HB Interview: Ethical procurement

In February, the NHS Supply Chain launched its new surgical instruments framework, outlining the body’s strong commitment to ethical procurement. Health Business has spoken to Stephanie Gibney, ethical and sustainability manager at NHS Supply Chain about transparent dealing in healthcare

Can you explain what the Labour Standards Assurance System is?
NHS Supply Chain has a Supplier Code of Conduct which outlines our main principles for suppliers in the area of labour standards and worker welfare. All suppliers are expected to adhere to these principles which address issues such as child labour, forced labour, wages, working hours, as well as health and safety. The Supplier Code of Conduct is a contractual requirement and has been part of all NHS Supply Chain Framework Agreements since 2009.

In recent years NHS Supply Chain has taken steps to reinforce the principles in our Supplier Code of Conduct through the introduction of the Labour Standards Assurance System (LSAS). The LSAS is incorporated into the contract conditions for product areas where there are known and documented labour standards risks or high predictors such as surgical instruments, gloves and textiles.

Essentially, the LSAS is a toolkit for labour standards management with NHS Supply Chain requiring suppliers to commission an external third party audit to assess how they are managing these issues in their organisation and also, importantly, in their supply chain.

The labour standards assurance system forms our ethical procurement approach at NHS Supply Chain, and was developed in conjunction with the Department of Health back in 2012. The LSAS covers the range of policies, processes and procedures that an organisation employs to identify labour standards issues, mitigate risk and drive improvement. It builds on the principles of due diligence extending this to routine consideration of labour standards – particularly important for suppliers doing business in countries where there is evidence of non-compliances and abuses such as forced labour or child labour.

The LSAS sets out staged milestones for suppliers to meet during the framework agreement, this emphasises continual improvement but also spreads the burden of implementation for suppliers, many of whom are SMEs. The results of the LSAS audit are shared with NHS Supply Chain enabling us to monitor the policies, processes and procedures that an organisation has in place to manage labour standards effectively in line with ILO (international labour organisation).

Which frameworks have Labour Standards built into them?
Nine framework agreements have Labour Standards Assurance built in. These include the framework agreements for: surgical instruments; textiles; gloves; procedure packs; IOL (intraocular lenses/ophthalmology); suction consumables; urology and bowel management; single use theatre clothing; and polymer.

We currently have over 200 suppliers committed to labour standards assurance through their contract conditions. This will increase when the framework agreement for General Wound Care launches in 2017 bringing more suppliers into scope for labour standards management.

The product areas for LSAS inclusion have been determined by conducting a risk assessment across NHS Supply Chain’s contract portfolio and by working closely with stakeholder groups such as The Medical Fair and Ethical Trade Group at the British Medical Association (BMA), experts in ethical trade, bodies such as the Ethical Trading Initiative (ETI) and colleagues active in public procurement elsewhere in Europe. The product areas above have known and documented risks or high predictors of labour standards issues.

NHS Supply Chain will continue to review the areas assigned for LSAS inclusion and its wider portfolio and new areas may be added if risks emerge or abuses are uncovered. Where framework agreements have labour standards contract conditions built in, NHS Supply Chain are committed to assisting suppliers with training webinars and feedback sessions. We use experienced labour standards practitioners to help to build capability in our supply base ensuring that suppliers are able to grapple with these issues and have access to guidance and tools to assist.

In addition gathering feedback from suppliers on LSAS implementation has been particularly useful in making the process more robust but also understanding what support suppliers need in the way of training or guidance.

How does the Surgical Instruments Framework enhance the work you’re doing on ethical procurement?
Labour Standards Assurance is about continual improvement within a framework agreement and from one framework agreement to the next. The new Surgical Instruments Framework has incorporated LSAS for the second time with enhanced contract conditions. New suppliers are not excluded from being able to compete provided they are committed to adopting effective labour standards management.

