Prioritising ethics over profit to rebuild trust

Corruption in supply chains can only be addressed through ethical business practices as well as a change in organisational culture and the prioritisation of ethics over profit.

At the recent Absa Business Day Supplier Development Dialogues, representatives from Absa Group, The Ethics Institute, Tiger Brands, the Centre for International Private Enterprise and the Industrial Development Corporation (IDC) discussed ethics and corruption in supply chains. The consensus from the panel was that systematic corruption and organisational culture needs to change, and supply chains must adopt a mindset that puts ethics before profit.

Corruption is a criminal offence

The panel highlighted that unlawful procurement practices, bribery and lack of transparency damages the trust needed for buyers and suppliers to work together.

Tshiamo Makoloane, group head for procurement risk and governance at Absa Group, believes all sectors should adhere to ethical business standards and use their ethics code of conduct as a moral compass for ethical practices. “The choice is ours; we can sit and do nothing, or we can act ethically now,” said Makoloane.

State of ethics in SA

Research by Afrobarometer in SA, led by the Institute for Justice and Reconciliation and Plus 94 Research, found that almost two-thirds (64%) of South Africans said that corruption increased in the past year, including half (49%) who believe it increased “a lot”.

The Ethics Institute CEO Prof Deon Rossouw described the state of ethics in SA as fragile, saying many public service departments, state-owned entities and private companies were involved in the damning report of state capture, which actions SA is still trying to recover from.

“On one side, the state of ethics in SA is fragile but on the other side, it opened up conversations about the urgent need for ethical leadership,” he said.

Many SMMEs don’t fully understand ethical business practices

Supplier development is a social and economic justice matter and ethical business leaders need to assist SMMEs to understand compliance policies and ethical business standards. “They don’t know the processes that corporates are adopting because there is secrecy,” said Litha Kutta, director of enterprise and supplier development at Tiger Brands.

While there are standardised and deliberate ways to keep opportunities a secret, ethical policies need to be in place to drive the right behaviour from staff entrusted to drive transformation. From working closely with SMMEs, Kutta noted that many often falter because they don’t have quality proposals and need support when pitching for opportunities.

Systematic corruption and ineffective public regulations

The discussion also centred on the lack of compliance regulations. Public service regulations prescribe what public service departments need to do when it comes to ethics but flawed national frameworks fail to ensure compliance. 

The legal regulations governing social and ethics committees in companies clearly indicate that businesses have an ethical obligation to the society they operate in. “Many business owners are against corruption and, a lot of the time, they are coerced into doing the wrong thing,” said Lola Adekanye, the senior programme officer for Africa at the Centre for International Private Enterprise.

Non-compliance must be reported

Whistle-blowers often lose their livelihood and jeopardise their mental health and relationships because as much as businesses are fighting against corruption, little is done to support those who speak up.

“There are systems in place to support whistle-blowers and the person flagging corruption should not become a victim,” said Lisa Pearce, the IDC's environmental, health and safety unit manager. Bribery and fronting are unethical ways to access opportunities and SMMEs should be educated about wrong business practices before they become victims of corruption.

Restoring trust and solving unethical business dilemmas

It was agreed that there is a strong commitment from supply chains to restore trust and take a stand against corruption. The onus is on everyone to create a sustainable economy that is equal, transparent and fair. Leaders must lead by example and motivate staff to follow ethical business standards.

“Companies often try to intimidate employees into being ethical. This is the worst way to get people to act right,” said Rossouw. The focus should be on helping them understand why ethics are the key to sustainable economic growth.

Key learning points:

• Businesses should be compelled to articulate their ethical standpoint and be clear about what will not be tolerated.
• Organisations need to build strong ethical cultures, so it becomes a habit to do the right thing, even when no-one is watching.
• Supply chains that develop suppliers and give them opportunities should be recognised and incentivised to do more.
• Greater transparency around opportunities in the private sector will enable SMMEs to understand how to access these.
• Businesses must put ethics first in their operations because it is the key to sustainability and scalability.
• Entrepreneurs need to see that corruption is both a business risk and a sustainability risk. Adhering to a code of ethics will help protect their business from corruption.