The Corruption Perceptions Index (CPI) is a must-read annual report for procurement professionals that source internationally.
Why? Because with a greater focus on risk, you need to know if your supply chain is contributing to the serious corruption problems, endemic in so many of the world’s poorest countries.
Clean vs. Dirty
There’s a running joke in Paraguay about the country’s entrenched corruption problem, exposed and broadcast year after year by Transparency International’s Corruption Perceptions Index (CPI). With a score of 130 out of 168, it’s one of the most corrupt countries in the world, but locals say that the reason it didn’t come in last is because “somebody must have bribed the judges”.
Highlights from the report include the top ten “cleanest” countries. It’s important to note that no single country anywhere in the world is corruption free:
4. New Zealand
5. Netherlands, Norway
10. Germany, Luxembourg, UK
It’s no surprise that the lowest-scoring countries include war-torn states that have suffered from decades of conflict, such as Iraq, Syria and Afghanistan.
150 – Burundi, Cambodia, Zimbabwe
153 – Uzbekistan
154 – Eritrea, Syria, Turkmenistan, Yemen
158 – Haiti
159 – Guinea-Bissau, Venezuela
161 – Iraq, Libya
163 – Angola, South Sudan
165 – Sudan
166 – Afghanistan
167 – North Korea, Somalia
Other interesting results include the USA in 16th place; Australia slipping to 13th place; Greece improving its performance to reach 58th place (in all likelihood due to international scrutiny during the Greek financial crisis); and China in 83rd place.
Northern European countries were ranked as the “cleanest” states, most free of corruption. However, Transparency International suggests that their records aren’t as clean as the scores would indicate, and it’s all down to sourcing from corrupt countries:
“The OECD Anti-Bribery Convention, adopted in 1997, requires each signatory country to make foreign bribery a crime for which individuals and enterprises are responsible. The Convention is a key instrument for curbing the export of corruption globally because the 41 signatory countries are responsible for approximately two-thirds of world exports and almost 90 per cent of total foreign direct investment outflows.
“Foreign bribery is not an abstract phenomenon; it has damaging consequences in the form of contracts not going to the best qualified suppliers, prices often being inflated to cover bribe payments, environmental requirements not being enforced and taxes not being collected.”
The CPI report shows, however, that half of all OECD countries are violating their international obligations to crack down on bribery by their companies abroad. This includes the cleanest countries identified in the report, such as Sweden (3rd place), which is facing allegations that it paid millions of dollars in bribes in Uzbekistan (153rd place).
Procurement professionals who source internationally have the power to halt the flow of cash moving from the cleanest to most corrupt countries, feeding the corrupt states and locking the world’s most vulnerable people into a cycle of impoverishment.
Here are three steps you can take, as a procurement professional, to ensure you do not source from a corrupt state:
Be informed – read reports such as the annual CPI and research the countries you are dealing with.
Understand the OECD Anti-Bribery Convention, and remember that individuals can be held responsible.
Procurious is celebrating its 10,000th member months ahead of its second birthday in a milestone that has surpassed all expectations.
We’re delighted to make this announcement and want to take the opportunity to thank all of our members for helping us to build and grow such a fantastic community.
When we launched in May 2014, we wanted to provide a hub for members to advance their careers, develop their skills and expand their professional networks. We like to think that the growth in the community suggests that we’re making a difference for procurement and supply chain professionals.
Shifting Procurement Landscape
A huge shift is in the making within the procurement/supply management profession. While cost remains important in the procurement function, professionals work at the interface of an extended global supply chain and are responsible for an ever-growing corporate spend.
Increasingly, Chief Procurement Officers (CPOs) command a seat next to the CEO in the boardroom, and successful supply management practices are seen as pivotal to corporate growth. As a result, demand for new talent is soaring, and so are advancement opportunities.
Against this backdrop, Procurious broke new ground in May 2014, when it launched as the first free online global business network for curious, ambitious procurement and supply management professionals. Building on its mission to strengthen the global supply chain community, Procurious has become a vital source of knowledge, connections, news, and advancement opportunities.
Unlike other communities, Procurious offers a powerful combination of career advancement, skill development, and professional networking, all on one platform. With more than 80 eLearning videos, discussions on everything from commodity indices to procurement systems, and a wealth of guest writers adding their voices to a twice-daily blog, Procurious is at the epicenter of the industry
Flexing Collective Muscle
“The complexities of procurement and supply management are a world away from what they were a decade ago. Executives realise the huge risk posed to their business if there are supply chain disruptions, or costly reputational damage caused by bad management and supply chain practices,” said Ms Seary.
