Ethical Supply Chains

We Want Ethical And Sustainable Supply Chains

This is the call coming from the next generation of empowered consumers. A 2015 online survey of millennials (that’s the only way to get in contact with them) showed that responsible sourcing in supply chains is becoming more visible; becoming more of an influence when choosing brands. In a report by Tam Harbert, E. Freya Williams, a communications and business strategist, says; “With the rise of social media, a company’s ability to control its image is gone, transparency is the new normal, and everything is discoverable. Your behaviour is your brand. And your license to operate depends on behaving well”. Millennials are knowledgeable and have access to far more information than any previous generation. We better listen to them.

What influences consumers?

What influences consumers? Source: (Ethics and the Supply Chain)

Supply Chains and Supply Chain Management (SCM)

The definition of a supply chain given by oxforddictionaries.com is “the sequence of processes involved in the production and distribution of a commodity“. That doesn’t really explain anything though. Abedullah Zaman, writing for the Independent Development Trust gives a slightly more informative definition in his presentation on professional ethics in supply chain management. He states; a supply chain is the “network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product”. So everyone involved really. From the extraction of raw materials to product arriving in the consumers home, every man, woman and, sometimes, child who has had influence on that product is part of the supply chain. Mr Zaman goes on to explain the term supply chain management as getting the right goods and services to the places and people that need them at the right time, in the right quantity and at an acceptable cost.

Ethics in SCM

Traditionally, the only group concerned with the ethical behaviour of companies was the consumer base. With modern technology, globalisation and an educated population the awareness of unethical practices is increasing. Consumers are no longer the only group concerned with the ethics of organisations. Investors are often scared away from lucrative business opportunities if there are any signs of unethical business practices. The media, governments and non-governmental organisations (NGOs) are too more informed and consequently more eager to pursue organisations considered to be conducting operations in an unethical manner.

There are three areas where society is particularly concerned with ethical practices:

Environmental Effects

People love the environment, although sometimes it doesn’t seem like it, they really, really do. Pollution, unsustainable agricultural practices and even earthquakes related to fracking are examples of how supply chains affect the environment. Michelle Russell of Just-Style notes that environmental impact is a priority for sourcing departments in 2016 and will continue to be. Initiatives for the garment and apparel industries like Greenpeace’s Detox campaign and the Zero Discharge of Hazardous Chemicals Programme (ZDHC) seek to encourage and facilitate the removal of harmful materials used in the industry as well as monitor and audit the industry.

Protest Posters - Don't Farck With Our Future

Protest Posters – Don’t Frack With Our Future

 

Health and Safety

The treatment of employees is an extremely important issue to consumers and investors alike. It is often easy for small organisations to ensure the other organisations within their supply chains are treating employees ethically. What can be far more difficult is to ensure the ethical treatment of employees in global supply chains where outsourcing can lead to grey areas in terms of ethical considerations. Nike and Apple have both been involved in scandals of this type where it emerged outsourced factories had questionable ethics, these scandals have impacted them negatively.

Worker in Nike Factory

Worker in Nike Factory. Source: (Ethics and the Supply Chain)

 

Consumer Rights

This is, for the consumer, often the most important aspect one wishes the organisations we are purchasing from takes seriously. Our own safety should never be a concern when we buy seemingly harmless products. When you purchase a flamethrower or pesticide the danger is inherent but should we have to worry about our safety when buying flooring or milk? Two cases involving Chinese organisations have shown that we should. In 2008 the Sanlu Group (43% owned by a New Zealand based dairy company) and other dairy product manufacturers, were found to be adding melamine to their products. This is done to heighten the protein levels and falsely identify the products as higher quality. The melamine was found to be the cause of 300,000 cases of chemical sickening in infants and led to the death of six of at least six children. Then, in 2015, an American flooring retailer, Lumber Liquidators, saw their stock price plunge as a “60 Minutes” expose found that the Chinese-made flooring they were selling contained formaldehyde at levels six to twenty times greater than California law allows. The US Centre for Disease Control and Prevention later reported that the flooring could result in an “additional six to 30 cases of cancer in every 100,000 people”.

Empty Shelves After Certain Products Removed

Empty Shelves After Certain Products Removed

 

Toward Ethical Supply Chains

There are many organisations working towards creating ethical supply chains. All levels of society benefit from ethical practices in business, from the global to the local. So the organisations involved in the fight for ethical and sustainable business practices must come from all levels of society, from the United Nations and multinational companies to community based organisations and local businesses.

No matter what your role in the supply chain (and you do have one, everyone does) it is a good idea to use the resources at your disposal to inform, educate and implement the strategies that will increase ethical supply chain management. Here are a few ideas, initiatives and events which may help you to do that.

Tips from the Chartered Institute of Procurement and Supply (CIPS)

When trying to address ethical issues in your supply chain CIPS recommends developing a strategy to streamline the process. Here is their four point plan:

  1. Review your supply chain – This seems pretty self-explanatory but is a large task. The first step here is to focus on your strategic suppliers (suppliers of goods which enable your service or form part of your production process) then look into non-strategic suppliers (anything in your business which is not directly linked to your service or production). The review process can be accomplished by sending suppliers questionnaires and using existing quality audits or technical reports. It is also important to determine the role of sub-contractors in you suppliers business to gain a holistic view of your supply chain.
  2. Identify problem areas – After your review you may find some suppliers have not adequately answered certain questions from your questionnaire or you have found issues in reports you have obtained. These are your problem areas that require further investigation. You also may have noticed some suppliers or sub-contractors operate in areas with a history of ethical violations, these organisations may too require further investigation.
  3. Consult – Try to find other companies buying in the same areas; you could pool information and resources if further investigation is necessary.
  4. Construct a policy – Now that you know where your problem areas are you can develop a policy to ensure ethical practices are maintained.

The UN Global Compact

The United Nations Global Compact is the world’s largest corporate sustainability initiative. Their aim is to get organisations to align their strategies and operations with the universal principals on human rights, labour, the environment and anti-corruption (in-line with the Sustainable Development Goal 12: Responsible Consumption and Production). Through the Advisory Group on Supply Chain Sustainability they offer tools and resources in the form of guidance notes, good practice case studies and reports which enable organisations to create ethical and sustainable supply chains.

Events

  • SEDEX – The Supplier Ethical Data Exchange offers events around the world which focus on ethical business practices.
  • Ethical Corporation – Provides reports, an online magazine and annual summit in the USA, Europe and Asia around the issue of “responsible business”.

Want More?

For more information on ethical practices in supply chains and business in general I recommend having a look at the SAGE Publications, Business Researcher website where you will find an entire section devoted to ethics and social responsibility. The Ethical Corporation is a wealth of knowledge for ethical and sustainability considerations and SEDEX provides training courses for buyers, suppliers and auditors.

I’ll leave you with this sombre thought…

Doug Guthrie, Forbes Magazine contributor, writes; “In the business world, fiscal imperatives often prevail over values—even the values of social responsibility and ethical behaviour”. This is an unfortunate truth in a capitalist society.

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