The ethical supply chain: Definition, examples, stats

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Consumers expect more from the brands they buy from than ever before, and an ethical supply chain is now a requirement in the experience economy.

As they gain awareness about issues related to the environment, sustainability and forced labor, shoppers are demanding that supply chains meet ethical standards related to environmental stewardship, sustainable sourcing, reducing waste, and better worker conditions.

A recent Accenture Strategy survey of nearly 30,000 consumers in 35 countries found that more than half of UK customers “want companies to take a stand on issues they care about such as sustainability, transparency and fair employment practices.”

What is an ethical supply chain?

The supply chain is no longer a back-office function that consumers have never heard of. Over the past ten years, it’s taken on a more forward-facing role that’s a competitive differentiator and part of the corporate business model.

So what is an ethical supply chain? It’s more of a practice than a definition.

Supporting an ethical supply chain means that companies will incorporate social and human rights and environmental considerations into how they do business across the world.

An ethical supply chain focuses on the need for corporate social responsibility, working to produce products and services in a way that treats its workers and the environment ethically.

Following are some questions that consumers are asking about brands and their supply chains:

  1. Do you trust your suppliers and supply chain partners? Do they keep their word regarding ethics and morals, regardless of possible additional costs?
  2. Does each link in the supply chain take care of its workers with fair pay, sustainable work loads, and ethical work conduct?
  3. Is the sourcing of materials done from sources with renewable or low impact extraction methods? Is this certified?
  4. If unethical behavior is discovered, how will it be remedied? Will each partner in the supply chain actively work to make sure it’s corrected?

Do you need an ethical supply chain? Yes.

Not surprisingly, companies of all sizes are asking themselves if they need a responsible, ethical supply chain. The answer is an obvious “yes.”

It can help protect brand reputation, build long-term loyalty, and provide a better customer experience. It can even help boost the bottom line: Studies have shown that three-quarters of Millennials are willing to pay more for sustainable goods.

The tougher question, of course, is how to make it a reality. It’s certainly easier said than done. After all, the sheer scale and complexity of today’s global supply chains is mind-boggling.

Take Walmart, for example, which deals with over 100,000 suppliers — a massive network of manufacturers, distributors and subcontractors, from different countries with varying laws and regulations.

New standards of supply chain 

The good news is that research from APICS, Supply Chain Management Review, and Loyola University Chicago found that more companies are prioritizing ethical supply chains. In fact, 83% of supply chain professionals said that ethics are extremely (53%) or very important (30%) to their organizations.

In addition, the Association for Supply Chain Management (ASCM) released new standards in June 2019 designed to “help customers assess the ethical, ecological and economic aspects of their supply chain.” Those who meet the standards are eligible to apply for the ASCM Enterprise Certification, a designation that demonstrates supply chain excellence and transparency.

“More than ever, consumers want to know that the products they buy are not only economically sound but also manufactured through practices that are ethically and environmentally conscious,” says ASCM CEO Abe Eshkenazi about the new standards. “Building these ‘triple E’ supply chains provide innovative companies with another platform to achieve competitive advantage, grow their market share and make the world better through supply chain – at the same time.”

Making the move towards an ethical supply chain

There are many actions that need to be taken in order to move towards an ethical supply chain, including simplifying processes; efficient planning; visibility into supplier actions; optimizing transportation routes to reduce fuel consumption; monitoring environmental risks; and much more.

Technology is also an essential part: IoT sensors, blockchain, AI-driven bots and advanced real-time analytics can help detect risk, boost efficiency, reduce redundancies and improve planning.

The bottom line is that as an increasing number of consumers demand social responsibility from brands in exchange for loyalty, more and more companies realize they need to take specific steps towards an ethical supply chain.

According to recent research:

  • 69% of surveyed companies are eliminating discrimination in the workplace
  • 63% are making efforts to uphold environmental responsibility
  • 57% are monitoring labor conditions
  • 56% are fighting corruption (extortion, bribery)
  • 55% are deploying environmentally-friendly technologies

That said, the ethical supply chain is an evolving practice, rather than a one-and-done event. There is clearly more work to be done, but the key to success, say experts, is getting in the game for the long haul.

Clearly, it’s good for business — and those that don’t invest in it are at risk of being left behind.

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Sharon Goldman
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Sharon Goldman

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