Utilities risking reputations on poor supply chain practices

The clamour for net zero, increased energy demand and shortages related to Brexit and the coronavirus pandemic have left utility companies overstretched and potentially vulnerable to unethical behaviours infiltrating supply chains. Utility Week invited industry experts to have their say on tackling poor practice.

Accelerated demand for low carbon infrastructure is inadvertently allowing poor labour practices to seep into supply chains as firms are forced to branch out from “bread and butter” operations and engage new contractors, according to Adam Whitfield – quality assurance and audit programme manager at supplier information and supply chain management firm, Achilles.  

Companies which suddenly find themselves inundated are having to track down new contractors which often aren’t signed up to all the “good things” from higher tiers on the supply chain, he explained.  

Consequently, issues encountered on almost a daily basis range from administration fees – which often bring workers below the minimum wage – and a dearth of checks over eligibility to work in the UK, to charging staff for PPE, not producing contracts of employment and “alternative discipline” – for example penalising members of staff and telling them they could work off a fine for free. 

With labour practice increasingly under the spotlight – indefinitely so, according to Whitfield – utilities firms which fail to prevent unethical practices infiltrating supply chains run the risk of severe reputational and financial damage, not to mention fines, import bans, exclusion from public procurement. 

“Best practice is coming from those that have done some really high-level analysis and are now focusing on those key risk areas and collaborating with companies to drive those improvements,” Whitfield explained.  

He added that having an open and transparent “social audit” is paramount. “It’s all too easy to hide things but having a supply chain that feels that they’re collaborating, that they’re working towards best practice, and being open about some of the issues that they have, means that these things can be identified and resolved,” he said.  

‘Industry wide audit’ 

Speakers at a Utility Week webinar, hosted in association with Achilles, agreed that a collaborative, evidence-based approach, would be key to ensuring that utilities can establish sector-wide ethical standards and ensure such shared values trickle down supply chains.  

The event, which is available to listen back to on demand here, included senior speakers from UK Power Networks, Northumbrian Water and Cranfield School of Management.  

According to Phil Hicks, head of procurement at Northumbrian Water, the company’s efforts to achieve net zero by 2027 have exposed it to new markets and huge demand creating, in his opinion, higher risk of poor practice.  

“How do we ask our supply chain to reflect the responsibility that we have as an organisation?” he said. “Therein lies a huge challenge.” 

Through enlisting the help of ethical training organisations to augment internal systems, risk analysis and driving supplier charters down supply chains, Hicks argued that it is very difficult to guarantee standards without sending people around the world to visit sites – particularly difficult amid pandemic-enforced travel restrictions.  

“Perhaps that’s where the collaboration comes in to help us with that kind of broad, industry wide audit,” he added. 

Need for accurate measurement 

Hicks also highlighted the importance of supply chain mapping to establish where risk lies and how to devise more targeted labour policies.  

“A criticism that’s been levelled at the profession in the past is that we focus on tier one and we do all sorts of wonderful audits and initiatives with our main suppliers – and we can demonstrate all sorts of wonderful behaviours with those guys – but what’s happening behind that?” he continued.  

What’s more, in tandem with stringent supply chain mapping, fellow panellist Soroosh Sam Saghiri, senior lecturer in supply chain management at Cranfield School of Management, fleshed out the importance of measuring any actions and improvements. 

“We cannot find much evidence of how effective training activities around for example, child labour or labour rights and labour practices, are,” he said. “The outcomes of that should be measured more accurately.” 

Ultimately, Nirmal Kotecha, director of capital programme and procurement at UK Power Networks, outlined the need to collectively establish an industry wide view on labour practice rooted in hard facts rather than anecdotal evidence. 

Other themes discussed during the webinar, titled “Poor labour practices in low carbon supply chains: risks for utilities’ responsible sourcing commitments” included: 

• The importance of sector-wide collaboration in rooting out unethical practices in supply chains. 
• Which contemporary challenges are creating opportunities for poor labour practices to creep into the supply chain. 

• How to articulate ethical expectations throughout the procurement process and beyond tier one of the supply chain. 
• How to measure the impact of training and initiatives to tackle poor labour practice and using it to address issues throughout the supply chain. 

To listen back to the event in full, click here 

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