The North East Institute of Business Ethics (NIBE) has called on firms to look closely at the values behind their decisions, after another high profile example of “supply chain bullying”.
Food manufacturer, 2 Sisters, which makes Goodfella’s pizzas and Fox’s biscuits, said in letters to its suppliers that it should not have to pay for goods or services until the last working day of the third month after they are received, a potential wait of up 90 days.
The firm also said it should get a discount for earlier payment and said the default payment would be extended to 120 days if suppliers rejected the deal.
News of the letters came a few weeks after Premier Foods was exposed for making ‘pay to stay’ demands on suppliers to remain part of the Mr Kipling empire.
The Federation of Small Businesses, which is supporting The Journal’s Pay Fair campaign, said such practices amounted to supply chain bullying - something one in five of its members had experienced in the last two years.
“There’s a sense that the mentality is: someone else does it, so we can get away with it too,” said the Reverend Glyn Evans, co-founder of the NIBE. “But who is the voice for the people affected? Often, people can be too frightened to stand up and say: ‘This isn’t on’.
“Gradually, you can end up creating a climate that becomes hostile. It can change, though, and it should change.”
He added that a cultural shift towards fairness was preferable to more regulation.
“I’d encourage people to ask: ‘What are the values behind these decisions and what are the costs to the people affected?’” he said.
“People often don’t see that cost, but that’s what we want to highlight.”
2 Sisters has said the letter only represented a starting point for negotiations, with the average payment wait last year being 49 days. Its terms and conditions have since been updated.
But FSB North East regional chairman Ted Salmon described this as a “poor defence at best”, missing the point that small firms do not have the power or resources to reject such terms, or to get recompense if they are breached.
“This is why we are calling for the Prompt Payment Code to be strengthened,” he added. “All firms should be on a fairer footing when negotiating payment terms, and it’s vital we outlaw unreasonable terms and conditions being imposed on suppliers.”
Through the Pay Fair campaign, The Journal is encouraging North East companies of all sizes to take a responsible and ethical approach to paying firms within their supply chain.
We are asking firms to sign NIBE’s Business Ethics Pledge, thereby agreeing to join with others to discuss the value of business ethics and to work with each other to transform their working environments for the better.
For more information, see http://www.nibe.org.uk/