Report: Ethical Dilemmas in Procurement BUS6105

Research Analysis Report:

Ethical Dilemmas in Procurement

Submitted By:

Priyanka Karuvannoor

1. Introduction

Procurement ethics plays a crucial role in ensuring fair business practices, supplier relationships, and cost efficiency while maintaining ethical integrity. A common ethical dilemma in procurement is using one supplier's terms to negotiate better deals with another supplier, which raises questions about fairness, transparency, and long-term business sustainability. This research analysis reviews nine scholarly papers to explore ethical decision-making in procurement, the consequences of unethical behavior, and strategies for balancing cost efficiency with ethical procurement.

Ethical decision-making in procurement is essential to avoid conflicts of interest, bribery, favoritism, and other unethical practices that could damage an organizations reputation. Companies that adopt transparent procurement strategies are more likely to foster trust among stakeholders, mitigate legal risks, and enhance their long-term profitability.

This report aims to provide a comprehensive analysis of procurement ethics, examining existing literature, real-world case studies, and key ethical frameworks. The discussion will highlight how organizations can integrate ethical procurement practices while maintaining financial sustainability and competitiveness.

2. Literature Review

2.1 Principle and Standards of Ethical Supply Management Conduct

This paper discusses ethical supply management principles, emphasizing integrity, professionalism, and adherence to laws and regulations. Key takeaways include:

• Ethical companies are more profitable, build brand loyalty, and attract top


• Ethical procurement professionals should prioritize long-term value rather than short- term cost savings through unethical tactics.


• Reciprocity in procurement (favoritism, quid pro quo arrangements) poses legal and ethical risks.


• Transparency in decision-making helps prevent coercion and maintains supplier


• Adherence to applicable laws and standards is vital, particularly in global supply chain operations where different regulations may apply

2.2 Ethical Decision-making of Purchasing Professionals

This paper explores the role of ethical sensitivity, judgment, and behaviour in procurement:

• Ethical dilemmas in procurement arise due to personal biases, favoritism, bribery, and deceptive contract terms.


• James Rests (1986) four-component model highlights ethical sensitivity, ethical judgment, ethical intention, and ethical behavior.

• Ethical decision-making is influenced by corporate culture and individual moral


• Organizations should implement ethical training programs to ensure purchasing professionals adhere to fair competition principles.

2.3 Ethics in Procurement: A Case Study from a Logistics Company

A case study of a small logistics company revealed that ethical procurement practices lead to cost savings, improved supplier relationships, and enhanced corporate reputation. The key findings include:

• Ethical procurement prevents financial scandals and legal


• Transparent supplier selection improves competitiveness and


• Implementing ethical guidelines helps prevent favoritism and


• Companies that emphasize integrity in procurement attract long-term business partners who value ethical dealings.

2.4 Sustainable Procurement Practices: Balancing Compliance, Ethics, and Cost

This paper focuses on how companies integrate ethics, cost efficiency, and sustainability into procurement:

• Ethical procurement prevents financial scandals and legal


• Transparent supplier selection improves competitiveness and


• Implementing ethical guidelines helps prevent favoritism and


• Companies that emphasize integrity in procurement attract long-term business partners who value ethical dealings.

2.5 Implementing Ethical Procurement Standards: Challenges and Best Practices

This paper explores the challenges of enforcing ethical procurement standards:

• Ethical procurement often involves higher upfront costs but mitigates risks like legal issues and reputational damage.


• Digital tools (blockchain, supplier management software) enhance transparency and ethical compliance.


• Organizations must balance cost constraints with ethical


• Developing long-term relationships with ethical suppliers fosters sustainable business

2.6 Key Issues in Ethical and Sustainable Procurement

This paper provides an in-depth look at sustainability and ethics in procurement, emphasizing:

• Regulatory challenges in global supply


• Long-term benefits of integrating ethical and sustainable sourcing


• The need for strong organizational policies and continuous

• Ethical procurement strategies must align with corporate social responsibility (CSR)

2.7 Ethical and Unethical Bargaining Tactics: An Empirical Study

This study examines deceptive negotiation tactics and their ethical implications:

• Some business experts argue that minor deceptive practices are necessary in


• Common unethical tactics include misrepresentation, falsification, and selective


• The ethical dilemma in procurement negotiations centers on balancing competitive advantage with honesty and fairness.


