Vendor relations principles

If you are a vendor and have questions about these principles or about doing business with Earlham, please contact the Vice President for Finance and Administration.

As a Quaker institution of higher education, Earlham expects its behavior as an organization in the world to bear witness to testimonies of peace, justice, respect for persons, integrity, and stewardship of the earth’s resources.

In this statement we try to describe principles, arising from our values, which help us decide when we may ethically deal with a vendor and when we may not.

If money did not circulate, but passed from one hand to another until it disappeared into a black hole, then we could try to direct it so that it passed through no evil hands on its way to oblivion. But money circulates, and the spender cannot prevent it from reaching the hands of people who will spend it on harm and wrongdoing. As soon as we spend money, therefore, we are complicit in the business of others and support it at least in small and indirect ways. We conclude from this that our purchasing decisions cannot be pure. We cannot rise above all complicity unless we become entirely isolated. The question is not whether we ever subsidize any degree of harm and wrongdoing, but how direct is the subsidy and how grave is the harm. Unfortunately, both of these are questions of degree, which means that our decisions cannot have the clarity and certainty of simpler ethical decisions.

Setting priorities

We recognize that enumerating and researching every way in which a business might violate its social responsibilities is an impossible task. Therefore we must set priorities which reflect our values and resources. Our current priorities are not exclusive, and may change in the future as our community changes, as business changes, and as we learn more about issues not currently on the list. [This paragraph is adapted from one by the Investment Committee of the United Church of Canada.]

Our priorities are of two kinds. First, we wish to avoid sending our money to companies which derive one-third or more of their revenues from the sale of alcohol, tobacco, gambling, or armaments.

Second, we wish to avoid sending our money to companies which we believe are responsible for serious or repeated instances of discrimination, pollution, labor or human rights violations, health or safety violations, or unlawful political activity. For these purposes, violations of applicable laws are not necessary to trigger our response, although in some cases they will suffice. We wish to avoid sending our money to companies which violate our own sense of their social responsibility, even if their conduct is lawful.

The principles in this statement apply only to major vendors, and only to Earlham faculty, staff, and students charged with the responsibility to act for Earlham College, or the Earlham School of Religion, in dealing with major vendors. For these purposes a major vendor is one on which we spend 1% or more of our procurement budget in a given year.

If a minor vendor does not comply with these principles, or if a major vendor is complicit in wrongdoing but not of the kinds or degrees described in these principles, then individuals may follow their consciences in refusing to engage that vendor for Earlham business.

Identifying unacceptable complicity

Because complete freedom from complicity is impossible for any institution committed to remaining a member of a larger social community, we see our task as distinguishing acceptable kinds and degrees of complicity from unacceptable kinds and degrees. In doing so, we will follow these principles.

In what follows, “harm” means harm or wrongdoing of the kinds on our priority list.

“To respond” to a vendor which we have decided is unacceptably complicit in harm is to take steps to change its behavior or to extricate ourselves from our relationship with it. These steps may vary from one situation to another. They may include writing a letter to the vendor asking it to change its practices or its relations with other parties, monitoring its progress toward such changes, ceasing to do business with it, and publicizing our decision.

1. We aspire to avoid subsidizing harm.

If a vendor is directly engaged in harm, then we will respond.

If a vendor is not directly engaged in harm, but is owned one-third or more by a company or individual directly engaged in harm, then we will respond.

If a vendor is not directly engaged in harm, but acquires one-third or more of its goods and services from a vendor directly engaged in harm, then we will respond.

If a vendor is not directly engaged in harm, but acquires a subsidiary after we have begun dealing with it, and the subsidiary is directly engaged in harm, then we will respond.

In short, we feel responsible for the money which goes to our vendors, our vendor’s significant owners, our vendor’s significant vendors, and our vendor’s wholly-owned subsidiaries. If any of these is directly engaged in unacceptable harm, then we will consider payments to the vendor as subsidies of the harm and we will respond.

We will not generally respond to a vendor if the harm arises from a vendor’s owner’s vendors, a vendor’s vendor’s owners, a vendor’s vendor’s vendors, or other parties two “layers” or more beyond the original vendor. The reason is that money circulates, and after a point we cannot hold ourselves responsible for where it lands. The layer beyond our immediate vendor is the point after which we have decided that our responsibility and economic support are too difficult to monitor and too indirect to require a response.

2. We aspire to avoid enriching those who profit from harm, even if our money does not subsidize the harm.

When a vendor has a wholly-owned subsidiary directly engaged in harm, then we will respond under the following circumstances: (1) the vendor makes one-third or more of its revenues from the subsidiary, and (2) the subsidiary makes one-third or more of its revenues from harm.

When a vendor is owned one-third or more by a company or individual who substantially benefits from harm, then we will respond. One “substantially benefits from harm” when one makes one-third or more of one’s revenues from harm or has a wholly-owned subsidiary directly engaged in harm.

We will not generally respond to a vendor just because it or its owner has objectionable customers, or just because it has an investor or stockholder who profits from harm through another investment. The reason is that the vendor or its owner may have indefinitely many such customers, investors, or stockholders, and it would be impractical to investigate them all or to hold ourselves hostage to their ethics.

