Unethical Procurement Practices

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Institutionen för skogens produkter

Organizational exposure to risk of unethical behaviour – In Eastern European timber purchasing organizations

Daniel Norberg & Emil Gustafsson

Master Thesis Nr 17 2008

ISSN 1654-1367

Institutionen för skogens produkter

Organizational exposure to risk of unethical behaviour – In Eastern European timber purchasing organizations

Daniel Norberg & Emil Gustafsson

Master Thesis 30 ECTS credits, D-level in Business Administration Daniel Norberg & Emil Gustavsson, Master of Science in Forestry, 02/07 Supervisor at SLU: Mårten Hugosson & Denise McCluskey Supervisor at Swedwood: Olle Axelsson & Linus Paulsson

Acknowledgements
This study was carried out from February 2007 until June 2007. We want to thank everyone who made this project possible, and we hope you found it interesting working with us. In particular, we would like to thank Swedwood's purchasing organizations in Russia, Latvia, Poland, Slovakia, Ukraine and Romania for their time and input, which has been invaluable. We appreciate your hospitality and personal engagement. We are very grateful to our supervisors at Swedwood, Olle Axelsson and Linus Paulsson, for their confidence in us to undertake this work. Thank you also to Mats Norberg and Clas Boström for your support. Finally we want express our gratitude to our supervisors at SLU, Denise McCluskey and Mårten Hugosson for all help, especially Denise’s assistance with the English language.

Abstract
Title: Organizational exposure to risk of unethical behaviour - in Eastern European timber purchasing organizations The issues Swedwood asked us to explore in their Eastern European timber purchasing organizations were: Have clear directives been given to each purchasing unit regarding the purpose and scope of its activities? If so, what do these directives contain? If so, how are these directives followed? How are purchasing transactions planned and carried out? What roles are involved in the purchasing process, and what are the responsibilities and authorities of each role? Can the purchasing process, or parts of the process, be improved? Can the company organize its purchasing units more effectively to ensure best practices? The overall approach we took was to assess Swedwood's potential exposure to low levels of legal or ethical practices by benchmarking its actual practices, using the concept of best purchasing practices described in the literature. To collected data using qualitative methods, since this is an appropriate way of raising the sensitive issues that needed to be addressed. This involved interviewing local purchasing organisations about their local market conditions, organisational structure and purchasing processes.

Issues:

Purpose:

Method:

Conclusion: The study has shown that organisations’ purchasing managers are exposed to considerable risks of low levels of ethical practices. While most local organisations have policies to prevent corruption, there is rarely a working manual to provide people with guidelines to achieve this. Support for ethical practices could probably be improved.

Key terms:

Corruption, Purchasing, Forestry, Organization, Timber

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Summary
Swedwood is a subsidiary of IKEA and was established in 1991. Swedwood International AB’s main task is to secure production capacity in areas where IKEA has procurement difficulties, thus securing products flows at required price levels. Swedwood facilities includes sawmills, wood-component factories and furniture factories. Swedwood has invested in countries which have a low ranking in the Transparency International’s corruption index. So Swedwood are concerned that they can potentially be exposed to low levels of legal and ethical practices. Since the risk of unethical behaviour increases in businesses where there are significant sums of money involved, timber purchasing is a particularly risky area. With the intent to act ethically and prevent...
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