For the new Surgical Instruments Framework, an entry level of Level 2 LSAS was outlined setting a benchmark for suppliers to trade on the new contract. However we have also outlined increased requirements to meet Level 3 LSAS in the first two years. Level 3 indicates suppliers have a robust system for labour standards management; processes are effective and evidenced as working overtime.

However, level 3 LSAS also includes supplier requirements to verify some degree of primary evidence from their supply chains, increase oversight and engage with stakeholders and other parties in their supply chains. This approach is a blueprint for how we take LSAS forward from one framework to the next.

What future plans does NHS Supply Chain have for ethical procurement?
Ethical procurement is a strategic objective and is included in our commitments for 2017-18. With greater transparency being the new norm of business and with greater emphasis on due diligence and oversight of supply chains particularly with the UK Modern Slavery Act, ethical procurement is more important than ever. For NHS Supply Chain, this will be about wider implementation of LSAS across new contract areas and further implementation down the supply chain for areas like Surgical Instruments.

Many aspects of the LSAS align to the reporting requirements of the UK Modern Slavery Act. Many of our suppliers have to publish a Slavery and Human Trafficking Statement as they meet the £36m threshold for reporting under the Act. Suppliers will find that implementation of LSAS supports the principles of this legislation and particularly that of ‘transparency in supply chains.’

What are the benefits of ethical procurement?
There are many benefits to this approach. The benefits for suppliers is that is shows industry is responsible and committed to improving labour standards as well as fostering transparency. Effective management and monitoring reduces the potential for labour standards abuses and puts a culture of rectification in place for dealing with issues.

Suppliers need to develop greater visibility and oversight of labour standards in the supply chain especially with the advent of the UK Modern Slavery Act. The benefit for the NHS is that trusts can purchase from the Framework Agreement with a degree of assurance that these issues are being managed. For NHS Supply Chain, this approach demonstrates a commitment to procure responsibly by embedding a culture of due diligence with regard to labour standards

How are your procurement colleagues involved in ethical procurement?
Buyers are aware of our Ethical Procurement Programme and I take every opportunity to raise the profile of this agenda across the business. As it’s a key element of our Sustainable Development Strategy, I provide regular updates to buyers on procurement webinars and using various other communication tools across the business (company news, website, intranet, internal newspaper Hub).

Ethical procurement is also referenced in policy and externally in our Supplier Code of Conduct which outlines our guiding principles on labour standards, the environment and business continuity. I work really closely with buyers and contracting managers to ensure our Framework Agreements consider ethical and sustainability issues throughout the procurement cycle.

This starts at the pre-tender stage when we are formulating strategy to the tender exercise itself and through to contract award and contract management. It’s my role to raise awareness of sustainability issues with our internal buying teams and influence them to embed sustainable and ethical procurement elements in their tenders.

Crucially, our category management process helps me to do this. Category management helps buyers to understand the risks and impacts of their procurement and I work closely with buyers as part of a wider cross functional group to put forward how we might manage and mitigate these risks.

More specifically, if a buyer is working on a product area with known and documented labour standards risks, we will, of course, work more closely together. My role is to support them in incorporating ethical procurement in the tender and to support contract and supplier management once the framework launches.

More recently, I have trained many of our buyers in the requirements of the UK Modern Slavery Act in order that they are aware of what implications this legislation has for our business and our suppliers. This training and capability building is delivered through what we call an ‘Experience Exchange’ – an interactive session which focuses on training but also on live examples. This recent piece of legislation has brought ethical procurement into sharper focus as it’s essential we increase oversight of our supply chain and build in mitigation where there are known risks.

What more could be done?
There is always more that can be done. The important thing is to raise awareness of labour standards issues, initiate dialogue with suppliers and embed a culture of rectification and continuous improvement. It’s about working with suppliers to address these issues and supporting them along the way. We are acutely aware that many of our suppliers are SMEs who may not have been used to grappling with labour standards issues before. It is important for all suppliers to be engaged in the process as it’s only by collaboration that we will deliver change.

NHS Supply Chain will continue to support suppliers with capability-building and awareness raising material.

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