Playing Fairly: Getting to Grips with Ethical Sourcing

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Business ethics such as corporate social responsibility or ethical marketing are nothing new. Yet, although more and more companies are including an ethical sourcing policy in their operational standards and principles, ethical sourcing (or ‘ethical procurement’) is still a developing idea. Ethical sourcing essentially puts ‘ethics’ at the heart of a business’ purchasing and supply chain management criteria. While the primary goal is to ensure that inventory stock is manufactured and delivered ethically, responsibility extends beyond sourcing. Ethical sourcing also includes the processes of evaluating and engaging with a supply market through to how businesses manage relationships with suppliers.

Hot Button Ethical Issues

Key ethical issues in the supply chain range from child labour to the use of organic ingredients. The quest to behave ethically is, in truth, almost so broad as to set businesses up for failure. So, what is at the heart of ethical sourcing? International trends indicate that ethical sourcing normally confirms that suppliers ensure their products are manufactured in safe and healthy conditions, that their workers are properly paid, and workers’ rights respected. It usually also means that the supplier is doing all they can to reduce their impact on the environment. This is especially critical to your business when sourcing globally in unfamiliar work cultures. If government or local industry practices are not sufficient in your supplier markets, requiring your suppliers to agree to an ethical sourcing policy will help to guarantee adequate protection for workers and the environment.

Is Ethical Sourcing a White Elephant?

Won’t ethical sourcing just scare off the average consumer, averse to paying a premium for a fairly sourced product? Not necessarily. Having an ethical marketing and distribution chain is adding more value than ever. Sourcing ethically seems to be increasingly important for businesses with a brand presence or online e-commerce channels. Ethically-sourced materials are among factors which contribute to earning customer trust and respect. By acting responsibly both inside and outside stores, your business should benefit from both tangible and intangible benefits. For example, sourcing inventory stock and raw materials ethically is a clearly differentiated position. People identify emotionally, politically and personally with ethically sourced products. As the market becomes increasingly competitive, it’s essential that your business can break the market down into segments that you know will be receptive to your product offerings. Developing a brand based around ethical, sustainable products is a great way to capture market share since ethical consumers and retailers tend to have a loyal customer base.

How to Get Started

A key starting point is to make customers and retailers aware that your products are made with ethically sourced inventory stock. Consumers want to make informed decisions about their purchases so there is no need to be shy in this area. As long as what you say is true, consumers and retailers will almost always welcome this type of news.

Make your suppliers aware that you may audit them unannounced. This does not have to be a traditional site-visit. Technology allows the use of social media to communicate directly with staff employed by your tier one and sub-tier suppliers. For instance, many major brands now allow for their suppliers’ workers to share potential grievances directly with them via anonymous platforms. Third party auditing programmes are also useful in this regard.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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