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4 Benefits of an Ethical Supply Chain

Michael Wilson | Feb 8, 2016

Consumers say they care about sustainability and ethical business practices, but do they really? Would anybody really choose a hotel, for instance, based on socially responsible ...

ethical-supply-chain-solutionsConsumers say they care about sustainability and ethical business practices, but do they really? Would anybody really choose a hotel, for instance, based on socially responsible business practices? Apparently, the answer is “yes.” In one Nielsen survey, 55% of global respondents said they’d pay more to buy from a company with environmentally and socially ethical business practices.

That’s a good thing – but there’s also a downside. Pressure from consumers can motivate businesses to claim sustainability without truly embracing it. Other companies are sincere in their efforts but make superficial changes that, while effective, don’t have the impact of a more systemic approach. If you want to really have an ethical supply chain rather than one that just appears to be ethical, here is where you need to start. And you may discover that the benefits extend beyond consumer goodwill.

1. Extend to Suppliers

This holiday season was rife with reports of exploding hover boards. Even though the problems stemmed from faulty batteries from a few suppliers, customers came to see the whole category in a negative light: “Hover boards burn down houses.” If one of your suppliers has a problem – whether it’s a problem of ethics or a problem of quality – consumers will hold you responsible for choosing that supplier.

However, despite the knowledge that consumers assign guilt by association, one survey revealed that 86% of companies said their ethics codes did not extend to suppliers. And that’s a mistake. It’s important that your supply chain solutions look beyond what happens within your four walls and encompass your suppliers. 

What’s the benefit? Trust. And if you think that doesn’t matter, consider the dog food industry. After a rash of pet illnesses and deaths, consumers developed the perception that any pet product produced in China is dangerous – and anything produced in America is safe. Thorough vetting and monitoring of all suppliers could have prevented that crisis.

2. Transparency and Accountability

When it comes to your supply chain, transparency and accountability go hand in hand. It’s hard to hold other members of your supply chain accountable if they don’t know how they’re doing. And if they don’t have the systems in place to measure themselves, that responsibility falls on you. One current best practice is to allow your supply chain partners access to your supply chain management system. This allows registered partners to have access to their own effectiveness, productivity, and compliance reports, and to take appropriate action when it’s needed. It’s simple data sharing that can deliver big results for your supply chain solutions. Because once everybody else has the information they need, you can hold them accountable for delivery. 

3. Collaboration

In China and many developing nations, manufacturing has a very low barrier to entry. The suppliers you choose may or may not have systems in place to embrace ethics and sustainability. Instead of writing these suppliers off – or holding their breath and hoping for the best – many enterprises are collaborating with their suppliers, providing them with the tools and guidance they need to bring their practices in line with the purchasing company’s goals.

Patagonia is one example. The company uses a third-party auditor to review their suppliers. That report is delivered to Patagonia’s social responsibility manager, who – when necessary – works with the supplier to come into compliance with Patagonia standards. And Texas Instruments has published their code of ethics in a dozen languages, and they encourage all suppliers to adopt TI’s standards as their own. This is typically easier and more cost effective than finding a new supplier, and it supports a commitment to ethics by not taking away business that provides jobs.

4. Hiring

Sustainability converts – even those who spent most of their careers putting the bottom line first – can be among the most enthusiastic supporters. Still, it’s important to ensure that new hires also support initiatives for an ethical and sustainable supply chain. It’s much easier to nurture qualities that are already there than to change deeply embedded perceptions, so the most successful companies going forward will be the ones that look for this attitude from the very first interview. In particular, seek out candidates who are looking for a company like yours – one that’s committed to social responsibility.

Social responsibility in supply chain solutions is a real thing. Consumers care about it, and it provides tangible benefits. Are your sustainability efforts more than just lip service?

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