No doubt, an ethical supply chain has become an increasingly valuable asset for businesses across the globe. It used to be that the concept was looked down upon and thought of as something for the craziest of society. However, it is clear that is no longer the case in today’s logistics and supply chain landscape.
An ethical supply chain is a supply chain practice that embraces corporate social responsibility guidelines. It is a growing concept and has become popular among organizations in the first world. Although not so much for organizations in the second and third world.
The slow reception is because of the perceived disadvantages of embracing ethical practices in the supply chain. These perceived disadvantages are myths, considering that 80% of customers want an ethical or sustainable supply chain.
In this article, we will be exploring some of these myths. Why they are prevalent. And why they are so wrong. So what are they?
1. Your Sourcing Partners Are Compliant.
It is easy for an organization to talk about the importance of compliance in the supply chain with its partners, but when it comes down to it, how compliant are these partners? The fact is if there is no enforcement, many times, there will be no compliance.
While you may trust your supply chain partners or stakeholders. And are willing to cut them some slack, the responsibility of enforcing ethical supply chain practices is on you. Therefore taking appropriate steps is paramount.
Think of it this way. What would happen if the government made rules and then refused to enforce them?
If 80% of customers will only patronize businesses and supply chains that are sustainable and run ethical operations, that means to get them to buy from you, there must be some effort on your part to ensure these type of supply chain operations. However, these customers are not going about policing your partners.
You promised sustainable or ethical practices. You drew out the policy to ensure your supply chain is living up to the promise. And you will have to enforce it. Failure to do so will make these customers feel betrayed, and it could impact the business in so many ways.
The bottom line is when it comes to supply chain ethics compliance. An organization must enforce compliance across the board of their supply chain management. If it hopes to see it become a success.
2. Vetting Suppliers Ensures Long-Term Commitment To Your Ethical Values.
Vetting is a critical tool when sourcing for supply chain partners and suppliers. There are several reasons why business organizations vet potential suppliers before getting into partnerships with them. However, ensuring these suppliers share the same ideals or values is the most important reason.
Under the current economic and supply chain landscape, sourcing has become a major practice. But different countries and regions have different acceptable practices. An ethical supply chain might be important to a business or supply chain in the United States but not so much for a potential supplier or partner in China or India.
If that is the case when outsourcing parts of the business and supply chain to the supplier, in many cases, the business may adjust its practices and operations to incorporate elements of sustainability or, at the very least, appear to have. All of this is just to ace the vetting process. When they are done with the vetting process and come on board, the supplier or business you are outsourcing will, in many cases, return to the less-than-ethical supply chain practices they were used to before partnering with your business.
So, in this case, there was vetting, but there was no long-term commitment to it. Only 25% of companies that report their greenhouse emissions engage their suppliers in ensuring they engage in sustainable practices. Supply chains do not put enough effort into following up on this situation and ensuring the practices continue long after the vetting operation.
While vetting is a significant first step, it is vital to ensure processes or procedures are set up to follow up with your partners, especially for organizations involved in global sourcing.
3. Ethical or Sustainable Supply Chain is More Expensive
“Ethical upply chain is costly!!” is one of the most popular reasons business organizations and their supply chains tend to shy away from sustainable supply chain practices. There is a general belief that it will cost the supply chain more to implement, operate, and maintain.
However, this is not the case. There are obvious flaws to that logic or thinking, and some of them are:
- While an ethical supply chain may require a lot of money to start, it is a supply chain investment that pays for itself in the long term. Take, for example, Nike. The company was formerly known for slave labour and its sales took a hit. However, they would turn this around by embracing more ethical practices.
- Customers care and are willing to spend more when the manufacruring and supply chain oepration that delivers that product to them is operted ethically. A survey by “Software Advice,” a supply chain company, showed that more than 30% of consumers were willing to pay more for goods produced under good working conditions.
- An ethical supply chain eliminates waste. And waste elimination is a massive cost saver for any supply chain or organization.
- Treating your workers well and encouraging inclusivity improves productivity significantly among your staff. Imagine the ripple effect across yoru supply chain.
4. Ripple Effect of Supplier Disruptions
Organizations and supply chains believe enforcing an ethical supply chain among their suppliers or partners may inadvertently disrupt their supply chain process. That short term loss can be quite scary. Especially for the large corporations. Shareholders and other staekholders may not be too understanding.
While this line of thinking may seem reasonable, it is not valid. Many organizations think they must get all their supply chain processes on board the suggested ethical standards at once, but that is far from the truth.
The ethical supply chain standard can be implemented in phases, gradually getting different processes on board until the supply chain is able to achieve ultimate goal.
Working in phases to achieve the optimal result would get an organization to its destination with little to no disturbance to its supply chain. The issue with implementing in phases is that the supplier may string the organization along for a long time.
Benefits of Ethical Supply Chain Practices
So there numeroud benefits for adopting ethical supply chains. Some of the benefits are more popualr than others, such as the environment getting to last a little longer and ending child labour. These are both great, but what about other less popular benefits?
- The organization’s reputation is enhanced among its customers, enforcing their loyalty.
- Far more flexible and agile supply chain
- A supply chain that values its workers will benefit from their motivation and loyalty.
- A less corrupt supply chain is always a plus for governance
- Greater quality of product to consumers
Wrap Up
Ethical supply chain is no more just an idea. It is now a necessary concept global supply chains must adopt for survival. Yes the environment will benefit from it but much more critical to the business is its positive impact on profitability and ease of operations.
To get more topics and articles like this, join the Supply Chain Nuggets family here
Obinabo Tochukwu Tabansi is a supply chain mastro and writer with a decade of experience working in different facets of the supply chain. Today he is living his passion for writing on all things supply chain. His blog, Supply Chain Nuggets, is Africa’s fastest-rising supply chain blog, helping professionals, business owners, and curious minds navigate the supply chain complexities on the continent.
