How do you deal with “Potemkin Villages”?


Have you heard of the term “Potemkin Villages”? This term is named after Prince Grigory Aleksandrovich Potemkin-Tauricheski, a Russian statesman who allegedly built fake villages to impress Catherine the Great, a reigning empress of Russia in the 18th century, on her "overland" visits to the Tsarist Empire.

A Modern-day Deception

The term “Potemkin's Village” has since come to refer to a facade created to deceive others. The term is often used to characterise any false appearance of success and has been applied to various fields, including academia, cultural diplomacy, and marketing ethics. In the areas of business ethics and supply chain management, we use the term “Potemkin's Village” to describe a company that creates a false appearance of responsibility and sustainability without taking meaningful action to address social and environmental issues in its operations. While this company “puts on a good show” for its stakeholders, nothing is as nice, clean, or good as it seems.

The Pitfalls of Prioritising Appearances Over Substance

Potemkin's Village highlights the importance of having transparency, accountability, and genuine commitment to social and environmental responsibility in business operations. Building artificial facades is time-consuming, costly, and unsustainable in the long term.

As legal and consumer expectations shift towards a focus on responsible business, the time and energy invested in constructing a 'Potemkin Village' could be more effectively used for long-term improvements to social and environmental practices, encompassing policies, procedures, and actions to address and manage social and environmental considerations.

Supplier's Role in Building Reputation Through Genuine Action

Suppliers can build a good reputation, increase customer loyalty, and improve their long-term financial performance by actively addressing these issues. Additionally, suppliers that address social and environmental issues can contribute to positive social and environmental outcomes and help build a more sustainable and responsible supply chain.

Step-by-Step Approach in Dealing with Misleading Suppliers

With the growing emphasis on ‘Supply Chain Due Diligence’ in the global business context, partner collaboration is key to supporting business ethics and compliance.

If you discover you have been misled about your supplier’s work processes and standards, it is important to approach the situation constructively.

  1. Gather Evidence: First, gather accurate and reliable information to support your claim. This can include documents, photos, or witness statements from employees on-site or from whistleblowers.
  2. Conduct on-site checks by local social due diligence specialists, or a grassroots survey of your supplier's employees. Engaging external experts can bring an objective perspective and thorough analysis to your confirmation process, enhancing the credibility of your findings.
  3. Approach your business partner calmly and professionally, and clearly communicate your concerns and evidence to support your claims. Foster an open dialogue and express your willingness to support them in finding a resolution.
  4. Suggest collaborative efforts or proactively propose a solution to address the identified issues. For instance, you might recommend that the supplier works alongside your team to develop a comprehensive plan for improvement. This collaborative mindset can foster a positive and cooperative atmosphere, conducive to finding effective solutions.
  5. Find a constructive solution with your supplier that meets the needs of both parties. This might involve implementing new policies, refining processes, or initiating training programs. By actively engaging in this constructive process, not only do you address immediate issues, but you also contribute to the establishment of a stronger, more resilient relationship with your supplier.
  6. Consult with supply chain experts and seek legal guidance applicable to your business context. External expertise can provide invaluable insights, helping you to address the situation comprehensively and strategically.
  7. Reflect on your own purchasing policy and ensure that ethical considerations are incorporated into your procurement strategies. You may need to reassess your company’s prioritisation of procurement pricing against changing stakeholder expectations and the cost of non-compliance.

By integrating social and ecological considerations in line with applicable laws, companies can effectively use resources to keep up with changing business expectations. If you discover that a supplier has provided misleading information, it is essential to approach the matter with a constructive and professional mindset. Strive for a collaborative solution that addresses concerns while meeting the needs of both parties. Lastly, seek guidance from specialists to navigate the complexities effectively. This comprehensive approach ensures a commitment to ethical business practices and facilitates the development of a responsible and sustainable supply chain.

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