We want to ensure a high standard of ethical practices within our suppliers’ operations and processes. How can we do this?

Many retail reputations have been tarnished because of insufficiently thorough approaches to ethical sourcing. Retailers need to be aware that unless they fully understand how their suppliers operate, they are exposing themselves to significant – and costly – problems. Key to ensuring suppliers’ ethical practices meet required standards is investment in due diligence.

Kroll senior director in the business intelligence investigations team Elizabeth Ross says this process should be in two stages. Firstly it should always be carried out before signing an agreement and suppliers should be asked to sign up to an agreed code of conduct. Secondly, it is vital to periodically review or audit suppliers to ensure compliance with the code of conduct.

Ross adds that this must be done in the context of the country in which the supplier operates. “Suppliers in certain markets may try to sidestep their ethical obligations, particularly in the current economic downturn when budgets are tighter and there is greater pressure on profit margins,” she says. This can lead to poor quality and faulty products.

Retailers should be ready to investigate any issues of concern that arise when working with suppliers and try to be as transparent as possible about standards. Ross says: “Ignoring the need for due diligence can be extremely expensive, with retailers having to embark on product recalls, reputation management campaigns and, in some cases, legal action.”

Prevention is always better than cure – and with the market as it is this has never been more important.