“This means that organisations of all shapes and sizes are placing a far greater emphasis on procurement professionals, who are commanding a seat right next the CEO at the boardroom table.
“It’s a world away from the procurement function within organisations a decade ago, when procurement was still considered a backroom function. Back then, buyers struggled for influence over corporate spend, typically buying from large suppliers and sticking with long-term contractors, with the primary focus on cost.
“Many of the issues the profession faces are too big for any one person or company to address alone. It’s exciting to think what our global procurement community can achieve as we flex our collective muscle.”
Engaging the Community
Procurious members engage with the site daily to find a daily stream of highly relevant and credible procurement news and information and broader business and tech/digital news that can be difficult to locate among the noise on LinkedIn.
Procurious member, Chetan Shetty of Productivity Champion Advisory Services in New Zealand, said the site contributes to their business network efforts. “The site is very different and a refreshing approach to connecting with like-minded professionals.”
Members hail from over 140 countries and represent some of the largest organisations in the world including Visa, BHP Billiton, British Airways, Apple, IBM, Shell, HSBC, Unilever, NHS and Deloitte.
You can join the Procurious community for free today by registering at Procurious.com.
To celebrate our milestone, we’ve created a neat infographic to illustrate just how far our 10,000 members could take us…
Meanwhile, here are some of the key headlines from procurement and supply chain this week…
Child Labour Concerns in Battery Supply Chain
A new report from Amnesty International and African Resources Watch has raised concerns about child labour in the battery supply chain
The report states that “very few” companies are taking the required steps in due diligence, particularly in relation to the mining of cobalt
Amnesty accused major global organisations, such as Apple, Samsung and Sony, of “failing to do basic checks to ensure that cobalt mined by child labourers has not been used in their products”
Cobalt is not currently covered under the US Dodd-Frank Act, which is limited to tin, tantalum, tungsten and gold
Almost a year ago to the day, Procurious published an article on the outcomes of the World Economic Forum 2015. We also took a look at the key topics that were to be discussed during the 2015 event.
You might be forgiven for thinking that, since the leaders from the world’s largest economies gathered in Davos twelve months ago, very little has changed. There are still major issues with global markets, falling oil prices, interstate conflicts and climate change.
Add to these factors the growing migration from war-torn regions, and terrorism, both on the ground and cyber-related, and it was a recipe for a very busy Forum.
What Was Different?
Despite all the pressing issues highlighted above, the WEF organisers picked a different topic to be the main theme for 2016 – Industry 4.0. This topic focuses on the so-called “Fourth Industrial Revolution”, where industries are increasingly digitised, and humans are replaced in many professions by robots or AI.
While this might be a positive thing for some of the attendees, including Jack Ma (Founder of Alibaba), Sheryl Sandberg (CEO of Facebook) and Eric Schmidt (Head of Alphabet, Google’s parent company), it is potentially very bad news for both blue and white collar workers, with an estimated 7 million jobs at risk over the next 5 years in the world’s largest economies.
Klaus Schwab, founder and president of the WEF, has written a book on ‘Industry 4.0’, in which he states, “We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another.” This theme also included a discussion on ‘smart machines’ being used in war zones.
What Else Was on the Agenda?
A number of other major themes appeared on the agenda, including terrorism, the migration crisis, cybercrime, and the on-going impact of the slowdown in the Chinese economy on the financial markets of the rest of the world.
In the run up to the 2016 event, the Global Risks Report published by the WEF highlighted large-scale ‘involuntary migration’, for example from civil wars, as this year’s major risk in terms of impact, and mitigation of climate change as the most likely global risk. This is the first time that an environmental issue has topped this particular list.
Climate change was one of the hot topics of the Forum, as leaders discussed the next steps and how to build upon the COP Climate Change Agreement that was signed in Paris in December last year. Global climate change is seen as having a major impact on other risks, such as food and water shortages and regional conflict, so the topic was never far from the centre of discussions.
Leaders also managed to find time to talk extensively about the global markets, including the impact of the slowdown in the Chinese economy. Christine Lagarde, managing director of the IMF, spoke on Friday about the need for Chinese authorities to communicate better with global markets over moves in equities and foreign exchange markets, in order to head off any further market downturns.
However, it’s not all bad news, as Lagarde stated that China’s move from an export-led to domestic consumer market economy was “manageable”, while holding estimates for Chinese growth at 6.5 per cent. It’s hoped that this turnaround will arrest fears of another global recession.
As the Forum drew to a close on Friday, there was a sense that 2016 could be a year of major upheaval, with markets not expected to recover immediately, slow growth predicted for at least the first half of the year, and a solution still required for mass migration.
