Ethical Sourcing: Where is the Nearshore Going to Draw the Line?

Let’s say there is a Government Minister working for a Caribbean government whose job is to stimulate foreign investment and promote his country as a great place to do business. Yet, in reality, that same minister has direct financial ties to a domestic call center/ BPO operation, putting him in a high-powered position to influence where new business opportunities are directed.

Some might respond by saying: What rock have you been hiding under? It’s the way things are done in “x” country and also across the region, so live with it.

Rise or Stagnate?

This is just one example of the multiple ethical challenges the region faces as it continues to climb up the ladder of global outsourcing respectability. Whether its government ministers profiting from their role of influence in the public sector to kick-backs channeled to municipal or state regulators to ease the process of setting up a delivery center or service providers counting temporary/ contract workers as “full time” employees – there are plenty of ‘behind the curtain’ ways of doing business that – if practiced in other markets – would flatly be labeled as corrupt.

Now, we’re not here to define what is corrupt and what isn’t. But we do think this is a magnificent opportunity for the Nearshore sourcing community to begin to recognize that flagrant examples of phony dealings and dirty politics are eventually going to come out into the light of day – damaging not just that country but, depending on which client may be involved, the entire region.

The Familiar Plea

In other words, the ignorance plea of – “this is just the way things are done” – is not going to cut it when the cancerous effects of shady dealings eat away at the core value proposition of doing business in a particular market. In an era where compliance and risk are commonly addressed in corporate board of directors meetings, it would take little provocation for corporate leadership to pull the plug on an offshoring contract or captive operation that has started to go rotten.

Some multinationals have experienced real horrors doing business in Latin America (Scotiabank’s classic nightmare of having its bank and assets wholly consumed by the Argentinian government ten years ago comes to mind), while others experience nothing but spectacular success. Therefore, a huge underlying opportunity exists for those governments and operators willing to ‘walk the walk’ of principled commercial and sourcing practices.

The issue of Ethical Sourcing was mentioned during a meeting last week with Dawn Evans, the CEO of Sourcing Interests Group, which held its semi-annual Summit in Florida. In a video interview (which we will distribute soon), Dawn expressed to me an interest in partnering with Latin American sourcing service providers who show a demonstrated commitment to ethical practices. (The SIG organization, which celebrates its twentieth year in 2011, is loaded with sourcing and procurement executives from top name U.S. corporations.) Dawn is representative of a huge class of top sourcing professionals who are vigilantly motivated to invest in markets where concepts like transparency and fair business practices are back up with sound laws and real enforcement.

The fact that the connection between Latin America sourcing and ethics is seldom made, there is obviously an opportunity here for a wider discussion and potentially some general rule-making on what constitutes Ethical Sourcing. What are some of the potential criteria?

Low hanging items on the scorecard could include documentation about hiring practices and how one defines full-time workers, workplace conditions, engendering a certain company ‘culture’ and the overall development of human capital. From the government level, there could be a willingness to participate in regular audits that would hold government leaders to a higher standard of conduct.

To think that global sourcing customers and investors are going to be so enamored with the Nearshore concept that they will persistently “turn the other way” when made aware of unsavory practices is frighteningly ignorant. When jobs are on the line and concern over corporate reputation is at an all-time high, the choice to flee a market will be an easy one.

Meanwhile, harder questions remain for senior ministers and power-brokers within domestic markets – where should the line be drawn?