‘Responsible sourcing’ refers to companies’ commitment to promote ethical standards and social responsibility when dealing with suppliers. When a product or service is considered responsibly sourced, it means that it was manufactured with attention to health and safety, human rights, and ethical and environmental principles. For instance, it is expected that the workers who manufacture a responsibly sourced product have been working under fair labor practices, and that the product was not made from conflict resources (natural resources that fund violence and armed conflict).
Responsible sourcing is an important part of the sustainable supply chain. Disregarding responsible sourcing can cost an otherwise sustainable business its credibility among consumers. Negative publicity generated by a transaction with an unscrupulous supplier can undermine a company’s reputation, potentially costing the company substantial amounts of money in public relations and legal costs.
Businesses can ensure responsible sourcing through several practices.
Comply with Existing Laws and Regulations
When choosing a supplier, companies must clearly communicate that they expect their business partners to be fully compliant with local and international laws and regulations. International environmental and labor laws include the Universal Declaration of Human Rights, the International Labor Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work and the UN Global Compact’s Ten Principles. To make compliance easier for suppliers, companies may consider joining trade associations that have an industry-wide supplier code of conduct. Such associations include the Worldwide Responsible Accredited Production (WRAP), the Conflict-Free Sourcing Initiative (CFSI) and the Fair Labor Association.
Adhere to Ethical Purchasing Practices
Companies should avoid purchasing practices that will force suppliers to disregard social and environmental standards. Rush orders, last-minute changes and orders that exceed suppliers’ capacities often lead to compliance violations such as excessive overtime work and illegal subcontracting. Ethical purchasing practices encourage suppliers to develop reasonable production schedules, which can prevent compliance violations.
Encourage Suppliers to Develop Their Own Standards
It can be easier for suppliers to internalize responsible practices if they are involved in developing them. Companies can train suppliers in various aspects of responsible sourcing, including environmental management and health and safety practices. When suppliers are knowledgeable in responsible sourcing, they can create business strategies that are geared toward this goal, while addressing their capacities and needs.
To make suppliers more open to adopting responsible sourcing, companies should educate them on the commercial benefits of doing so. A safe workplace, for example, can lead to higher employee productivity due to reduced cases of work-related illnesses and accidents. Products made from environmentally-friendly materials support resource conservation and, ultimately, greater business continuity. When suppliers know that they have a vested interest in responsible sourcing, they are more likely to integrate it in their business operations.
Consumers are increasingly well-versed in sustainability issues, and expect companies to be sustainable in all aspects of their business. Responsible sourcing is one way for companies to prove this characteristic.
ADEC Innovations (ADEC) is a leading provider of ESG solutions, with expertise delivering fully-integrated consulting, software and data management services. For more information on The Importance of Supplier Risk Management, read our Blog post.
