Today, supply chains are considered strategic to the business, and meeting customer expectations for ethical and sustainable supply chain operations is increasingly becoming a top priority for supply chain managers. Show Last year, supply chain research specialists APICS found that 83% of supply chain professionals thought ethics were extremely or very important for their organization. When you consider the brand and reputational damage – not to mention the legal implications – of unethical labor, it’s not difficult to see why. Yet, even today, global brands are still discovered with unethical practices in their supply chains. Modern supply chains are global, complex and multi-tiered, which makes it easy for unethical practices to happen without the brand’s knowledge. For a major organization, it’s no longer enough to know what your supplier is doing. You need to know what their supplier is doing, and their supplier’s suppliers, and so on. For example, in the fashion industry, 93% of organizations admitted that they still don’t know where their cotton was manufactured. This can be a very costly error. In 1996, after it came to light that a sportswear manufacturer used child labor, the company had to pay millions of dollars in fines and, far more importantly, had 15% wiped from its corporate value. Yet this company is now an exemplar for what can happen when you build ethics into your supply chain. Why being ethical is importantCustomers are now more informed and more demanding – and that can be a good thing. Research has shown that amongst Millennials, as many as 9 out of 10 will swap brands to one they believe to be more ethical. Some estimates suggest that there’s an opportunity worth $996 billion for organizations that adopt an ethical approach throughout their business. One of the most surprising findings from research is that customers are willing to pay more for products that are ethical and sustainable. In 2016, The Nielsen Global Corporate Sustainability Report showed that as many as 66% of people are willing to pay more for goods that have a positive social and environmental impact. Another report found that customers were willing to pay a premium of as much as 25% for ethical products. Defining the ethical supply chainModern supply chain operations have become much more customer-facing, and many companies strategically use their supply chain to drive business initiatives and improve customer experience. Delivering for the customer means understanding their needs and expectations, and sustainability and ethical business are now key differentiators. According to EuroMonitor International, 65% of consumers now say that they attempt to make a positive difference through their choice of everyday purchases. An ethical supply chain operates in a way that delivers the highest levels of ethical and sustainable operations. This spans three key elements – economic, environment and social responsibility – and particularly focuses on:
In complex global supply chains, ensuring ethical operations is up to everyone – from the company’s employees to its suppliers, customers and trading partners. Each has a vital role to play. That said, cases like the sportswear manufacturer demonstrate that companies can’t absolve themselves of responsibility for what happens in their supply chains. Interestingly, this is an area where supply chains may have an advantage over other areas of the business. The transparency and visibility that supply chain professionals worldwide have built into their operations are exactly what’s needed to ensure ethical policies and practices are being followed. Where are we todayThe common feature of many high profile cases such as the sportswear manufacturer is the lack of transparency to see exactly what’s going on at each stage in the supply chain. When a company doesn’t have a clear understanding of its suppliers’ operations – even at the start of a contract – how can it monitor and manage supplier performance against a backdrop of continually evolving environmental, market and political conditions? The APICS research found that 71% of organizations had a supplier code of conduct but just over half enforced it. Similarly, 70% of respondents indicated they have a formal policy to understand where their supply is manufactured but only 43% said they understood how their suppliers operated. At the heart of delivering an ethical supply chain is information. An organization must be able to access information on their suppliers and their activities. They must also be able to make that information accessible to partners and customers. Key areas such as workers’ contracts and conditions, the provenance of materials, environmental performance and financial process need to be able to be monitored, and organizations need to be able to identify any supplier breaches of their ethical policies and take remedial actions quickly. New systems are required to capture and manage data across the supply chain. According to APICS, less than half of the global supply chain operations surveyed were using software and technologies to monitor supplier compliance. At OpenText™, we’re working with brands worldwide to improve their ethical performance and are delivering tools and solutions to enable the supply chain transparency and visibility that every modern business needs. We’ll look further into the ethical supply chains and the technologies that underpin it in future blogs. If you’d like to know more about how OpenText can help improve your supply chain operations, please contact us.
An ethical supply chain incorporates employees' rights and environmental concerns, with sustainability a top priority across the supply chain. The reduction of dangerous emission, waste of raw materials, and human rights issues are just some of the elements that come into play with an ethically sourced and managed supply chain. Research from APICS and Loyola University Chicago indicates that companies have gotten the memo, thanks in large part to growing public concern over abuses of the past. The research team reported that 83% of supply chain professionals found supply chain ethics very important to their business. In 2019, the Association for Supply Chain Management released standards to assist customers with economic, ecological, and ethical concerns regarding supply chain management. ASCM rewards suppliers who meet the standards with an ASCM Enterprise Certification. This credential shows that the supply has worked to achieve excellent ethics and transparency in supply chain material sourcing, waste management, and employee treatment. Supply chain ethics have emerged as a critical element in managing businesses. This previously obscure function has seen the light of day and is now openly discussed in boardrooms and by the C-suite. Leaders today see supply chain management ethics as a strategic must-do that gives them a competitive edge over businesses called out for human rights or environmental wrongdoing. Most people have come to understand the necessity of the ethical supply chain. However, there has been a lot of confusion over who's responsible for making sure policies play out when dealing with suppliers. Respondents of an ASME (Association of Small & Medium Enterprises) survey found various departments were responsible for upholding the policy with the top contenders including:
This thinking creates a dangerous gap in the belief that ethics are important and the actual carrying out of those beliefs at multiple levels of the organization. Only 31% of participants acknowledged responsibility partially fell on their own shoulders. Inconsistent communication and a lack of accountability create gaps where abuses go unnoticed and therefore silently sanctioned. One solution involves the commitment of top executives to fix the breakdown in communication. The message from legal, finance, and corporate leadership should be unequivocal as far as the tie between corporate goals and sustainable, ethical practices in how goods are produced and delivered to the company's customers. If your organization lacks a road for these goals, you can start with a summit of leaders and representatives from the supply chain. Map out measurable goals and determine who has ultimate responsibility in putting together a way to ensure every department holds up its end of the bargain. Supply Chain EthicsSourcing of materials and parts has become global and this increases the risk of exploitation when it comes to the fair treatment of workers and ethical concerns that involve pollution and waste. Supply chain ethics include the following:
These practices have become part of international law, but there is still work to be done as far as enforcement in many parts of the world. What is Corporate Social Responsibility?Corporate Social Responsibility has gained traction due to both internal pressures from employees and leaders and from external pressure, including growing expectations from consumers. Activists, media outlets, and even governments are now holding companies responsible for the ethical considerations of their decisions, including the entire supply chain. For companies that want to attract and keep to people, it's important that the corporate values mirror those of the workers. Fair wages, anti-discriminatory hiring practices, a ban on human trafficking, and certification as a "green" company all work towards corporate social responsibility. At the end of the day, companies must know what their suppliers are doing. Transparency across the supply chain is becoming the standard rather than the exception. In some places, it's being codified into law. Customers want to know that the company has strong corporate value and that the products they purchase don't harm the environment or compromise the safety of those who produce them. Businesses are solidifying their expectations in written agreements with suppliers, who must use more sustainable materials and manage waste in a way that doesn't destroy the environment. As awareness continues to grow and more laws are passed, both ethical supply chain and corporate responsibility concepts will continue to become more mainstream, to the benefit of workers, consumers, and the environment. |
In supply chain Management ethical issues
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