However, there also appeared to be a feeling of tangible outputs from a business point of view. The central theme of ‘Industry 4.0’ raised interesting points around the future of many industries, and in a number of sessions, there was agreement that business needed to step away from a narrow focus on profits and take steps to improve workers’ conditions, promote diversity and take a perspective that covered a wider group of stakeholders.
It will be interesting to see if we are still talking about the same issues when the 2017 Forum rolls around in 12 months.
Need some headlines and stories for your morning coffee with your friends? Procurious has got you covered…
BMW Top Sustainable Corporations List
BMW has topped Corporate Knights Magazine’s annual ‘Global 100’ list of sustainable corporations for 2016
The study looks at companies with a market valuation of $2 billion or high, and scores them against global industry peers on a list of 12 quantitative KPIs not exclusive to to environmental sustainability
Companies are scored on these KPIs, and the top performer from each industry outlined in the Global Industry Classification Standard goes to the final list
2016’s list also included Dassault Systemes (Ranked 2nd), Outotec (3rd) and Commonwealth Bank of Australia (4th)
A new business has been launched in Vancouver to change the way residents approach thrift shopping in the face of ‘fast fashion’
‘My Modern Closet’, founded by Chloe Popove, is the first consignment store to offer people donating to the business a collection option, with customers then being given 20 per cent cashback or credit to shop online
It is hoped that the business will encourage more people to donate used or unwanted clothing and fight the impact of fast fashion
Any un-sold clothing is donated on to charities helping to give clothes to the homeless, and to Syrian refugees
The Open University says businesses and universities must work more closely to address skills shortages.
Figures released today show that the UK continues to face up to a worsening skills crisis. Despite the overall rise in job creation, the vacancy rate continues to increase, and is particularly acute in specialist areas such as IT and engineering.
The latest Labour Market Figures, produced by the Office for National Statistics (ONS) reveal there are 588,000 more people in work than this time last year, but that there has been a 6 per cent increase in the number of unfilled roles over the same period, as there are now 756,000 vacancies.
Concerns for Businesses
The on-going shortage in skilled workers is increasingly causing concern for businesses. Decision makers are facing up to the effects of this market on their businesses: hard to fill vacancies can cause delays in developing new products and services, meanwhile the latest CBI/Accenture Employment Trends Survey, published last week, reveals that over half (52 per cent) of respondents believe that developing and maintaining digital skills within their organisation has a new urgency in this climate.
Despite there being over 2 million students enrolled on degree courses in 2014/15, with a 3 per cent increase in full-time first year enrolments in engineering and technology subjects, businesses often find that graduates are not adequately prepared for the workplace.
The skills gap is affecting UK productivity, for instance, engineering companies have reported an annual shortfall of 55,000 skilled workers. It has been estimated that addressing the shortage of skills in this area could generate £27 billion per year from 2020, roughly equivalent to 1,800 new secondary schools or 110 new hospitals.
Issues for Small Business
Michael Martins, Economist at the Institute of Directors said:“These jobs figures, which show the British labour market ended 2015 strongly, could be just what the doctor ordered as we see nothing but storm clouds gathering across the global economy.
“While this is clearly good news and the increasing number of vacancies means that the unemployment rate could continue to drop, addressing the skills gap takes on a fresh importance. For small firms that employ fewer than ten employees, the struggle to find workers is particularly acute, with vacancies rising by 13.1 per cent in the last quarter.
This is another reason why employers hope the government will not follow through on suggestions to restrict skilled migration from outside the EU, especially as the monthly quota for Tier 2 visas has been shown to be inadequate in addressing skill shortages.”
An Answer in Workplace-Based Education?
The Open University is arguing that a greater emphasis on workplace-based higher education is necessary to create more value for businesses and individuals alike. Steve Hill, Director of External Engagement at The Open University, comments: “The skills gap is affecting everyone, holding back businesses and having a knock-on effect on British economic productivity.
“In most cases, the answer to this shortage is right under our noses – with up to 90 per cent of the current workforce still in work over the next decade. With the right training and up-skilling, these individuals can become the engineers, data scientists and high-skilled digital workforce the UK needs to compete on the world stage.
The challenge now is for Governments and the academic sector to work together to develop courses that meet the needs of businesses, and provide the right support for those committed to developing their careers.”
The OU regularly supports over 1,300 organisations, including KMPG, Hay Group and the NHS, delivering flexible learning solutions at scale to address skills shortages and develop high performing workforces. With a global reach and as the UK’s leader in part time education, with 76 per cent of OU’s current students studying whilst working full or part time, the OU is well equipped to deliver consistent learning at scale to dispersed workforces.
