Beyond Profit: Introducing Ethics into Modern Supply Chains

Act ethically or operate profitably? The belief that businesses face a binary decision between ethics and profitability holds little water. For example, mounting research suggests that customers’ attitudes are shifting towards buying sustainable and ethically produced products. Meanwhile, ethical sourcing practices have been proven to introduce resilience, enhanced brand reputation and profitability too.

The truth is, that there is a far more nuanced understanding of the relationship between ethics and profits in business. As more and more organisations recognise how intertwined these approaches are and how they can reinforce one another in the pursuit of responsible and successful business practices, ethical supply chains will become the norm, not an outlier.

It’s worth noting here that ethical sourcing should not rest on greenwashing or corporate grandstanding. Nor is it as simple as setting guidelines. The nature of today’s complex global supply networks means ethical sourcing can be tricky to perfect. Rather, introducing a strong ethical sourcing stance requires proactive goals and strategies that align with an organisation’s key environmental, social, and corporate governance (ESG) objectives. In this article, we look at some best practices for their introduction and integration of ethical sourcing into the heart of supply chain processes.

But first, let’s look at what ethical sourcing means. While there are several definitions, the  Chartered Institute of Procurement & Supply (CIPS) puts it best when they say: “Ethical sourcing is the process of ensuring the products being sourced are obtained in a responsible and sustainable way…that workers involved in making them are safe and treated fairly and that environmental and social impacts are taken into consideration during the sourcing process”.

Introduce transparency and traceability

Ethical supply chains are transparent and verifiable. They demand a comprehensive understanding of the sources at the origin and pathways of a company’s products, from raw material sourcing to final product delivery. And the identification of every intermediary, manufacturer, distributor, and retailer involved in the process, even going as far as a supplier’s, supplier.

Grasping the complexity of modern supply chain processes and identifying potential areas for ethical improvement requires in-depth information. Data must be collected on the various stages, geographies, and participants to assess the associated risks to both human rights and the environment in these areas. From there, you can begin to understand the working conditions, labour rights, and the environmental footprint spanning the entire production process. If an issue is identified, steps must be taken to mitigate risks and prevent ethical violations.

Transparency also hinges on the establishment of clear lines of communication and mandated traceability with suppliers. Ethical organisations work alongside their suppliers to build relationships founded on trust and cooperation. This creates an environment where concerns and objectives can be shared to ensure that ethical standards are being met. Verification methods – such as audits and assessments – can also be employed to confirm that suppliers adhere to guidelines and that the information shared does align with the reality on the ground.

Of course, transparency is not static. It requires continual monitoring and improvement. It’s important to regularly review and update supply chain practices, making adjustments to further enhance transparency and traceability standards on the journey to ethical sourcing.

Drive environmental sustainability across the chain

Ethical procurement also demands environmentally responsible sourcing methods, such as processes that reduce waste, and minimise the carbon footprint. This may involve opting for sustainable materials, energy-efficient processes, optimised transportation methods and waste-reduction strategies.

Support social responsibility initiatives

Beyond the immediate supply chain, ethical organisations engage in social responsibility initiatives that benefit the wider community. This may include supporting local development, education, and charitable programs to create positive change that extends beyond the day-to-day business operations.

Consider the rigour of certifications

Many ethical organisations will pursue certifications such as Fair Trade, Rainforest Alliance, or B Corp to validate the organisation’s commitment to ethical and sustainable practices via a trusted third party while also signalling sustainability as a priority to customers and stakeholders.

Technology and ethical supply chains

Technology is a powerful ally in the pursuit of an ethical supply chain. The blockchain, for example, allows the creation of a transparent ledger of your supply chain activities to ensure that every product’s journey is traceable, recorded and verifiable. Supplier collaboration platforms can create a collective sense of responsibility for ethical practices by connecting and facilitating real-time communication and data sharing with suppliers. Artificial intelligence (AI) can be put to work analysing vast amounts of data to detect irregularities and potential ethical issues, ensuring concerns can be addressed before they escalate.

The importance of ethical supply chains cannot be overstated. They represent a paradigm shift in how businesses operate, a shift driven by the recognition that our choices as consumers have far-reaching consequences. From human rights violations to environmental degradation, the impact of supply chain practices extends far beyond the boardroom, and the ability to stamp out poor practices is within the reach of corporations.

Procurement professionals are well placed to cement an ethical ethos in supply chain practices, both by achieving sustainability targets with suppliers and optimising internal operations. Although obstacles and complex challenges will naturally occur, adopting proactive measures for ethical supply chain practices is the key to producing a positive impact on people, the planet and the organisation’s long-term profitability.