Business ethics and ethical purchasing

Business Ethics and Ethical Purchasing

Business ethics can be defined as systems of principles and values that direct choices and dealings within a company. In the business world, a company's culture often sets the values for determining the distinction between good and bad decision making and actions. In the most fundamental terms, business ethics comes down to knowing the difference between right and wrong and deciding to do what is right. "The phrase business ethics can be used to describe the actions of individuals within an organization, as well as the organization as a whole" (White, 2012). Core ethical values and responsibilities are typically expressed through an ethics policy. This is followed by a code of ethics, setting down the way the institution aims to conduct its business, including promises to stakeholders and guidance for staff. A standard of ethics may envelop issues not covered by law concerning a specific function like procurement (Procurement and business ethics, 2008).

Because purchasing is money driven activity ethics has tough battle with everything else that is in play. Therefore the importance of ethics is a mark elevated in purchasing than other fields where money in not the main driving instrument. It is not an easy job to keep the ethics elevated and fair in procurement. It needs exact concentration, perseverance and motivated people to keep up the ethics with in the procurement process (Ethical Buying or Ethics in Purchasing, 2011).

Ethical purchasing helps business in a lot of ways including the feel good feature of everyone concerned. It aids in driving fair competition sowing improvement for enhanced cost effective ways of doing things. This in the end leads to more importance for the money being spent. On the other hand, unethical purchasing leads to less value for the money being spent, or the money is being wasted leading to an increase in inflation. Overall, one gets less than what they paid for, causing a drain in their over cash (Ethical Buying or Ethics in Purchasing, 2011).

Ethics in the circumstance of procurement concerns the standards of conduct which make sure that individuals and organizations are trusted and appreciated by those with whom they deal. The organization or institution should be thought of as a good customer. Poor relations with suppliers can cause long-term harm to the status and credibility of the organization or institution. An organization or institution must make sure of regulatory compliance and propriety in the handling of public funds. There are some simple rules that if followed will allow procurement people to stay out of trouble:

"do not bend or break the rules follow procedure if approve is needed, get it first do not allow a conflict of interest to affect or appear to affect decisions do not use the organizations or institutions funds for private benefit be even handed

record the reasons for decisions" (Procurement ethics, n.d.).

When a company deals with its purchasing in unethical ways, it cannot suppose its suppliers to be trustable associates and guarantee business continuity. If one doesn't align with something, they shouldn't expect others to do it either. This weakens the entire value chain making it less aggressive in the market. Hence it is important for both buyer and supplier to connect in ethical dealings in their transactions (Ethical Buying or Ethics in Purchasing, 2011).

Ethical issues arise largely in three areas of procurement practice and all three should be considered when doing business:

Procurement conduct: this refers to the way that staff does business. The way that procurement is carried out.

Selection of Suppliers: does ones institution seek to promote its corporate responsibility objectives through its purchasing activity and supplier relationships? Will ethical criteria be used to exclude or positively discriminate in favor of certain suppliers?

Supplier's practice: is one clear about the extent of their institution's responsibility down and across the supply chain? What do they expect of their suppliers? Does the company impose social and environmental standards on their suppliers (Procurement and business ethics, 2008).

There are compelling arguments for treating your suppliers fairly and for being concerned about the source of your supplies. First is the need for sustainable supplier relationships. Mutually beneficial terms, fair practice and trust should improve the reliability of your supplies. Second is reputation risk. Good ethical practice can enhance the institution's integrity and reputation (Procurement and business ethics, 2008).