distribution and the ethical business

Lead paint on toys. Poison in pet food. Toothpaste laced with antifreeze. Tainted pharmaceuticals.

It has not been a good year for many businesses that source their products in China. Most recently, Mattel, the maker of some of the world's most popular toys and dolls, had to recall nearly 1 million of its Fisher-Price toys when it discovered that its supplier coated their surfaces with lead paint.

Once it became aware of the extent of the problem, Mattel moved relatively quickly and at great expense to get the toys off retailers' shelves and retrieve them from those consumers who had purchased them. And it instituted new safeguards, testing every batch of paint used by its suppliers and adding more random inspections of suppliers' factories in China.

But this recall, like toymaker RC2's recall of 1.5 million Thomas and Friends toys and parts earlier in the summer (also for the use of lead paint), highlights the difficulties of managing today's sprawling, complex supply chains within the ethical standards of a responsible corporation.

It is not just a matter of rogue operators. The contract manufacturer responsible for using lead paint in the Mattel case was not new on the scene. According to news reports,Mattel had done business with the supplier for 15 years. But China in some respects is still a frontier economy with far fewer legal and ethical safeguards than we enjoy here in the United States. Doing business there entails both business and ethical risks.

Much of the attention to these ethical issues naturally focuses on procurement: Are the supplier's labor practices and business practices fair and consistent with the buyer's ethical standards? Does it operate safely? Does the supplier comply with business requirements or cut corners to make a few extra yuan?

A May 2006 Business Ethics Briefing issued by the Institute of Business Ethics in the United Kingdom suggests that businesses committed to ethical procurement examine not just their suppliers' practices, but their own practices as well. Based on its research into common ethical troublespots, the institute advises managers to pay particular attention to the following three areas of procurement practice: the selection of suppliers (Do ethical criteria carry weight in supplier selection?); procurement conduct (Does the company hold its own staff to standards of high integrity? Does it treat suppliers fairly?); and relationships with suppliers (Does the company impose social and environmental standards on suppliers, seek to influence their policies and practices, or offer them assistance?).

Those are crucial issues, but ethical procurement represents only one aspect of the ethical supply chain. With concerns about global warming coming to the fore, the concept of a business's "carbon footprint" is also gaining more attention— and that will inevitably result in greater focus on green, or sustainable, warehousing as well as the efficiency and productivity of freight transportation.

In a 2005 article in the British publication Ethical Corporation, writer Dale Neef argued, "In the modern global manufacturing, assembly, or distribution company, supply chain scrutiny should include all of the company's activities from ethical purchasing through to proper disposal of the end product. This is because it is specifically during supply chain and logistics activities—purchasing, transportation, manufacturing, assembly, storage, and product disposal— when pollution is caused, oldgrowth forests are cut down, or energy and resources are wasted."

Improving logistics and supply chain practices, he contends, can improve worker health and safety and reduce environmental damage. At the same time, such efforts can enhance a corporation's public image as well as improve its bottom line.

For most businesses, good business practices are fairly well ingrained in everyday behavior. But as supply chains become more dispersed, as concerns over sustainable practices grow, they are worth thinking about anew.