The line, “Quis custodiet ipsos custodes?”, first appeared in Satires by the Roman poet Juvenal, and literally means “Who will guard the guards themselves?”. The question now being asked is, “Who audits the auditors?”, and the answers don’t look good.
Research from the University of Sheffield released last week claims that supply chain auditors are actually “‘working’ for the corporations”, and ultimately failing both the supply chain workers and the environment they are supposed to be protecting.
SPERI, the Sheffield Political Economic Research Institute, conducted 25 interviews over a 2-year period with auditors, business executives, NGOs and suppliers around the world, as well as visiting factories in China, before publishing their results.
The report argues that “audits are ineffective tools for detecting, reporting, or correcting environmental and labour problems in supply chains”, and that many of the problems that ethical audits were created to solve are actually being made worse by the process. This is in part down to the organisations carrying out the audits working towards the interests of businesses.
One auditor was quoted in the report as saying, “we will audit as far down as the brand wants to go”. As stakeholders and organisations, such as ISM and CIPS, focus more on the concept of the end-to-end supply chain, including all supplier and subcontractor practices, it appears that in some cases, the full chain is not being assessed.
The Auditing Industry
A quick Google search for the term ‘supply chain audit’ throws up a vast number of results. Included in these results are a considerable number of private companies who are either supply chain auditors, or offer it as part of their services. The increasing market for ethical audits has led to the creation of a booming industry.
It should be pointed out that these firms are not being accused of falsifying results or deliberately misleading the organisations who are employing them to audit supply chains. The accusations lie in the fact that some practices within the supply chain are being missed.
Apportioning blame, even taking the findings of the SPERI research into account, is not as black and white as people might think. If the organisations carrying out the audits are providing misleading findings, then action must be taken.
However, much as procurement may be bound by a specification when purchasing goods and services, auditors will be bound by what they are requested to do by the employing organisation. The auditors may be culpable for not going far enough, but the blame should be shared if organisations are seeking to limit their activities.
Governmental and Public Input
And perhaps this is part of the issue, in having auditors as commercial enterprises. These organisations will be operated as businesses with the aim of meeting customer demand, but, as a business, still need to make enough money to remain operational and satisfy investors.
The SPERI report argues that ethical audits need greater governmental involvement, both from the point of view of conducting audits, but also in enforcing the required standards for working conditions and the environment. Governmental enforcement of these regulations can be difficult, especially where organisations operate global supply chains and fall under a diverse set of jurisdictions.
Many national Governments are tightening regulations around modern slavery and the environment. The UK Government has announced a set of measures aimed at combatting modern slavery in the supply chain. The newly formed Gangmasters and Labour Abuse Authority will be able to use the measures to force organisations to take action, where there is belief that offences have occurred.
However, in order for the issues to be tackled effectively across global supply chains, similar measures need to be in place for all countries, or there will always be areas where practices will remain unchecked.
You can find a full copy of the SPERI report here. We’d love to hear your thoughts and opinions on this issue. If you work for an auditing company, let us know your experiences of this too.
In the meantime, you can check out the major headlines in procurement and supply chain this week…
EU to Scrutinise Large Company Big Data Use
The European Union is considering whether the way large Internet companies, such as Google or Facebook, collect vast quantities of data is in breach of antitrust rules
Margrethe Vestager, European Commissioner for Competition, speaking in Munich over the weekend stated that the EU would step in if Big Data usage was negatively impacting competition
Some experts have warned that with a few large companies controlling the data, it becomes harder for new organisations to enter markets, being too far behind to compete effectively
Ms. Vestager also said the EU would look into why some companies can’t acquire information that is as useful as the data that other competing firms have.
The Modi Government in India has announced plans to assist start-ups in the country by only requiring the businesses to pay statutory fees for getting started
In a move designed to encourage innovation and entrepreneurship, the Government will cover the costs of filing of patents, trademarks or designs
The Government has also agreed to relax public procurement regulations for start-ups, not requiring the businesses to meet current regulations for prior experience/turnover found in the manufacturing sector
The Government hopes that this scheme will eventually lead to the development of start-up organisations in sectors such as agriculture, healthcare and education
ECHR Rules Companies Can Monitor Employee Internet Usage
The European Court for Human Rights has ruled that companies can monitor employees’ internet usage, providing they have given warning beforehand that personal use of facilities is forbidden
The ruling comes after a Romanian engineer took his employer to court after being fired for having private conversations with his family on a Yahoo Messenger site
The ECHR, finding in favour of the employer, noted in its ruling that “it is not disputed that the applicant’s employer’s internal regulations strictly prohibited employees from using the company’s computers and resources for personal purposes.”
