We read an interesting piece recently about how both Woolies and Coles are requiring their local suppliers to submit to an ethical audit in line, they say, with the same rigorous standards they apply to overseas suppliers. They are dealing with two industry associations, one of whom has agreed to cooperate and the other, AUSVEG, who has not.  The thrust of the AUSVEG resistance is that it is an additional impost on their members business.  They do not object in principle to the concept of ethical audits but did reason that Woolworths had a different set of principles for overseas suppliers, for example in relation to freedom of association where apparently Woolworths response was that the laws of the country where the supplier resides need to be applied.

Philosophers call this cultural relativity and it is a dangerous principle to apply to supplier relationships, as Google are now struggling with in China and as companies like Gap, Nike, Marks and Spencer and Walmart have found to their cost in the past.  The downside of this principle if broadly applied is that whatever’s legal goes. So if it’s not illegal to employ 10 year olds sewing soccer balls in Pakistan then it is OK for retailers in developed countries to buy the soccer balls at, coincidentally, very low prices.

But the story does raise the bigger issue of ethical audits in supply chain which, of themselves are a good thing.  Increasingly, Australian businesses, especially those that do business in other countries, are responding to demands from informed consumers for more transparency in sourcing goods which find their way onto supermarket shelves.  But ethics extends beyond simply sourcing and, like charity, needs to begin at home.  In order to demand standards of suppliers, consumer companies need to apply the same rigorous standards to their own businesses. Neither Coles nor Woolies submit themselves to a regular ethical audit nor do they have in place a systematic ethics training program, although to their credit Coles has started to publish an externally verified social report where Woolies does not. Both have been caught out in the past for slippages in their sustainability records – Woolies had to withdraw a line of toilet paper after it was discovered that the environmental credentials claimed by the producers in Indonesia were bogus and both have been caught up in scandals over bribery in procurement.  Neither is prepared to accept the commonly held criticism of abuse of market power by consumer groups and regulators alike.

On the face of it, ethically auditing their supply chains seems a strange place to start on a journey towards more ethical trading. Contrast this with the Tesco group in the UK. Since 2005 they have conducted a group-wide anonymous supplier survey.  Their statement of supply chain enshrines the principles of:

- Treat with Respect

- Professional

- Clear in our dealings

- Reliable in paying on time

- Committed to meeting customer requirements

- Maintain high quality standards

They have established Producer Clubs around the country which meet regularly “to share information to help producers understand customer trends so they can plan their activities” and they make a commitment to “source fresh within the country where possible”. Most importantly, they make a commitment to be an advocate for sustainability in the industry so that all boats are raised.

Ethics is not a cloak of convenience to be pulled on when seeking to exact standards from suppliers or as an excuse for dropping producers from your supply chain.  As Paul Tillich says, “ethics is not a subject, it’s a life put to the test daily in a thousand different moments.”

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