Harvard Case - The International Committee of The Red Cross: Development of an Ethical Procurement Policy
"The International Committee of The Red Cross: Development of an Ethical Procurement Policy" Harvard business case study is written by Remi Charpin, Elodie Le Grand, Marie-Eve Rancourt. It deals with the challenges in the field of Operations Management. The case study is 13 page(s) long and it was first published on : Aug 25, 2021
At Fern Fort University, we recommend the International Committee of the Red Cross (ICRC) develop a comprehensive Ethical Procurement Policy that prioritizes human rights, environmental sustainability, and ethical sourcing practices across its global supply chain. This policy should be underpinned by a robust framework that includes clear guidelines, transparent processes, and rigorous monitoring mechanisms to ensure its effective implementation and continuous improvement.
2. Background
The ICRC, a humanitarian organization with a global reach, faces the challenge of procuring goods and services ethically while navigating complex geopolitical landscapes and diverse supplier ecosystems. The case study highlights the ICRC's commitment to upholding its core values of neutrality, impartiality, and independence, which are essential for its humanitarian work. However, the organization recognizes the need for a formalized Ethical Procurement Policy to ensure its operations align with these values and address potential risks associated with its supply chain.
The main protagonists in this case are:
- ICRC leadership: Concerned about the ethical implications of their procurement practices and seeking a framework to ensure responsible sourcing.
- ICRC procurement team: Responsible for sourcing goods and services and tasked with implementing the new policy.
- Suppliers: The diverse range of companies providing goods and services to the ICRC, facing potential scrutiny under the new policy.
3. Analysis of the Case Study
The ICRC's ethical procurement challenge can be analyzed through the lens of operations strategy and supply chain management. The organization needs to balance its humanitarian mission with its operational efficiency and ensure that its procurement practices are aligned with its core values. This requires a holistic approach that considers:
- Supply Chain Transparency: The ICRC must develop a robust system for tracking and verifying the origin of goods and services, ensuring that suppliers adhere to ethical labor standards, environmental regulations, and conflict-free sourcing practices.
- Risk Management: The ICRC needs to identify and mitigate potential risks associated with its supply chain, including human rights violations, environmental damage, and corruption. This requires proactive due diligence, supplier assessments, and ongoing monitoring.
- Stakeholder Engagement: The ICRC must engage with its suppliers, stakeholders, and the broader humanitarian community to foster transparency, build trust, and ensure collective responsibility for ethical procurement.
Key frameworks to consider:
- Total Quality Management (TQM): The ICRC can leverage TQM principles to embed ethical considerations into its procurement processes, fostering continuous improvement and promoting a culture of accountability.
- Six Sigma: The ICRC can utilize Six Sigma methodologies to identify and eliminate defects in its procurement processes, ensuring that ethical sourcing practices are consistently implemented.
- Lean Manufacturing: The ICRC can adopt lean principles to streamline its procurement processes, reducing waste and improving efficiency while maintaining ethical standards.
4. Recommendations
1. Develop a Comprehensive Ethical Procurement Policy:
- Define Clear Ethical Standards: The policy should clearly define the ICRC's ethical expectations for suppliers, covering areas such as labor rights, environmental protection, conflict-free sourcing, and anti-corruption.
- Implement a Robust Due Diligence Process: The ICRC should establish a thorough due diligence process for evaluating potential suppliers, including background checks, audits, and risk assessments.
- Establish a Supplier Code of Conduct: The ICRC should develop a binding code of conduct for all suppliers, outlining ethical expectations and consequences for non-compliance.
2. Enhance Supply Chain Transparency and Traceability:
- Implement a Supplier Management System: The ICRC should invest in a robust supplier management system that tracks supplier information, performance data, and ethical compliance records.
- Utilize Technology and Analytics: The ICRC can leverage technology, such as blockchain and data analytics, to enhance supply chain transparency and traceability, enabling real-time monitoring of ethical practices.
- Promote Open Data and Reporting: The ICRC should commit to open data and reporting practices, making information about its supply chain readily available to stakeholders.
3. Foster Stakeholder Engagement and Collaboration:
- Engage with Suppliers: The ICRC should actively engage with its suppliers, providing training, guidance, and support to help them comply with ethical standards.
- Collaborate with Industry Partners: The ICRC should collaborate with other humanitarian organizations and industry partners to develop best practices and share knowledge on ethical procurement.
- Promote Public Transparency: The ICRC should be transparent about its ethical procurement efforts, communicating its policy and progress to the public and stakeholders.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with the ICRC's core values of neutrality, impartiality, and independence, ensuring that its procurement practices reflect its humanitarian mission.
- External customers and internal clients: The recommendations address the concerns of stakeholders, including donors, beneficiaries, and the broader humanitarian community, by ensuring ethical and responsible sourcing practices.
- Competitors: The recommendations position the ICRC as a leader in ethical procurement, setting a benchmark for other humanitarian organizations and promoting responsible sourcing practices within the industry.
- Attractiveness ' quantitative measures if applicable: While quantifying the impact of ethical procurement can be challenging, the recommendations contribute to the ICRC's long-term sustainability by mitigating reputational risks, fostering trust, and enhancing its brand image.
6. Conclusion
The ICRC's commitment to developing a comprehensive Ethical Procurement Policy is crucial for maintaining its reputation, ensuring the integrity of its operations, and upholding its humanitarian principles. By implementing the recommended framework, the ICRC can effectively manage its supply chain, minimize ethical risks, and contribute to a more responsible and sustainable global marketplace.
7. Discussion
Alternatives not selected:
- Minimalist approach: Implementing a basic ethical procurement policy with limited enforcement mechanisms. This approach might be less resource-intensive but could lead to inconsistent implementation and potential ethical violations.
- Outsourcing procurement entirely: Delegating all procurement activities to a third-party provider. This approach might streamline operations but could compromise the ICRC's control over ethical standards and transparency.
Risks and key assumptions:
- Implementation challenges: The ICRC may face challenges in implementing the policy effectively, particularly in complex and challenging environments.
- Supplier resistance: Some suppliers may resist the new ethical requirements, potentially leading to delays or disruptions in the supply chain.
- Cost implications: Implementing a robust ethical procurement framework may involve additional costs for due diligence, monitoring, and supplier engagement.
8. Next Steps
- Develop a detailed implementation plan: Outline specific actions, timelines, and resource allocation for each recommendation.
- Engage with stakeholders: Communicate the policy and implementation plan to key stakeholders, including suppliers, staff, and donors.
- Pilot test the policy: Implement the policy on a pilot basis to identify and address any challenges before full-scale implementation.
- Monitor and evaluate progress: Establish key performance indicators (KPIs) to track the effectiveness of the policy and make adjustments as needed.
By taking these steps, the ICRC can ensure that its Ethical Procurement Policy is effectively implemented, contributing to the organization's mission and promoting ethical practices throughout its global supply chain.
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Case Description
The Asia sourcing manager at the International Committee of the Red Cross (ICRC), a humanitarian organization working in conflict areas, had contributed to the 2009 creation of an ethical procurement policy to respond to urgent needs around the world. Her mandate was in line with the ICRC's strategy of improving the flexibility, cost effectiveness, and sustainability of its supply chain. Ethical procurement could not be enforced, however, when sudden conflicts or natural disasters relied on local purchasing or cash transfer programs to meet the needs of distressed populations. Ten years later, despite efforts to systematize and expand the ethical procurement policy, emergency relief items were still being procured from local and regional markets through traders or cash transfer programs not covered by the policy. How could the ICRC address this gap and promote the ethical procurement of relief items at the local level in emergency situations?
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