This prior warning given to the employee played a large role in the decision, as the Court could rule that it was not a breach of his human rights
Take a fresh look at the consumables in your supply chain.
On December 21, 2015, SpaceX’s Falcon 9 made history. After successfully delivering 11 communications satellites into low-Earth orbit, the nine-engine booster rocket returned safely to Cape Canaveral, landing dramatically on a jet of fire.
Less than a week later, SpaceX founder Elon Musk tweeted that the Falcon 9 was “back in the hanger … no damage found, ready to fire again”.
Reusability the Key
Placing satellites into orbit is no mean feat, but the astounding, history-making part of this operation was landing the booster. It’s all about reusability. Until now, putting a rocket into space has been prohibitively expensive due to the single-use aspect of launching. In his detailed explanation of Musk’s vision, Tim Urban of the website Waitbutwhy compares single-use spacecraft to air travel:
“Imagine the current air travel industry with one key difference: an airplane works for one flight only. Each flight is on a brand new plane, and after the flight, passengers exit into the terminal and the plane is broken down into scrap metal and possibly-reusable parts that are sent off to be refurbished for use in a future plane.
An airplane costs around $300 million to build. So in this new model, in addition to paying for the crew’s time and fuel, airlines have to spend $300 million extra each flight to build a plane. How would that change things?
First, there would be very few flights available—the schedule would be limited by the pace of plane production. Second, the price of a round-trip ticket between Chicago and San Francisco would now cost about $1.5 million per person. For economy.”
Musk himself has stressed that reusability is the key to making human life multi-planetary:
“If one can figure out how to effectively reuse rockets just like airplanes, the cost of access to space will be reduced by as much as a factor of a hundred. A fully reusable vehicle has never been done before. That really is the fundamental breakthrough needed to revolutionize access to space.”
So how will SpaceX’s achievement affect the costs of getting to space? With a human mission to Mars as the ultimate goal, back in 1989 NASA estimated it would cost $450 billion to send 4-6 astronauts, about $100 billion a seat. This was upgraded in 2004 to $50 billion, or $10 billion a seat. Musk has a per-seat goal of $500,000, 20,000 times less than NASA. That’s less money than an average home loan in Australia.
The huge reduction in costs will be brought about through a combination of revolutionary improvements, including low-cost propellant, making the return propellant on Mars, and having approximately 100 paying passengers per flight. The biggest saving, however, will be through the rapid reusability of rockets, where the only costs involved are maintenance, life-support and refuelling.
The closest NASA has come to reusability was through the now-retired Space Shuttle program, which was able to land the spacecraft itself but not the booster, costing over $200 million per astronaut.
What About Your Supply Chain?
The Falcon 9 story is inspirational in the sense that SpaceX has achieved something that the world’s best aeronautical engineers said could never be done. The single-usage problem has been unsurmountable for decades, but SpaceX solved the puzzle and other organisations will soon follow suit.
The message here for procurement professionals is to take a fresh look at the consumables in your supply chain that could possibly be reusable. Whether the article is as expensive as a rocket booster or as cheap as office paper, it’s worth reconsidering whether items really are only suitable for a single use. Reusability is good for the bottom line, good for the planet, and will help put humans on Mars sooner than we think.
A lack of growth in key markets will lead global players to seek opportunities in the developing world.
Forecasts show that 2016 will continue the trend of minimal year-on-year growth in consumer goods spending, both in the UK and across Europe. In this environment manufacturers will carry on looking for opportunities to consolidate and pare down costs, focusing on developing world markets with higher growth potential.
However, competitive pressures are substantial: manufacturers based in the developing world are leveraging their low cost base and local knowledge to win both in their home and international markets.
Slow Global Growth
2015 saw a continuation of the effects of the ‘Great Recession’ that started in 2007, with historically low revenue growth, margins and shareholder returns. In the eurozone for instance, growth slowed to 0.3 per cent in November, with growth in Italy as low as 0.2 per cent.
China has also experienced significant slow-down, with economic growth at a six-year low of 6.9 per cent in Q3 2015. The impact of the slow growth has spilled over into 2016, with continuing falls in the Chinese stock market and slow demand for commodities having an impact on the wider global economic market.
Nick Miller, head of FMCG at Crimson & Co commented: “Seemingly as a result of this growth, some of the largest acquisitions and takeovers in 2015 have focused on cutting costs in supply goods and services to market. Kraft and Heinz’s merger last July has led to multiple cost cutting measures, as has the more recent take-over of SABMiller by ABInbev.
