As the industry innovates and culture trends begin to change, organizations must adapt in order to have future success. Culture and ethics are an increasingly growing hot topic in today’s day to day business. Not only are customers clamoring to do business with a company with a good reputation and a stringent program around ethics, employees are also striving to work for an organization that places great emphasis on ethical business practices. These recommendations will help to ensure an ethical business environment across the board:
1.) Know your third parties
It is critical to hire employees and work with third parties that have the same values that the company embodies. With attention being paid to unethical corporations in the media and employees being encouraged to speak up if they become aware of unethical behaviors, companies are making changes and investments into resources and developments around ethics. One important investment, especially in the logistics industry, is managing risk around vendors and third parties because actions of third parties can create compliance risks for a company. To mitigate these risks, it is imperative that a company develops and implements stringent requirements to manage third-party relationships.
Selecting the right third parties is imperative. Corporations should work with third parties that have the same values and commitment to conducting business in an ethical manner. This can be difficult especially for global companies that use third parties in jurisdictions where corruption and human rights violations are the norm rather than the exception.
Companies should go through a due diligence checklist to determine the level of risk that the third parties present. Two important considerations of possible risks include industry and jurisdiction.
- Industries with high risk involve government officials or require approval from the government for some aspects of the business which could lead to potential bribes.
- High-risk jurisdictions or locations that have a high risk for corruption, terrorism or money laundering, can be researched through the Corruption Perceptions Index created by Transparency International that ranks countries on a corruption scale.
Third parties should also be continuously screened against government watch or sanction party lists. If a situation arises where a third party violates the law, this could harm the reputation of the company that has chosen to do business with that third party. Similar to the theory “the company you keep determines your character,” organizations should select third parties that share similar values and cultural ideals. Third parties should be warned of possible relationship termination if they fail to conduct business in an ethical manner.
In order to mitigate risk, companies should have third-party programs and processes in place that employees can follow when selecting third parties.
It is also important to have the third parties under contract to limit liability to the companies and to ensure third parties agree to follow local laws and regulations around anti-corruption and human rights.
2.) Employ a top-down approach
It is critical that companies employ a top-down approach when it comes to ethics, and senior managers and the board of directors must be expected and encouraged to support the initiative of working with ethical companies. Such commitment from executives will drive home the message that ethics matters, and who you choose to do business with reflects on the company. Without management’s full commitment, employees may not follow through because they may not see the importance of the program.
Corporations must balance financial opportunity and cost savings with analysis of their third parties, to avoid risk to their reputation and finances. Some companies try to cut costs through the use of cheaper and potentially corrupt suppliers. Getting the job done quickly through whatever means possible becomes a priority instead of working with suppliers that operate a business in an ethical manner.
Companies that are involved in an unethical violation directly or indirectly (through the association of a third party), can have significant fines to pay to the Department of Justice (“DOJ”). There could also be investigations initiated by the DOJ that can ultimately disrupt the day to day business of the company.
3.) Put the right tools and resources in place
There are many tools that organizations utilize for vendor management in order to prevent companies from allegations of corruption and bribery. Technology or software around vendor management can help companies combat corruption and ensure ethical practices. Specifically, companies purchase software to assist with vendor vetting and supervision. A software program can be helpful, but if there are not existing strong programs in place around vendor selection, the software itself will not be effective.
BDP International (“BDP”) has tools in place to mitigate the risks that can exist when working with third parties. One tool includes agreements that must be signed with each third party. The contracts have language around the requirements to follow anti-corruption and human rights laws with the context that if the laws are not followed, the business relationship will be terminated immediately.
Another tool is BDP’s Third Party Code of Conduct. This document is similar to BDP’s internal Code of Conduct, which outlines high standards and expectations for service providers on ethical behavior during all business interactions that involve the organization. Third parties are expected to review and sign off on the code on an annual basis.
The final tool is the corporate policy in selecting business partners. The policy outlines strategies in connection with corporate values; a checklist of due diligence documentation and questions to obtain from third parties; and how to analyze the information provided.
Third parties should also be monitored through periodic visits and regular contact. Employees that deal with third-party relationships should be trained on the policy around selection and management. Training should be repeated periodically to keep employees engaged and aware of the standards of the company. Implementing an internal program and policy around third-party selection and management is an important strategy that can prevent reputational and financial risk to companies. Adherence to high standards around ethics and selecting the right third parties to do business with is essential in the logistics industry.
At BDP, it is non-negotiable that our employees strictly adhere to our Code of Conduct. Our customers can rest assured that they are partnering with an organization that does not waver when it comes to ethical business practices.