More than at any other time in history, the past few years have demonstrated the extent to which our economy and the health of our businesses depend on the supply chain. In order to keep costs low and maximize production, procurement has expanded into more and more developing countries, thus exposing companies to additional risks and making ethical sourcing an extremely relevant priority.
What is ethical sourcing?
There are three components of ethical sourcing.
- Environmental. This is made up of carbon/global footprint reduction, taking steps against climate change, and promoting energy conservation.
- Social. This requires that products be obtained in conditions promoting diversity, social justice, and fair working conditions.
- Economic. This involves an environment of financial stability and reduced energy demands.
In general, ethical sourcing enables businesses to increase revenue, reduce costs, and manage risks.
What does ethical sourcing look like?
When a company chooses to enact this ecosystem of ethics, it elects to responsibly manage its supply chain by only getting its products and components from suppliers who follow specific legal requirements and sustainable practices. Another way to look at this practice is that businesses committed to ethical sourcing avoid vendors known to engage in the following.
- Worker exploitation (forced or underage labor, low pay, and other substandard conditions).
- Negative environmental impact (causing severe pollution, harming animals, etc.)
- Knowingly deceiving customers about products, services, or policies.
- Unfair competitive practices.
Ethical sourcing seeks to minimize a business’s exposure to any of these practices via the implementation and enforcement of a clear set of policies and procedures for sourcing merchandise and its components.
Why does ethical sourcing matter for your business?
Your merchant provider has furnished you with a complete point of sale and customer management system that helps to safeguard data, promote secure payments, streamline business processes, and enhance your ability to provide that all-important personalized shopping experience to your customers. However, as laudable as these valuable components may be, they may fall flat without a strategy for ethical sourcing. Exactly why is this so important?
Perhaps most vital, it impacts your reputation. Becoming known as an entity that cares about ethics and sustainability goes over very well not only with investors but also increasingly with savvy customers. Many now make it a point to only do business with stores who can demonstrate their commitment in this arena.
Customers are not the only ones who care about ethics; employers do as well. If you want to attract and retain high-caliber workers, committing to these practices can be an important step.
Then there are legal considerations. As awareness continues to expand regarding the importance of ethics, sustainability, and renewability, there are sure to be new and updated regulations imposed on most industries. Ethical sourcing is one effective way to stay ahead of the curve in this regard.
Moreover, the risk to which your company is exposed may be lower when you follow ethical sourcing strategies. For instance, working with suppliers already committed to best practices reduces the chances of supply chain disruption affecting less conscientious sources.
Living out your business’s commitment to ethical sourcing.
If you have just begun to dip your toes into ethical sourcing and want to begin improving your company’s policies, it is important to recognize that the process will not be completed overnight. Over the course of time, however, you can take the following actions.
- Lay the groundwork. Determine the criteria that you will use to measure the ethical soundness of your suppliers. Use elements like working conditions, environmental footprint, human rights violations, and supply chain ethics, and then determine the benchmarks that you will use to gauge each candidate. Be sure that everyone involved in the vetting process knows and adheres to your new standards as they select suppliers.
- Once your policies are in place, continually audit your suppliers’ performance. Investing in a supplier management software solution will give you tools enabling you to communicate easily back and forth with vendors, manage data securely, and monitor compliance.
As a business owner, the idea of ethical and sustainable sourcing may seem unattainable and overwhelming. Although your small policies and directions certainly will not change the trajectory of the entire world, you actually can demonstrate that you are committed to meeting your company’s current needs in a way that takes the future into strong consideration.
The good news is that the more agile and efficient your supply chain becomes, the more ethical and sustainable it can be. Whether or not it is depends largely on your willingness to put these important concerns first in your day-to-day operations.