This trend in the supply chain is surely set to continue, with larger companies merging to create greater economies of scale to further leverage low cost methods in order to reach their target audiences.
In this way, supply chain innovation will also be driven by a need to curb costs and expenditures. Small companies, that are more flexible than larger corporations, are able to react to market developments faster, changing their strategies to bring fresh ideas for supply chain excellence. Larger players, unable to invest in this dynamic way of working, have tended to buy innovation by acquiring smaller companies. Coca Cola has already purchased Innocent drinks with this aim in mind.”
Global vs. Local
Given the lack of growth in Europe and China, many organisations are looking to the developing world for growth opportunities. However, these opportunities can be difficult to tie down, with organisations typically losing out to regional players more comfortable with the local environment.
The smaller companies in the developing world have significant advantages over global organisations seeking to expand in the region. As these companies are already present in the area, they will have an existing customer base, as well as an in-depth knowledge of the market, giving them an edge over external players.
In addition, they have immediate proximity to this rapidly expanding customer base, with naturally greater flexibility to be able to react quicker to market developments.
Miller added, “Just as with innovations in the supply chain, large businesses will likely look to purchase small companies in developing areas to speed their time to market, instead of building their own on-the-ground agencies. This will be a more cost-effective way of speeding growth in these regions, as well as providing immediate expertise into valuable areas.”
As Intel declares that its supply chain will be free from conflict minerals this year, we take a look at what other organisations are doing, and what impact these materials can have on a supply chain.
Conflict materials are raw materials sourced from a particular part of the world where conflict, such as civil war, is occurring and affects the trading of those materials. The proceeds from the trade of these materials, such as conflict diamonds, are often used to fund armed groups in these regions.
Conflict minerals are the raw materials columbite-tantalite (coltan), cassiterite (tin), gold, wolframite (tungsten) and their derivatives, the vast majority of which are found in the Democratic Republic of Congo and adjoining countries, a region which has been ravaged by civil war and other conflicts for over 20 years.
These minerals are used in a wide variety of manufactured products, including consumer electronics such as computers, laptops, tablets, smart phones and even washing machines.
In 2010, US President Barack Obama signed The Dodd-Frank Wall Street Reform and Consumer Protection Act into law. Section 1502 of the Act required all American companies to determine whether their products contained conflict minerals through due diligence carried out in their supply chain, and to report this to the US Securities and Exchange Commission (SEC).
There were criticisms of the law on both sides, with some groups arguing that it didn’t go far enough and ban the sourcing of such products entirely, while others argued that over-zealous enforcement of the law could adversely impact legitimate workers in the region, who relied on trading these materials for their livelihoods.
Since the law was passed, it has been estimated that it has helped to reduce funds going to armed groups in the DRC by up to 65 per cent.
In the UK there is no strict regulation on conflict minerals, although there are initiatives that have been created to stop these materials entering the supply chain. These initiatives require organisations to provide a ‘proof of origin’ on raw materials, or carry out similar due diligence in their supply chains to assess where funds from trading are going.
During 2015, the European Parliament voted in favour of a mandatory monitoring system for minerals originating in conflict areas, similar to the provisions in Dodd-Frank. The system suffered similar criticism to Dodd-Frank in relation to provisions for legitimate traders and miners.
Supply Chain Transparency
Growing public scrutiny of organisational practices, and the rise of consumer power when it comes to sustainably manufactured or procured products, will lead to a requirement for a vast improvement in supply chain transparency in the short-term future.
With Intel now reporting that its supply chain will be free from all conflict minerals in 2016, many other high-profile organisations, particularly those in the electronics industry, will be keen to follow suit.
Apple reported progress in the removal of conflict minerals in its product in April last year, but cannot yet claim to be ‘conflict free’ as all of their suppliers are yet to complete the auditing process. A further 120 companies,including Dell, HP, Nokia and Microsoft, have signed up as members of the Conflict-Free Smelter Program (CFSP), which aims to ensure that metals and minerals are worked with in conflict-free factories.
However, there appears to be a lot of work for a number of organisations to do. A report released by Amnesty International last year showed that 79 per cent of a sample of companies who had filed reports to the SEC in 2014, had failed to meet the minimum disclosure requirements.
Supply Chain Risk
Organisations must undertake a considerable volume of work to ensure that their supply chains are free from conflict materials of any kind, including conflict minerals. The management of this issue, and the associated risks, needs to be handled proactively, or the organisations will have to deal with any repercussions.
As political and socio-economic climates grow more unstable, global supply chains face increasing risks when doing business, and even the best prepared can fall foul of the actions or activities of a third party in the chain. However, there are steps that can be taken to minimise these risks.
