How these 5 key areas can drive ethical sourcing
What is ethical sourcing?
Ethical sourcing is the process of responsibly and sustainably obtaining products. This is through ensuring workers within the supply chain are paid appropriately and treated fairly, their working environments are safe, and that the environmental and social impacts surrounding production are taken in to consideration.
Below are 5 key areas that businesses should be realising when evaluating ethical sourcing.
1) Work collaboratively with suppliers
Build relationships with your existing suppliers and work collaboratively with them in order to be more ethical, ultimately creating transparency throughout the supply chain.
This doesn’t necessarily mean writing off existing suppliers that don’t yet have the means to hit those required standards yet – it means actively working with them in order to achieve those standards.
This in turn has a positive effect on the business, both internally and externally, and will create a better profile for you and your supplier. Following a profile boost for suppliers, their network should also be broadened due to more people wanting to work with them – only a positive for your business!
Share your plans and expectations and learn from their ideas and knowledge!
Another objective is to achieve competitive advantage, by reducing cost, increasing value, leveraging supplier innovation and reducing risk throughout the life cycle of the relationship, as highlighted in the graphic below.
2) Utilise technology
Technology should play a key role in ensuring you continue to carry out due diligence when monitoring suppliers’ processes, especially with sub-tier suppliers.
The larger the supply chain, the harder it is to effectively monitor performance and processes without sufficient technology in place – examples of this can be seen within the fashion industry where modern day slavery is still an issue further down the supply chain.
With supply chain policies so difficult to enforce in developing countries, having visibility of data is a key cog in effectively utilising supply chain technology, and with multi country/currency/ERP system organisations, that can prove to be a real challenge that will need addressing.
3) Opportunity for growth and savings
By investing in suppliers’ development, the opportunity for growth in revenue and quality increases. Improving practises will increase the capability of suppliers, as showcased by Unilever investing in farming practises of tea farmers, so they could produce more tea than previously. This will also increase competition within suppliers, ultimately improving standards of working and the quality of produce.
What is really interesting in supplier collaboration is taking costs out throughout the supply chain through Supplier Collaborative Cost Reduction.
4) Consumer awareness
Consumers care increasingly more about a company’s sustainability and ethical sourcing efforts and tend to reward it with brand loyalty. However, this goes above and beyond just appealing to external consumers. Reports show that one of the top things employees look for when applying for jobs is a company’s CSR model, with ethical sourcing playing a key role in this.
And the notion that consumers like the idea of ethical products, but aren’t willing to pay a premium for it now seems redundant with recent figures from a US survey stating that 45% of consumers would pay more for responsibly produced clothing and footwear, and 44% of consumers would pay more for responsibly produced over-the-counter pharmaceuticals.
5) Implement your policies internally
As a business, it’s important to set a defined CSR policy and implement it internally. Ensure your own employees are committed to maintaining ethical processes and procedures. If your key stakeholders and those with buying power understand the CSR in place, it should trickle down to the supply chain. The policy has to be effectively adhered to both internally and externally, with no room for manoeuvre.
Points to consider
- The purpose of an ethical supply chain goes beyond just consumer approval, it can generate savings opportunities through strategic supplier collaboration
- Stakeholder engagement is key – implementing a policy internally that can be transferred to suppliers is paramount
- Constantly evolving as a business will not only keep you at the top of your game, but also create new opportunities as you grow