Why CSR and Responsible Sourcing?

Date: March 6, 2015

Why CSR and Responsible Sourcing?

Advantages of Sourcing from Ethical and CSR Suppliers

Broadly speaking, corporate social responsibility (CSR) refers to a business strategy that includes practices that impact society at large in positive ways. CSR involves a shift away from the time-honored single bottom-line approach and marks a significant shift towards a “triple-bottom-line approach.” This new approach strikes a balance between social, environmental, and economic values, or in trendier terms: people, planet, and revenue. CSR goes beyond simple philanthropy and donations to charities. It is a top-down approach to socially responsible business and has become an important facet of responsible product sourcing, as well as a decision criterion in consumer spending.

The marketplace grows each day and becomes more global and connected, offering consumers more choice about where to spend their money. Consumers are interested in seeing their dollars have a positive impact. As people gain more awareness about global environmental and social issues, they have an increased desire to make impactful spending choices. The key is for businesses to inform the public about their careful CSR choices in product sourcing, so that consumers can make informed spending decisions. Quality CSR marketing also plays a large role in where today’s top talent desires to work and can draw in quality employees.

CSR strategy varies by industry and company size. And so, a wide range of social and ethical concerns now impact the way responsible companies do business and the way they are viewed by consumers. Some key issues include: environment (carbon footprint, ethical waste management, biodegradable material use, and eco-friendly packaging and distribution practices); labor practices (fair-trade or fair compensation, healthy working conditions, ethical employment standards, and anti-corruption measures); safety standards (quality of materials and construction, product testing, chemical disclosure, and recall planning); and philanthropy (helping the less-fortunate with earnings through systematic contributions, in-kind donations, or sponsorship of community programs through time and resources).

For those who do business or source in foreign countries, the challenge for successful CSR implementation is even greater and requires more effort. In general, international labor practices and safety standards vary widely and can present additional difficulties for smaller companies. Business owners can attend conferences and read trade journals to benefit from the research others are able to do. Savvy CSR strategy includes learning to ask potential vendors specific questions about their practices and ask for documentation to support their claims.

Another option is to let larger companies do the research. Giants like Nike, Target, Starbucks, and Wal-Mart have public lists available detailing where they source their products and even the factories they use. Piggy-backing on their research can be a significant time and money saver. This does involve risk, in that Target and Nike can certainly be misinformed or misled about practices and no guarantees are offered.

A thorough CSR strategic plan requires extra time, effort, and commitment for responsible sourcing, which can be especially tough for small businesses. However, it can yield exceptional benefits, such as consumer loyalty, operational and material savings, motivated employees, heightened brand awareness and reputation, additional access to resources and sourcing pipelines through governmental CSR campaigns and rewards, and greater revenue overall. Research indicates that consumers are willing to pay 5% to 8% more for products from companies that utilize socially responsible practices. This number is only increasing over time and corporate social responsibility is certainly here to stay.

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