Optics are important in today’s commercial world – how you ‘look’ in the eyes of your consumer matters, more than ever before. Companies invest heavily in developing their audience’s perception of their brand – the ethics, morality and mission that they are led to believe that the organisation follows/upholds, which mirror their own or what they would want in the brands and businesses they buy from. Companies should, therefore, be working with organisations that reflect their cultural alignment.
Cultural Alignment – Misalignment of Values
Such ‘perceptions’ of cultural alignment are hard won and oh-so easily lost, as Boohoo recently discovered when reports emerged last summer that workers in their UK factories were being paid below the minimum wage, that they were subject to human trafficking, and staff were being forced to work in unsafe conditions, even when they had coronavirus symptoms. By the end of the year Boohoo is reported to have severed ties with 64 factories due to “violations of the Boohoo code of conduct”.
Just a few months later, Apple was reported to have suffered a similar reputational challenge when its factory in Taiwan was caught in a web of deceit surrounding labour abuses. To their credit, it was an investigation that Apple instigated which discovered these abuses, but the question remains, how much damage can a misalignment of cultural values between you and your suppliers cause to your business and what can you do to avoid this happening to your organisation?
Apple’s Taiwanese Troubles
Apple reportedly relies on purchases from over 200 suppliers for the parts that go into its tech. They make a big deal about the values and standards that they expect from everyone they work with. Their website states: “At Apple, people are at the heart of everything we do and everything we make. That means considering not only those who will use a product, but also those who help build it. So we hold ourselves and our suppliers to the highest standards to protect the people in our supply chain, and the planet we all call home. Our Supplier Code of Conduct is designed to uphold that commitment. From the sourcing of materials to the recycling of our products, we work with suppliers to ensure that our requirements are being met.”
They go on to state that “Labour, human rights, and environmental protections are the foundation of our Supplier Code of Conduct”, and that they “require suppliers to provide fair working hours, a safe worksite, and an environment free from discrimination. These protections apply across the supply chain, regardless of a person’s job or location.”
The company’s Supplier Responsibility page is highly thorough, a lengthy promise of care and attention segueing into more specific areas such as wellness training, personal development and environmental goals.
They claim to perform over a thousand assessments a year on their supplier partners, and it was clearly one of these which found issues with the Taiwanese supplier, Pegatron. The reported issue, at its core, was that in breach of Apple’s code of conduct, student workers were being asked to work overtime and night shifts. Once this had been discovered, Apple is reported to have said: “The individuals at Pegatron responsible for the violations went to extraordinary lengths to evade our oversight mechanisms.”
Supply Management, the magazine of the Chartered Institute of Procurement & Supply (CIPS), reported in September 2019 that another Apple supplier, the Zhengzhou Foxconn factory, which makes the iPhone, was found to be doing something very similar. The factory was the focus of an investigation by the China Labor Watch organisation into labour abuses, where poor conditions, an illegal over-reliance on temporary and student workers, and forced overtime, where some were expected to work up to 100 hours a week, were revealed.
Clearly, there will always be some suppliers who will exploit their human resources, especially in countries where worker’s rights are lower down the priority list. However, as this is a ‘known’ issue and it is the responsibility of every client who uses these suppliers to employ adequate monitoring to ensure that the incredibly eloquently presented code of conduct promises on websites and packaging are upheld in the real world.
3 ways to encourage closer cultural alignment with suppliers
While Boohoo and Apple do not own the factories that were at the centre of these scandals, there are a minority of suppliers that will attempt to maximise profit above values – as a result, it is all too easy for the failings of your suppliers to tarnish your reputation with very real financial ramifications as customers and clients second-guess their decisions to buy from you.
It is, therefore, more important than ever to conduct a thorough due diligence process when taking on new suppliers and then to regularly revisit them to make sure that those you choose uphold the standards you expect of them.
From our experience of working on hundreds of complex strategic relationships, we have evidenced three behaviours that consistently exist in strong collaborative relationships and which are conspicuously absent or depleted in those that have become troubled.
- Contractual enlightenment
The cultural values you and your strategic supplier partners agree to uphold should be built into your contract. There should be no ambiguity here, with standards, relationship charters, business expectations and escalation processes presented clearly, agreed between you and confirmed as understood from the outset.
While challenges may still arise, clarity at this stage is vital to the avoidance of unnecessary delay, confusion and excuses should a supplier’s standards slip below what you require of them.
Contractual enlightenment is not just about the clarity of your contract, it’s the interaction you have with it once your supplier relationship has begun.
Often contracts are signed and forgotten, filed away, never to see the light of day again. However, a good contract that’s well utilised, should offer a roadmap to the best engagement with your strategic supplier, through good times and bad.
Contractual enlightenment means allowing your relationship to be guided by the behavioural governance in your contract, referring to it regularly, referencing it in meetings, understanding its nuances and turning to it for direction both for good behaviours, and in times of trouble.
- Biannual reshaping exercise
A well drafted contract in a complex supplier relationship should contain a requirement for both parties to meet on at least a biannual basis to ensure that it is still ‘fit for purpose’ and constantly remains aligned to your business outcomes and values.
Meeting with your supplier on a regular basis to determine progress, monitor productivity, raise any issues and to find mutually acceptable solutions to challenges that either party has identified along the way, is just good practice.
One of the primary elements of this biannual exercise, though often low on the agenda, is to review the cultural deviations that have become evident – behavioural changes that require resetting, standards that have started to drop, an environment that facilitates rather than addresses this.
One reason for the frequency of these meetings is so that any issue is not given enough ‘air’ to grow too large, so you can use this opportunity to realign any cultural shifts that threaten your relationship and the project as a whole.
- Follow through with commitments
Follow-through is an integral part of developing and maintaining commercial trust in your strategic relationships – doing what you say you will do when you say you will do it. When it comes to steering that relationship, follow-through is also vital. So, whatever you agree on with your supplier in your biannual review and refine meeting, it’s important that you take the lead in making it happen. Plans will not make change, action will.
When it comes to culture, change can be a slow process, as delicate cogs need to be turned to shift perceptions, amend attitudes and bring a workforce back in line with your code of conduct’s expectations of them.
Change can also be hard and may come with some resentment or resistance, which is why it is important that you show that you are prepared to do your bit by evidencing that you can make the required changes to your organisation as well.
It’s fair to say that even the best companies out there, those that have spent the time to develop cohesive and comprehensive supplier responsibility promises, can be caught out when a supplier lets them down.
While it is clear that Apple have gone above and beyond with their promises and their claims of regular monitoring and assessments are certainly up there with the best, they were still let down.
This only increases the importance of due diligence and supplier reviews if you are looking to rely on your brand reputation and fear the consequences should your suppliers be found to be abusing your trust and your code of conduct.
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