Responsible business: how can companies restore trust from their suppliers? 

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The collapse of Carillion in January 2018 left around 20,000 UK staff working in public sector jobs reliant on the Government for continued wages, while thousands more in the private sector were not afforded the same protection and cut loose after 48 hours.

But the impact of the construction firm’s liquidation was far wider-ranging, with debts totalling more than £4bn being written off in the light of the company’s insolvency. This included financial damage incurred by up to 30,000 small businesses.

Carillion’s collapse was one of the more high profile recent examples of the knock-on chaos that one firm’s failure can cause to suppliers. Though it was signed up to the Government’s Prompt Payment Code, which requires firms to undertake to pay suppliers within a 60 day maximum and preferably within 30, Carillion was often making smaller firms wait for 120 days or more for their money, according to BEIS committee chair Rachel Reeves MP.

The collapse, in part, contributed to public confidence in UK business reputations falling 9% over the past year, a hefty fall which led to the CBI call on businesses to “focus on what matters – being good for their employees, customers, communities, investors and suppliers.”

But will smaller suppliers, especially those hit by Carillion, trust the supply chain system again? And if so, how?

It’s easy to suggest that current regulation may not be tight enough and allow larger firms to exploit others. AAT is a signatory member of the Prompt Payment Code, for example, but we recognise that the code is a pledge for good practice, rather than anything enshrined by law or penalties for non-compliance. However, should the system need stricter governance, or should fairness and good practice be allowed to operate freely?

And within this, how can accountants ensure that not only are their own businesses operating responsibly, but as they take on more of a strategic consultancy role over the coming years, that the businesses they advise are showing best practice in this area as well?

AAT is hosting an event in October where we aim to discuss how being responsible can help businesses succeed throughout the supply chain and to the benefit of the whole economy. Stakeholders from the likes of the Organisation of Responsible Business, Business in the Community and Opinium Research will be joining us, and we will be sharing resulting thoughts and recommendations – which we hope will benefit accountants and small businesses alike – following the event. We hope to have a few of our members in attendance to offer their thoughts as well.

AAT is hosting a breakfast roundtable on the theme of responsible business at its Barbican offices between 8.30-10am on Thursday 11 October.

Attendees include representatives from the Organisation of Responsible Business and the Federation of Small Businesses. Spaces are very limited, but if you are interested in taking part and finding out more, we would love to speak with you further (on a first come, first serve basis).

Please email [email protected] for further details. 

Adam Williamson is AAT's Head of Professional Standards.

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