between social responsibility and economics. They need to make procurement decisions under cost pressure while also being asked to meet the social responsibility objectives of the company. This can often feel like they are asked to meet competing objectives.
- A business unit has asked me to procure a product or service, but I can see that the price or timelines they have in mind could undermine decent working conditions for the supplier’s employees (i.e. the supplier will probably be unable to respect our supplier code of conduct)
- A supplier wants our business and therefore offers a low price that I can see may compromise their ability to ensure decent working conditions for their employees
- The supplier has offered a price and timeline that allows them to pay their employees fair wages and avoid excessive overtime, but my savings targets mean that I need to achieve a better price1
- Generally, I am asked to ensure suppliers comply with my company’s supplier code of conduct, but also to buy products and services as cheap as possible
- The application of my Supplier Code of Conduct or any other decent work policy by the supplier will entail costs, but my company is not willing to increase the payment to cover these costs (e.g. if PPE — Personal Protection Equipment — is required). I don’t know how to guide this conversation when the supplier brings it up.
- We procure a product/service from a single source with one supplier effectively having a monopoly. This supplier shows deficits in the working conditions of its employees and is not showing a willingness to improve.
- We have no way of ensuring whether fair prices go towards supporting decent working conditions. For example, our supplier might not necessarily pay the best possible wages to its workers, even if the price was increased specifically to help the supplier cover the increase in wages.
- We have no understanding of the cost-breakdown of our suppliers, and suppliers are not willing to share this information and therefore do not know what a fair price is
- We work mostly with intermediaries who do not want to share the production units
See the elements to be taken into consideration for the determination of wages in the ILO MNE Declaration, paragraph 41. ↩
Explore different buying dilemmas to consider when developing a sustainable procurement approach.
Each of these cases presents a tricky situation for you as the buyer. They require that you balance one objective (achieving better social and sustainability outcomes in the supply chain) with another (achieving the best price and fastest delivery times for the company) – often without explicit guidance on how to do so.
How can you deal with these dilemmas?
The short answer is that often you cannot easily solve them alone - you need to escalate them with your manager or leadership within your procurement team and sometimes this would lead to discussion high up within the management of your company. While the dilemmas outlined above may relate to your immediate buying decisions, they are also linked to the structures and processes your company has in place. You – as a buyer on your own – will not be able to address all aspects of creating positive, mutually beneficial relationships with suppliers who provide decent work opportunities for their workers. Ultimately, ensuring sustainable procurement might require changing the culture of your company to acknowledge that there are different, beneficial ways to produce goods or services.
For immediate buying decisions
Have a conversation with the people who can help you resolve the dilemma. They would likely be your boss or manager who sets your KPIs and savings targets. If you know your company has a responsible sourcing/social impact/social sustainability/CSR team, connect with them to get their expert guidance. If you are uncertain this function exists, ask around to find the right people. Some conversation starters with your boss or manager could be:
- “I wanted to talk to you about the buying decision for product XYZ. I want to make sure we achieve the best outcome for all involved.”
- “Requesting Unit A has asked for the delivery by X date, which is short notice for the suppliers. I’m concerned that by setting this date, we are causing the supplier’s employees to work excessive overtime, which isn’t in line with our commitment to support decent work in our supply chain. In addition, the quality of the products may suffer if this is rushed. We need to discuss with Unit A what is driving this short lead time and if there is room to extend. If it cannot be changed, we need to work with the suppliers on ensuring the best quality product and no degradation of labour standards.”
- Do the math. Using what you know about production and operating costs including compensation, calculate if the number makes sense. “We have a supplier that has offered X price for the products you requested. It’s by far the lowest quote we have but at this price there is no way fair wages for the supplier employees are covered. At this current rate, fair wages will be hard to achieve. The supplier is offering this price to ensure they get our business, but it isn’t in line with our corporate commitment to support decent work if we encourage them to drive down prices to a level where they may compromise on working conditions for their employees. Are you okay for me to have a conversation with them about this? And if they can’t assure me that within this price they can fulfil our expectations of decent work, may I either agree to a higher price on the condition that they will do this, or choose a different supplier? We have to live our values as a company and this would be a good opportunity to put this into practice. What are your thoughts?”
- “I was hoping you could help me resolve a dilemma I have around the buying decision for XYZ service. Supplier A is offering X price. This is a fair price that allows the supplier to pay their employees fair wages, in line with our requirements on decent work. At the same time, my savings targets mean that I should try to drive down the price further. I have hesitations about doing this, as they are a good supplier who is treating their employees well, which we should be encouraging. But I also don’t want my bonus payment to suffer if I don’t meet my savings KPIs. How can we resolve this?”
- “The supplier for product XYZ shows deficits in the working conditions of their employees and is not demonstrating a willingness to improve. They are the only supplier we currently have for this product, so it would be difficult to replace them. We need to talk about what approaches we might take to improve the situation with this supplier - and if this is not possible, identify other options to procure this product. I will set up a meeting with our Responsible Sourcing team.”
- “Similar situations come up all the time, for all of us buyers, and we don’t have specific guidance on how to handle them. How do you think we could go about putting some principles into place that help us with future decisions like this?”
- “We have no idea where our products are produced. Can we have more transparency in our supply chain by working directly with suppliers?”
Find examples of conversation starters with your management team, which will help address decent work dilemmas.
In the long term, the aim should be:
- A business model that supports better working conditions for workers and promotes respect for the fundamental principles and rights at work
- A company structure and processes that enable responsible buying
- Good communication across teams, with consistent messages to suppliers
- A company-wide understanding of how purchasing practices impact on workers
- A transparent supply chain.
To achieve this, you – or whoever is best placed to initiate this – need to start a process that will bring the right people around the table, to work out how to successfully balance the conflicting demands. Everyone who has a role in defining and executing what is purchased by your company, when, how and why should be represented at the discussion table. Below are strategies to resolve dilemmas.
Strategies to Resolve Dilemmas
- Your company, like every other, is pulled in different directions. Different agendas may conflict with each other, yet they may all be legitimate. Your company values and purpose can help you navigate this complexity.
- Map typical buying situations and identify where and when conflicts lie now or may arise in the future (this may include legal liabilities of not ensuring decent work)
- Greater collaboration between multiple functions and job roles — from procurement and ethical trade to sales and technical as well as finance and legal teams — is key to support decent work throughout the supply chain
- Involve senior management from the various functions if possible
- To address future conflicts and resolve them, consider creating a “Responsible Procurement Committee” — with representatives across functions and diversity of perspectives and backgrounds. For example, an all-male committee might be less inclined to recognize the specific impacts of overtime work for women.
- Consult other stakeholders who might have extensive experience in mitigating labour rights risks through improved purchasing practices, such as global trade unions, industry initiatives or relevant NGOs
Work together to develop solutions that meet your ethical standards and your company’s economic objectives
- Use your company’s values and purpose as a guide
- Refer to company policy and commitments
- Agree on principles that will help you balance conflicting demands in real-life situations
- Open up channels for staff to raise any conflicts of interest that arise
- “Responsible Procurement Committee” to address feedback as and when it emerges
- Promote freedom of association and collective bargaining among your suppliers
- See what you can learn from other companies’ experiences and good practices
- Consider drawing on external expertise for mitigating labour rights risks through improved purchasing practices, e.g. trade unions or industry initiatives