Ethical Trading Policies

Exporters that bid for supply contracts under a tendering exercise are now commonly required to provide an Ethical Trading Policy Document – this is particularly common in relation to government procurements. Even outside competitive tender requirements the buyers’ ‘right to know’ is becoming increasingly significant. In general, commercial buyers and domestic shoppers are becoming far more aware of global social, and other related, issues and these often impact upon purchasing decisions.

So, what do we mean by ‘ethical trading’? The Ethical Trading Initiative have an, internationally recognised, 9 point base code of practice:

1. Employment is freely chosen

2. Freedom of association

3. Working conditions are safe and hygienic

4. Child labour shall not be used

5. Living wages are paid

6. Working hours are not excessive

7. No discrimination is practiced

8. Regular employment is provided

9. No harsh or inhumane treatment is allowed

This base code is founded on the conventions of the International Labour Organisation. Additionally, in 2011, the United Nations Human Rights Council introduced the UN Guiding Principles on Business and Human Rights. in an attempt to address the issue of human rights in businesses.  

Few would argue that the base code is anything other than a highly desirable, and completely reasonable, set of rules. However, compliance and implementation can be complex, particularly in the globalised environment under which 21st Century international trade operates. Can any exporter state, with complete confidence, that their value chains and logistic chains are fully compliant with the code? I would suggest, not. Initiatives, such as ‘Fairtrade Certification’ are a significant step forward but only cover limited sectors.  The big question is how far back can an exporter / manufacturer or importer reasonably go, and in how much detail, to ensure overall compliance. Think of this next time you buy a coffee from one of the principal outlets – most of whom work very hard to ensure ethical compliance – consider the coffee growers, consolidators, pickers and fertiliser packers, the raw materials for the cup, the logistics chain including domestic transport in the country of supply and ship’s crews and bunkers. The list goes on reflects one of the biggest challenges in globalisation – the large number of participants in the value chains and supply chains of even the most basic products.

It has to be accepted that complete control allowing 100% ethical trading is, in most cases, virtually impossible to achieve. Accordingly, the most sensible and practical solution must be a policy of ‘best endeavours’.  This does not mean that doing ‘lip service’ is adequate it means that all cross-border trade stakeholders - whether manufacturers, producers, service providers, exporters or importers – must be diligent in their procurement and contracting operations to do all they can to meet the criteria listed above. They must also strictly adhere to the criteria themselves. These are some recent tweets:

“Brands should boycott Turkmenistan cotton over use of forced and child labour > @klaraskriv from @Anti_Slavery urges global brands to pledge not to knowingly source Turkmen cotton…

“Fashion brand Esprit and international union, @IndustriALL_GU, have announced the signing of a global framework agreement, which commits to respecting, protecting and championing the human rights of Esprit's workers in its supply chain…

“Our @cindy0berman alongside Brent Wilton of CocaCola and Doug Nystrom of Walmart will be discussing responsible #recruitment in a complementary @InnovaForum webinar on Thursday 18 August. Register here:…

The above serve to illustrate the diversity of ethical trading issues, including recruitment. It is important for international traders to recognise the benefits of ethical operating. It is generally accepted and reported that these can include increased sales, increased investment, enhanced staff loyalty and increased trust in the business. Not least of all there can be significant cost savings, for example by increased use of re-cycled materials and / or fuel savings. Ethical trading should be viewed as an opportunity rather than a threat. It has been suggested that it is not unusual for ‘ethically produced and shipped products’ to realise higher sale prices than other similar goods. The concept can be supported by multi-lateral, incentive driven, initiatives, such as the Generalised System of Preferences in some instances.  However, it is also essential for international trade stakeholders to ensure they have, and regularly review, a robust ethical trading policy supported by appropriate policy documents. The arguments are not simple and there can be a very difficult trade off. Think back to the coffee example – the author witnessed a container of coffee being stuffed in East Africa. It took a team of 6 men who carried the 50 kgs sacks on their heads or shoulders at significant risk to their health. The, more ethical, alternative would have been 1 man with a fork lift  truck but this would put the other 5 out of work with little chance of alternative employment in the village. Ethical trading policies must be practical and realistic or they become inoperable.

Article written by Jon Walden - Associate of Strong & Herd LLP

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