Duty of care in the supply chain – who has the need?

Purpose

I do want this blog to stimulate some discussion and I hope legal opinion. Mind you, legality is a much lesser issue than ethics or morality. I simply want to state a case on behalf of SMEs and micro businesses. And it is fundamentally to do with communication.

Honesty and an apology

Do you ever wonder where you sit in a supply chain and why it is that people you would expect would communicate honestly do not? I do, and sometimes feel ashamed of the way in which I treated small companies and individual contractors when I had an Executive role in a big corporate. To all of those to whom I might have shown disrespect in the past I apologise profoundly. I now know what happens and also why – but why is not the subject of this blog.

Treatment of suppliers and CSR

A few years ago a large company to which I am a (very small) supplier insisted that any supplier to them should have a published CSR and Sustainability policy. Although it seemed an onerous expectation of a micro business providing coaching and training services, I did take it seriously and decided to define such a policy for my company. What better than to start with that customer’s own policy statement as a template? I looked at this carefully and decided I could adopt much of it but would go one step better when it came to dealing with my own suppliers and sub-contractors. So, my policy includes this phrase:

“We undertake to offer equivalent or better terms for any sub-contracted resources and we commit to timely payments of their invoices.”

Many of my friends thought that this stance was commercially stupid – I would end up taking the risk on debts from big companies. But I disagreed – and still do. Businesses are ultimately judged in the market by how they treat their suppliers as much as – and I believe ultimately more than – their end customers. This becomes their “ethos”. It reflects what they believe. Simon Sineks’s video about “Starting with Why?” also testifies to the truth of this. “People don’t buy what you do, they buy why you do it. “

Recent context

The recent publicity about Tesco and their alleged poor historical treatment of their suppliers (including delaying payment of invoices) is testimony to this argument. Press coverage in January 2016 suggested that whereas Tesco had improved behaviours in recent months, there were other upmarket high street names (one that has always been my shopping favourite, oh dear) that lagged behind Tesco’s’ recent commitment to 14 days’ payment terms to their small suppliers.

Customer or supplier

There is, though, another piece of argument that I need to probe. It is the concept of “customer”. It strikes me that, when looking at classical retail structures in a competitive market, the customer supplier relationship is clearly demarked. The customer (actually consumer) has a need or want; the supplier provides against that requirement. In other words, the “need” is with the purchaser. And consumer law backs the purchaser – the person with the need.

But in some commercial relationships, the opposite can apply. If the buyer is a big corporate and the supplier is an SME or micro-business, the need, especially when it comes to communication and a fair commercial relationship, is with the supplier of the product or service.

Illustration

Let me illustrate. I run a micro business providing training and coaching services to a big corporate. I need a high level of trusted communication (and relationship) from that customer so that I can plan my business financially and commercially. (Let us ignore the repeated delays in payment of invoices which are an irritation and cost to me.) The key thing is that an unexpected termination of a rolling contract or repeated cancellations or postponements could have a significant damaging impact upon my company. I believe in this instance that the customer owes a duty of care to the supplier – my company. So, timely communication of requirements and forecast is an obligation upon the purchaser of the products or services I provide to them.

But is that the way we are treated? Unfortunately, it is not. Big corporates are the worst. They care enormously about what their customers think of them (of course it has a direct affect upon their trading) but have little regard for the way they treat their suppliers (especially small ones). And, in this instance, if protection in law is needed, it is protection of the supplier as opposed to the customer that matters.

A reflection

Tesco appears to have recognised its supply chain responsibilities and the importance of their reputation in the wider market. The consulting and technology sector (the one I know best) should turn the same mirror upon itself.

The original Duty of Care legal precedent is worthy of a reminder. It referred to “acts or omissions which could reasonably be foreseen could cause injury to their “neighbour “.  “Neighbour” was broadly drawn and I understand that under English law it applies providing there is a contract in place.  So, “neighbour” includes supplier, does it not?  So, please, on behalf of smaller suppliers – let’s have some Duty of Care!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s