Increased collaboration with suppliers and supply chain partners and creating greater visibility through the use of data, as well as policies and processes governed by procurement, can all help to reduce these risks. It’s down to the individual organisations to work out what is best for them.
Procurement risk, including supply chain transparency and ethics, will be one of the major themes at the Procurious Big Ideas Summit 2016. Stay tuned in the next couple of months for more information on the event, and learn how you can get involved.
Meanwhile, we’ve scanned the news feeds and Internet to find the major procurement and supply chain headlines this week.
‘Non-Compliance’ Issues Alleged at Co-op Group
Kath Harmeston, former Procurement Director at the Co-operative Group, has alleged that procurement policy non-compliance were as high as 70 per cent
The claims were made during an employment tribunal where Harmeston is seeking £5.2 million from the organisation for unfair dismissal
Harmeston alleged that staff “across the business were placing commitments with suppliers without going to the procurement department first”, including on up to 50 capital projects
The Co-operative Group responded that Harmeston’s claims were a “smokescreen”, covering up poor performance and the hiring of a firm of consultants who had previously been subject to whistleblowing claims
A collaborative procurement agreement on the purchase of vehicles for 34 police and emergency services organisations in the UK will create savings of up to £7m
The agreement, the largest of its kind ever put together in the UK, will see the supply of over 3,000 vehicles, 1,200 of which will be manufactured in the UK itself
The suppliers – General Motors UK trading as Vauxhall, Ford, Volvo and BMW – were selected from a list of companies on the national government framework agreement
David Wilkin, West Midlands Police’s director of resources and the national policing lead for the procurement of vehicles, said “All suppliers in the process had to demonstrate their working relationship with local dealerships to ensure that going forward maintenance of the vehicles such as warranty repairs are carried out locally, ensuring we continue to support the local economy”.
The Chancellor’s warning of a “cocktail of new threats” to the UK economy shows that deficit reduction must be the top priority for the UK Government, says the Institute of Directors.
A slow start to 2016 for global markets, particularly in China, Brazil and Russia, the ongoing tension in the Middle East and stock market falls were all highlighted by George Osborne in a speech made in Cardiff on Thursday.
Although only just over a week into the new year, economic alarm bells are sounding around the world, with China suspending trading on its stock market twice last week due to heavy losses, as well as the continuing fall in global oil and other commodity prices.
What is the Deficit?
The deficit is the total amount of money a national government borrows, with the UK’s current deficit estimated at just under 5 per cent of GDP. Net borrowing for the UK in 2015-16 is forecast to be £69.5 billion, which is equal to 3.7 per cent of the UK’s GDP.
However, it’s not quite as simple as being just the money that is borrowed, as the deficit can be impacted by a number of macro-economic factors, such as economic growth and the strength of overseas markets who the UK is exporting to.
The “cocktail of threats” that Osborne warned about shows a picture of the global economy that is in sharp contrast to the rosier picture painted by the Chancellor in his Autumn Statement, when he said that the UK economy was “growing fast“.
However, with planned welfare cuts set aside, and targets for borrowing exceeded in 2015, many experts are also warning that the Conservative’s plans for a budget surplus by 2020 may prove to be very difficult.
Importance of Deficit Reduction
With a less positive outlook for the coming year, the Institute of Directors has stated that reducing the UK’s deficit is now more important than ever, to allow the country to cope with any future financial crisis.
James Sproule, Chief Economist at the IoD said: “Osborne’s warning comes at an important time for the world – and British – economy. With turmoil on the stock markets, interest rates still at extraordinary lows, and various surveys painting a less than rosy – albeit more realistic – outlook for the developing world, the UK must be prepared for all eventualities. First and foremost, that means a continued focus on eradicating the deficit.
“85 per cent of IoD members support the Chancellor’s plans to run a small budget surplus by the end of this parliament. They know that without bringing public spending under control, the UK’s debt pile will continue to grow. That means when – not if – the next crisis strikes, it is unclear how well we will be able to weather the storm.
“The IoD warned last year that the Chancellor did not leave himself much room for manoeuvre by relying on a £27 billion accounting windfall in the Autumn Statement to balance the books. Now those concerns have come into sharper relief.
“Without a concerted effort to bring ever rising public spending under control, tax hikes like the apprenticeship levy will always be tempting, and the promised increase in income tax thresholds and cuts to corporation tax may not materialise. The fact the sun seems to be shining a little dimmer highlights the importance of fixing the roof sooner rather than later.”
