It’s Time to Talk About Why Ethical Sourcing Matters

The pressure is on for procurement to set an example for ethical sourcing practices. Find out why it’s such a prevalent topic and what you need to be aware of in your organisation. 

---

You’ll undoubtedly have seen the headlines recently.

83 major brands implicated in report on forced labour…

The reputational risk of human rights abuses in supply chains

Responsible procurement faces perfect storm

It all sounds pretty serious, but that’s the truth of it: there’s never been a more critical time for procurement. The spotlight is on ethical sourcing, and there’s more public pressure than ever to ensure that the global supply chain industry is complying with ethical practices, working towards a more sustainable future. 

But if you’re a procurement pro, you know all this! You’ve been part of a business function that is working to lead organisations towards best practice and social procurement priorities. 

Right now, it’s time to take a step back and re-establish what we’re dealing with. With so many buzzwords and opinions flying around, it can be hard to tune out the flurry of noise and focus on the actionable change within our own organisations. And as our knowledge about ethical and sustainable practices evolves, so too do our definitions!

The team at Procurious understands, and we’ve got you covered. While there isn’t a single definition, we focus on ethical sourcing as the sourcing of products in a responsible and sustainable way. 

This includes, but is not limited to: fair treatment of employees, a diverse supply base and supporting local business, investing in social enterprises, and protection against fraud, corruption, and unsustainable practices. Businesses that engage in ethical sourcing are working towards leaving a positive impact on their employees, consumers, investors, and wider society. 

For more on our definition of ethical sourcing, and a summary of the Ethical Trading Initiative Base Code, check out this recent article.

Ethical sourcing is the means by which we achieve our sustainable goals. It ensures business longevity, but it also establishes what kind of impact our organisations will have on society at large. We’ve delved into the environmental side of sustainable procurement in our recent research and events program. 

But now, it’s time to explore social procurement.

Being ethical means doing the right thing – by our employees, suppliers, investors, customers and community.

Here are five important reasons why we need to talk about ethical sourcing:

5 Reasons We Need to Talk About Ethical Sourcing:

1) Modern slavery is still prevalent

We wish it weren’t so, but forced labour in supply chains is still occurring at alarming levels today. In fact, an astonishing 40.3 million people are estimated to be in slavery worldwide, often engaging in high-risk work with unsafe working conditions. 

While there is significant action being taken by governments and human rights organisations, the fight to eradicate it must also occur internally. Ensuring supplier sustainability and gaining oversight over sub-tier supplier networks is critical, with the right tools and technology in place to maintain high levels of analysis at every step of the procurement process. 

2) Supplier diversity is no longer a nice-to-have

In fact, it’s a must-have, and COVID-19 proved it. Over a third of respondents to our What Next? research report said that their network of trusted suppliers was too small to cope with the crippling disruptions caused by the pandemic. Unsurprisingly, 43% of respondents in that same report plan to expand their supply base to avoid too much concentration in one geographic area.

But supplier diversity isn’t just about risk mitigation – it’s about inclusion and economic growth. 

As we’ve seen in the US in the case of vaccine production, manufacturing offshore is becoming a trend of the past, and the benefits of local sourcing are swiftly gaining traction. From decreasing supply chain costs to increasing sustainability, from reduced time to market production frameworks to uplifting local and underrepresented business demographics, the opportunities to benefit from local procurement seem pretty endless.

3) We are vulnerable to fraud

While the pandemic spurred a rise in fraudulent activity and have left organisations vulnerable to attacks, cybersecurity issues have threatened the supply chain for a long time. Cited in a 2020 report from Deloitte, it was revealed that 4 in 10 surveyed manufacturers indicated that their operations were affected by a cyber incident in the past twelve months, while the average financial impact of $7.5 million from a data breach in 2018.

An organisation with compromised operations is an organisation that puts people, profit, and planet at risk. Technological defences are quickly emerging as potential solutions, but there’s a long way to go.

4) Our employees and customers demand it

The public pressure is on to ensure ethical sourcing practices. The power of the consumer has never been more fully realised, with customers boycotting brands that do not comply or meet their sustainability expectations. Simultaneously, the media jumps to break stories on companies that are exposed for violating human rights or having inadequate workplace safety conditions. 

What’s more, ethical and sustainable practices are proving to be an internal driver – according to the results of the 2020 Purpose Survey from McKinsey & Co, a comprehensive ESG agenda is the key to retaining and increasing the engagement of current employees, as well as attracting new recruits.

Let’s not forget the workplace safety side of the coin – without adherence to legislation or transparency about employee conditions, the consequences can be catastrophic. And the problem appears systemic, with current systems of auditing jobs too insufficient to address issues such as fair pay violations.

5) Reputations are on the line

As pointed out in this recent article from Avetta, there are significant reputational risks to abusing or neglecting ethical practices in the supply chain. A single step out of place in the supply chain process could result in the closure of the business, or confrontations with the judicial system. 

Achieving ethical accreditation starts with transparency, and ensuring the proper governance of internal processes, and aligning company values with Corporate Social Responsibility standards.

Research can show the way forward

With all this in mind, it’s no wonder we need to talk about ethical sourcing. We recognise this urgency at Procurious, which is why we’ve partnered with Avetta to conduct our next research report, Ethical Sourcing: How Can You Be Sure? This will be the showstopper report of 2021, with insights from industry experts, and the input of the procurement community from the very beginning.

If you’re reading this article, we need your help. Your expertise. Take our quick, 15-minute survey and you’ll be helping us make a critical observation of just how far we’ve come with ethical sourcing… and how far we have to go.