Comment

So far, many western companies have been able to justify outsourcing services and supplies to developing countries on the grounds that it provides work and revenue in countries which need it most, as well as cutting corporate costs and meeting the boards' prime requirement, that company directors act in the best interest of their organisations' shareholders. Reducing costs is an obvious aid to increasing profitability.

However, the question remains, how far should they go? Once having outsourced to one economically poor region, should they then switch to another country which is even cheaper? Shareholders may be happy to go along with the decision, but what about other stakeholders? The directors may not consider them as such, but they include those workers in the country which is 'left behind'.

A recent news report claimed that a small South African state, Lesotho, is now facing bankruptcy as a result of textile sourcers moving to cheaper producers in countries like China. And this suggests that there has to be a balance between profits and ethics.

Consumers know it. To take a simple example, in the UK it has been proved that many people are prepared to pay more for free-range eggs rather than support what they view as unacceptable practices associated with battery farming.

Your procurement department needs to know that its commercial decisions must be tempered with risk management considerations. The cheapest buy can be the most expensive in the long run. Loss of your company's reputation can erode shareholder value far faster and more irrecoverably than any physical hazard.