Social media can help to facilitate global communication and information gathering, but it can also be used for illegal means such as terrorism. With Twitter being fined for non-removal of “terrorist propaganda”, we investigate what countries are doing to stem this particular use of social media.
As we reported last week, Twitter was fined in Turkey for failing to remove content that the Turkish Government said was “terrorist propaganda”. The major social media platforms have been very careful in the past to strike a balance between removing materials, while at the same time trying not to inhibit or stop legitimate political debate.
However, in light of the terrorist attacks in Paris, Lebanon and the USA, organisations and legislators are now looking at what can be done to limit access to social media for terrorist organisations, both for communication and publication.
Pressure on Platforms
Twitter, Facebook and YouTube have recently come under more pressure from governments to closely monitor, and remove, posts, accounts and videos that are either violent or contain terrorist propaganda. However, all three platforms take a reactive stance on this, relying on their users to report content like this before it is removed.
Extending the powers that the platforms operators have to carry out removal and tracking activities on these posts has been discussed. This has raised concerns among free-speech campaigners as to where these powers would end and as to what would fall under the categories for removal, as this is frequently hard to define.
New legislation was passed last week by the US House of Representatives, which now requires the Obama administration to produce a strategy to combat terrorists’ use of social media. The legislation was passed in response to the terrorist attack in San Bernardino, California, and aims to allow for more close scrutiny of social media activities as part of visa application consideration.
Rights and Freedoms
At the same time as the legislation went to vote, the UN was holding a special meeting of its Counter-Terrorism Committee, where preventing terrorists from exploiting the Internet was also on the agenda. Prominent in the discussion was how to carry this out, without impinging on the rights and freedoms of global citizens to legitimate debate and activities.
It is suspected that ISIS/ISIL has used social media to attract over 30,000 foreign terrorist fighters, from over 100 countries, to join their fights in Syria and Iraq. However, all parties were keen to assess how terrorist activity could be halted, while at the same time ensuring that any restrictions did not create grievances that would play into the terrorist groups’ hands.
Jeffrey Feltman, UN Under-Secretary-General for Political Affairs, told the Committee, “It is precisely [the] exploitation by terrorists and violent extremists that can easily result in us restricting human rights and fundamental freedoms”. Feltman went on to say that the intention was to put “young people at the centre of these efforts”, with this generation both most comfortable with social media, as well as the most susceptible to extremist propaganda.
Immature Business Sector
In the UK, the social media companies have also been reprimanded by the county’s most senior counter-terrorism officer, Mark Rowley, who, in describing social media as an “immature business sector”, criticised some of the organisations for not co-operating fully with police investigations.
Legislation similar to that discussed in the USA doesn’t exist in the UK, creating concerns that the police are missing important intelligence on terrorist activities, and falling behind these organisations by not being able to operate in the social media environment as well as the people they were tracking.
It will be interesting to see how legislation is developed, as well as how the platforms themselves can deal more effectively with pages and information relating to terrorist activities, and having a better solution for dealing with the spread of information.
Do you think social media could or should be more closely monitored? Is there a line that can be drawn between freedom and public safety? Get involved on Procurious and join the discussion.
Meanwhile, we have been keeping an eye on all the major headlines in procurement and supply chain this week for you to share with your friends…
Apple Price Falls on Supply Chain Concerns
Concerns about Apple’s supply chain data and predicted sales for the first half of 2016 have caused its price targets to be reviewed
Investment firm RBC Capital Markets cut its price target for Apple to $140, down from $150 (already a decrease from earlier in 2015)
The firm cited slower than expected sales of the iPhone 6 in the first two quarters of 2016 as the reason
This was also due to key organisations in Apple’s supply chain cutting estimates for business in the same period
20 competing package delivery firms in France, as well as their professional trade union, have been fined €672 million by the French Competition Authority for price collusion
The authorities stated that the firms had shared sensitive information about price increases during group meetings with the transport and logistics trade association, TLF, between 2004 and 2010
8 of the companies, including DHL Express France, Norbert Dentressangle and Royal Mail’s French arm, General Logistics Systems, comprised 71 per cent of the French market during this period
The authority concluded that French SMEs had been hit hardest by the collusion activities, as they did not have the negotiating power of the largest clients to reject or renegotiate the price increases
A number of high-profile global grocery supply chains have been linked to slave and forced labour in the seafood processing industry in Burma
Shrimp from the suppliers is used in the USA by a number of companies, including the organisation that owns Red Lobster and Olive Garden, as well as retail chains Wal-Mart, Kroger, Whole Foods, Dollar General and Petco
Thai Union, the primary supplier to the American companies, has committed to cleaning up its supply chain and reduce reliance on poorly regulated contractors