The Ethics of Global Sourcing

Question: Can you give an example of an ethical dilemma you faced?

Ben Heineman: I wouldn't say it was a dilemma, but it was a problem and it was not an uncommon problem for a big global company. In the early 1990's, we started to do global sourcing. What the means is, you're basically buying product or subassemblies or things that go into products from companies outside the United States, where you have a contractual relationship with them. They're not your employees, they're third parties.

The question was, would we imposed ethical sourcing on those companies and by that we mean, that you make sure that they had no prisoner/child labor, that they had decent environmental standards, that they had decent wages, and decent working conditions, and decent living conditions if the employees in fact lived on the facilities.

We had no legal obligation to do that because these were not our facilities, these were not our employees. But we decided that we would require this of our sourcing partners because it was important to do for at least three reasons:

1. We were concerned that there might be enforcement of law against them which would stop supply even though enforcement in some of these companies like China is very erratic.

2. We were very concerned about our employee's morale. If we had one set of standards 50 miles away, but allowed much poorer standards from our suppliers, that would be, I think for at least some employees, very disconcerting. Why were we being so hypocritical, one standard in our plants, another standard somewhere else especially when those standards can be very injurious to the public. For example, one of the early suppliers I went to in China was literally putting mercury from making light bulbs which went into the rice paddies, which we, of course, put a stop to.

3. At least in the company that I worked for, is we were an icon for globalization. One of the criticisms of globalization is that you're exploiting bad practices that you wouldn't do at home, so we felt that it was important in our supply chain we not allow these kinds of bad practices.

That will be an example of a decision that we made it was not required by law that you call was an ethical decision something beyond what the law requires which we gave a lot of thought to and very early in the early 90's, mid-90's, started to have a program, when we qualified suppliers that they had to meet these other conditions involving child labor, prison labor, environment, and so on, not just that they made good products and their finances were okay.

So that would be an example of how you would reason about establishing a global ethical standard beyond what the law required.

Recorded on November 3, 2009

Legally, General Electric had no obligation to the overseas facilities they employed. That didn’t rid the company of a moral obligation, describes Ben Heineman, GE’s former general counsel.

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