• Ethical training for procurement professionals is essential to minimize deceptive

2.8 Ethics in Negotiation: Causes and Consequences

This paper explores why negotiators act ethically or unethically and the consequences of such actions:

• Ethical behavior in negotiation is not inevitable, nor is unethical behavior always


• Psychological factors such as moral character, ethical fading, and environmental cues influence negotiation behavior.


• Deception in negotiations can lead to trust erosion, retaliation, and negative long-term economic outcomes.


• Understanding behavioral ethics can help train negotiators to make ethical choices while achieving strategic goals.

3. Analysis and Discussion

The ethical dilemmas in procurement arise from the need to balance cost efficiency with integrity. The research reviewed highlights several key areas where organizations face ethical challenges and the strategies they employ to navigate them.

3.1 The Role of Transparency in Ethical Procurement

Transparency is a fundamental aspect of ethical procurement. Organizations that maintain openness in their supply chain management tend to foster trust among stakeholders, including suppliers, customers, and regulatory bodies. Transparency involves clear communication of procurement policies, fair bidding processes, and ensuring that supplier selection is based on merit rather than personal relationships or under-the-table agreements. Many companies implement digital solutions, such as blockchain technology, to enhance transparency and traceability in procurement transactions.

3.2 The Cost-Ethics Trade-offs in Procurement Decisions

One of the primary challenges in ethical procurement is balancing cost savings with ethical considerations. Organizations often face pressure to reduce costs, which may lead them to engage in practices such as supplier switching based on price alone, disregarding long-term supplier relationships and ethical sourcing standards. However, as research suggests, ethical procurement can yield long-term benefits, including improved supplier trust, better product quality, reduced legal risks, and a stronger brand reputation. Companies adopting sustainable procurement strategies can achieve cost savings over time through economies of scale, long- term contracts with ethical suppliers, and investments in sustainable materials that reduce waste and improve efficiency.

3.3 Ethical Supplier Management and Accountability

Managing suppliers ethically requires organizations to establish clear guidelines and accountability measures. Ethical supplier management includes ensuring that vendors comply with labour laws, environmental regulations, and anti-corruption policies. Many organizations conduct periodic audits and supplier assessments to enforce compliance. Additionally, organizations that prioritize ethical supplier management are more likely to develop strong, long-lasting partnerships with their vendors, reducing disruptions in the supply chain.

3.4 Impact of Unethical Procurement Practice

Unethical procurement practices, such as bribery, favoritism, and fraudulent contract terms, can have severe consequences for organizations. Case studies highlight how companies engaging in unethical procurement face reputational damage, legal penalties, and financial losses. The Enron scandal and other corporate fraud cases underscore the risks associated with unethical supply chain management. Furthermore, unethical behavior in procurement can lead to distrust among suppliers, reducing the willingness of reputable vendors to engage with an organization.

3.5 Strategies for Enhancing Ethical Procurement

Organizations can improve their ethical procurement practices through several key strategies:

Establishing a Code of Ethics: Defining clear ethical guidelines for procurement teams and suppliers

Training and Awareness Programs: Educating procurement professionals on ethical decision- making and industry regulations.

Supplier Due Diligence: Conducting background checks and ethical assessments before entering contracts with suppliers.

Incentivizing Ethical Practices: Rewarding ethical behavior through recognition programs and supplier incentives.

Leveraging Technology: Utilizing digital tools such as AI-driven compliance monitoring and blockchain for transaction transparency.

By implementing these strategies, companies can ensure that their procurement activities align with ethical standards while maintaining operational efficiency.

4. Conclusion

Ethical procurement is not just a regulatory obligation but a strategic imperative for organizations aiming for long-term success. The reviewed research demonstrates that ethical procurement fosters sustainable business practices, mitigates risks, and strengthens supplier relationships. Organizations that invest in ethical procurement strategies tend to enjoy enhanced reputation, reduced legal risks, and improved financial performance.

Balancing cost-efficiency and ethical responsibility remains a challenge, but organizations that integrate sustainability, transparency, and accountability into their procurement processes will be better positioned to achieve long-term success. By leveraging technology, enforcing supplier accountability, and promoting an ethical culture within the organization, businesses can align their procurement strategies with corporate social responsibility and sustainable development goals.

Ultimately, ethical procurement is an investment in organizational integrity, ensuring that businesses remain competitive while upholding social, environmental, and economic responsibilities. Future research should focus on the role of emerging technologies in ethical procurement and the development of standardized global procurement ethics frameworks to guide businesses across various industries.