When dealing with a vendor would make us complicit in this kind of harm, rather than the kind described in the first principle above, then our response should usually fall short of ceasing to do business with the vendor.

3. It is more important to avoid doing harm than to advance good causes.

It would be convenient to do both, and we should do so when we can. But we fear that making both tasks obligatory would strain our resources. We would need two sets of criteria: first, for what is harm, and how much complicity in harm is too much, and second, for what is good, and how much participation in good is enough. This would make the policy roughly twice as complex, and implementation roughly twice as difficult.

4. We hold many values simultaneously. One is to avoid subsidizing harm. One is to avoid enriching those who profit from harm. Another is to ensure the thriving of Earlham College.

When all available vendors of a certain product or service are unacceptably complicit in harm, then we must ask whether we are willing to do without or to produce it from our own labor. Often we will not be willing to do either. Buying from one of those vendors can be an ethically acceptable outcome when the loss of the vendor’s product or service (for example, electricity) would significantly compromise the institution.

Earlham’s investment policies foresee analogous dilemmas. We try to maximize the return on our investment and to steer away from companies selling alcohol, tobacco, gambling, or armaments. When our financial and moral criteria conflict, then we give priority to our moral criteria and willingly take a lower return on our investment.

Vendor dilemmas may not be as easily solved. One reason is that the thriving of the institution is one of our moral values, not one which must be subordinated to our moral values. A second reason is that it is easier to take a lower return on our investments as the price of moral conduct than it is to operate without some critical goods and services provided by outside vendors.

To give priority to the thriving of the institution is not an abdication of our values, but one way to resolve difficult conflicts among them.

5. It is not always enough for a vendor to comply with all applicable laws.

We have already decided this with regard to investments. Alcohol, tobacco, and armaments are legal products. But we do not want to profit from them through our investments, or subsidize them through our purchases.

There may well be areas in which we use the law as a convenient test of moral acceptability. For example, we might decide that monitoring a company for invidious discrimination or excessive pollution is beyond our means. We might respond to a company for engaging in lawful forms of discrimination or pollution. But we might decide instead to investigate whether the company has, or has recently, been convicted of serious or repeated violations of discrimination and pollution laws.

On our line-drawing decisions

Because the gravity of harm and the directness of our relationship to it are matters of degree, and because the implementation of a policy requires us to draw sharp lines, we want to say a word about these line-drawing decisions.

The harms on which we presently focus in our priority list reflect our current most urgent concerns modified by consciousness of our resources. These priorities may change over time.

The 1% major vendor threshold, the one-third revenue threshold, the one-third ownership threshold, the one-third procurement threshold, and the two-layer rule, are arbitrary. There is some practical basis for them, but they are arbitrary in the sense that we could change them, within limits, without changing our ethics.

The basis for the 1% major vendor threshold is that it would be a hardship for us to investigate all vendors with which we do a small amount of business. The basis for the one-third ownership threshold is that owners with this much equity in a company tend to have a controlling interest, and those with less tend not to. The basis for the one-third procurement threshold is that companies which rely to this large extent or more on harmful enterprises make their customers into partners in the harm. Similarly, the basis for the one-third revenue threshold is that companies which rely to this extent or more on profits from armaments and other harmful products make their customers into partners in the harm.

While these line-drawing decisions might be revised without undermining our principles, we recommend that they only be revised prospectively and without particular vendors in view. It is better to have a rule we can implement than to open the door to divisive questions of degree for which there can be no principled answers.

Monitoring compliance

For most of our major vendors, on most issues, we will detect potential problems and monitor continuing compliance with our principles through a social audit. This is simply a list of questions which we expect our major vendors to answer. We will trust them to give accurate and honest answers unless we have some reason to withdraw trust.

On some issues, it is possible to hire independent third parties to act as auditors. We probably could not afford this, but it remains a possibility.

We propose that the Vice President for Financial Affairs maintain a list of Earlham’s major vendors and a second list of the vendors with which we have decided not to do business.

We propose a standing Vendor Relations Committee (VRC). The VRC should have one member of the teaching faculty from the college and one from ESR, each named by the faculties’ nominating processes; one student from the college and one from ESR, each named by the student governments’ nominating processes; one member of the hourly staff named by Employee Council; and one senior member of the Earlham administrative faculty named by the President.

The VRC will take on four kinds of business. First, it will write the social audit, revise it as needed, administer it to vendors, interpret the answers, and decide how to deal with vendors whose answers are inadequate. Second, it will decide controversies about our vendors in light of the principles in this document and a factual inquiry into the relevant vendors and alternatives. This includes deciding what steps to take in response to unethical vendors. Third, it will bear responsibility to recommend revision of the principles in this document. Fourth, it will meet annually with the Vice President for Financial Affairs to review his/her lists of our major vendors and vendors with which we have decided not to do business. The decisions of the VRC will be advisory to the President of Earlham College.

A member of the Earlham community may ask the VRC to inquire into an Earlham vendor by sending a letter to the convener or to any member of the VRC.

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