Navigating Ethical Business Conduct Five Essential Rules for Responsible Procurement Practices
- Adam
- Jul 1
- 3 min read
In today’s defence industry landscape, ethical procurement is more important than ever. Ethical practices help build trust and long-lasting relationships between companies and their suppliers. However, the procurement landscape is fraught with challenges, from questionable hiring practices to unfair contract terms. This post presents five essential rules for ethical business conduct that everyone involved in procurement should follow. These guidelines are especially critical for government officials overseeing procurement processes, ensuring that standards are maintained.
Rule 1: Respect for Employee Relations
One of the most pressing issues in many industries is the poaching of staff from competitors. When companies aggressively target employees from rival firms, they create instability that harms not only the individual businesses but also the entire industry. For example, a MSP might lure away skilled engineers from others or its own supplychain, disrupting projects and leading to potential layoffs.
Instead of poaching, companies should focus on attracting talent through their own strengths. This can include offering competitive salaries, benefits, and opportunities for growth. When businesses respect each other's employee relations, they foster a healthier environment that benefits everyone. According to a 2022 survey by LinkedIn, 75% of job seekers prioritise workplace culture and ethics over salary when choosing an employer.
Rule 2: Fair Contract Negotiations
Engaging in fair contract negotiations is crucial for maintaining integrity. When companies use pressure tactics or lack transparency, they risk damaging relationships with stakeholders. For instance, a large US owned corporation might push a smaller supplier into accepting unfavorable terms under duress, which can lead to long-term resentment and mistrust.
Businesses should establish fair negotiation frameworks. Clear communication channels allow all parties to express their needs and concerns, leading to fair agreements. Even is a supplier has signed a contract, it is worth considering if any of the terms in the contract would be deemed unfair under Australian Unfair Contract Terms legislation.
Rule 3: Avoiding One-Directional Unfair Contract Terms
Relying on unfair contract terms that favor one party jeopardises ethical procurement. Such terms can create a hostile environment filled with distrust. For example, if a supplier is locked into a contract with clauses heavily in favour of a buyer, they may struggle to meet obligations, resulting in strain on their operations. In Australia, if one of the companies is an SME, then there is legislation that can protect the small company.
To ensure balanced agreements, businesses should craft contracts that fairly outline responsibilities and expectations. Government officials can reinforce this by promoting guidelines that discourage bias in contract terms. A balanced approach not only enhances trust but also encourages collaboration, ultimately benefiting both parties involved.
Rule 4: Manipulating Supply and Demand
Manipulating supply and demand can distort the market and lead to inflated prices. For instance, a company may create artificial scarcity for a product, driving up prices at the expense of consumers. This can lead to a loss of trust and reputation.
Ethical procurement should focus on fairness and transparency. For example, demanding suppliers follow a set of values based behaviours without providing the values or the behaviours sets up companies for a fail, this behaviour could be seen as unethical or inappropriate, especially if the company is working on Government projects and therefor bound by procurement guidelines.
Rule 5: Objective Procurement Decisions
Subjectivity in procurement can lead to biases that favor specific suppliers not based on their qualifications but on personal relationships. This compromises the entire procurement process. For instance, a contracting officer might consistently choose a friend’s company over a competitor with a better proposal and performance history. Or based on a subjective assessment of behaviour or values alignment.
To mitigate this, firms should adopt objective criteria for evaluating suppliers, focusing on performance, reliability, and pricing. This promotes transparency and fairness, helping to eliminate bias from the procurement process.
Moving Forward with Integrity
In a world full of ethical challenges, navigating procurement requires a strong commitment to responsible practices. By adhering to these five essential rules—respecting employee relations, engaging in fair contract negotiations, avoiding unfair terms, preventing manipulation of supply and demand, and ensuring objective decision-making—companies can improve their ethical standing and foster a fair marketplace.
Government officials have a significant role in promoting these practices by establishing guidelines to discourage unethical behavior. Their leadership helps cultivate a culture of integrity and accountability in business.
Ultimately, ethical procurement is about more than compliance; it’s about building trust and lasting relationships. Investing in ethical practices today will lead to stronger partnerships and great reputations in the long run.
Comments