The Unrevealed Benefits of Ethical Supply Chains

In today’s socially conscious world, ethical supply chains are becoming more and more prevalent. An “ethical” supplier is a concept that entails a much broader definition than a business practitioner that engages in their work with honesty. The idea involves a strong adherence to strict labor standards, fair pay for the production of goods, observance of business’ effect on local and global economies, and the need for corporate citizenship and social responsibility. Now more than ever, this is a concept being brought to the surface and many companies have been put under the ethical spotlight for neglect in their supply chains.

The internet and social media have opened consumers’ as well as businesses’ eyes to social causes. However, is their concern substantial enough to alter their buying habits? Whether you are targeting consumers or other businesses, there is likely to be a difference between what people say they would do, and what they act on in reality. The “Key Priorities for Ethical Supply Chains” report from Software Advice–a website that offers free reviews of supply chain management software–presents some surprising details surrounding the debate.

The key takeaways from the report reveal that of the respondents studied, the majority claimed they would pay 27 percent more for a product that is normally $100 if ethical labor and materials were used in its production. Also, the consumers sought were split on which factor would most convince them to buy from a firm: improved working conditions, community involvement, or environmental efforts. Overall, according to a poll of recent ethical priorities, consumers said they would pay more for ethically made products, without hesitation.

Although the survey was targeted to consumers, there are many parallels when considering B2B suppliers as well. Organizations going through the strategic sourcing process might consider this factor enough to make it a key point within their score carding. Potential clients might be willing to pay more money knowing their products were made ethically, and therefore companies are able to offset the increased prices from their ethical manufacturing suppliers. Ultimately, ethical supply chains can enhance an organization’s:

Vision and Goals: Since specific objectives allow an organization to strive toward a common goal, it is the first step in accomplishing and advancing a company’s mission. In terms of ethics, when an organization forms their expectations, they also decide how they will define their core ethical values and how those principles will be integrated into operations. When supply chain ethics are involved in a business’ foundation, they open up the door to eliminate labor associated with unfair payment levels, but also sustainable supplier relationships through ensuring partners that they will undergo their agreements with integrity and trust.

Leadership: Objectives supporting a socially responsible supply chain are a component of an ethical business’ appeal; however, it is the leadership who serve as a vehicle of those principles that allow the true transfusion of the values. Leadership is enhanced through an ethical supply chain because when an organization is assessed from the top, the leaders held accountable for promoting ethics will trickle down this behavior. These ideals are extended to legal compliance and other regulatory areas critical to the success of an organization.

Infrastructure: An organization structures their ethics and integrity function hand in hand with their core business so that it can move forward with its goals in social responsibility, but also the organization’s mission. As an ethical supply chain becomes a goal, organizational frameworks allow for transparency in processes and there becomes a clear road to accomplish goals involving ethically sourced materials/services, but also other business objectives.

Legal Compliance: With a strongly enforced set of policies and rules, the legal guidelines for an organization’s supply chain ethics systems can be formed. This category assesses the internal framework that provides the floor for ethical behavior—extending into external applications which can help the organization adhere to business law.

Whether you are servicing goods or services to businesses or consumers, it is no longer an option to overlook the intricacies of your supply chain if market competitiveness is a goal. With organizational goals and involvement of press and investors factoring into a company’s future outlook, the most potential can be granted through an ethical supply chain supporting operations. 

This article was originally published on My Purchasing Center™ as a guest blog contribution. My Purchasing Center™ is a website designed to provide the essential information required by purchasing and procurement management professionals to keep their companies competitive in a dynamic global marketplace. The original article can be viewed here.

Sources referenced:

http://qedconsulting.com/files/GlobalEthicsandIntegrityBookmarks.pdf

http://www.softwareadvice.com/scm/industryview/key-ethical-priorities-2014/

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