Ethical Sourcing

Ethical sourcing

Ethical sourcing is the process of sourcing products in a sustainable and responsible way. Ethical sourcing is also about ensuring that the workers involved in making the goods are safe and working in a sustainable environment free of fraud, corruption, and bribery. Human rights are respected, and workers are paid a living wage and treated fairly.

Procurement professionals should always consider the triple bottom line people, planet, and profit, and should uphold ethical behaviour, reporting any instances of bribery and corruption they encounter. They must treat suppliers, ethically and transparently and act in the interests of the organisation rather than for personal gain.

Organisations are responsible for ensuring the sourcing of products is done ethically. It’s important to recognise the environmental and social impacts of working with a particular supplier, before selecting them.

Why is ethical sourcing important?

Recently, there has been a huge global interest in ethical practices, particularly relating to labour and environmental practices oversees. Procurement activity is no longer about economic factors, but non-economic factors too. For example, how environmentally friendly are your contractors and suppliers? Where does the wood come from? Are you benefiting your local economy? It’s fundamental that procurement professionals maintain integrity and look out for signs of modern-day slavery, fraud, corruption, human trafficking, and child labour within the whole supply chain.

• Ethical practices promote a positive corporate image whilst helping to build and maintain brand reputation
• Consumers are often willing to pay more for ethically produced goods which are marked clearly, I.e., Fairtrade labels
• Following the codes of conduct and ethical guidelines set by regulatory bodies ensures greater compliance with legal and other obligations
• Ethical sourcing helps to mitigate operational risk

How to apply ethical sourcing?

It’s important to establish consistent ethical behaviour across the whole supply chain and to create an atmosphere that supports the reporting of unethical behaviour. Take a look below at some things to consider when applying ethical sourcing within your organisation.

• Construct an ethical sourcing policy and issues a code of conduct that will help your suppliers to understand your ethical position
• Identify the risks associated with your suppliers in their specific country such as production processes and human rights abuses
• Analyse the working conditions of your supplier. This could be done through visits and spot checks, questionnaires of through an investigation via the non-governmental organisation (NGO)
• Research other companies within your sector. What is their ethical policy? What are they not doing that you can do? Doing this research will give you a competitive edge, particularly if competitors are not following best practice

What are some of the risks of ethical sourcing?

Ethical sourcing comes with risks, particularly if you are sourcing globally. It can often be difficult to monitor your supplier’s behaviour oversees and could result in the decline of your organisations reputation. Here are just some of the risks associated with ethical sourcing:

• There is a huge variation of ethical standards and acceptable behaviour across countries due to cultural diversity, so a single code of conduct cannot be applied universally
• Ethical practices can impose extra costs on companies
• Introducing codes of practice can be difficult as all workers need to be on board

Listen on demand and get the latest practical insights from our panel of procurement and supply experts.