Ethical Sourcing

Oct 16, 2012

Ethical Sourcing

Consumers are going green. They are also going for ethical. This is how the term ethical sourcing has arisen, and more and more corporates are now including this new standard in their purchasing practice.

Goodbye to sweatshops

Ever since the national anti-sweatshop campaign in the 1990s, clothing and sports-gear conglomerates such as Nike, GAP, Reebok, and Adidas have been implementing social-responsibility initiatives in their management and purchasing sectors.

Nike, being criticized above all others, started working with suppliers in the developing world in order to avoid overtime, child workers, work harassment and abuse. It has introduced a code of social responsibility to its suppliers covering some 700 factories in 52 countries, accounting for around 800,000 workers. At first the road was not smooth for Nike’s new plan. It was hard to get so many suppliers working towards a new goal as many of them were very cost-conscious and had never heard of corporate social responsibility. During the early stages of its factory assessments, Nike experienced stubborn or even hostile factory owners, who basically did not understand why Nike was checking the small details of their production processes and putting so many limitations in place.

The situation improved when both sides got to know each other deeper: Nike understanding suppliers’ constraints and concerns, and suppliers interpreting Nike’s reasons for such moves.

As noted in Nike CSR reports, the number of suppliers meeting its qualification has been on the increase. What’s more, for Nike, was that valuable, lasting partnerships were nurtured with its suppliers, an important element in a healthy supply chain.

More of the above-mentioned companies began their own CSR programs, establishing collaborative strategies with their suppliers, sometimes even with their suppliers’ suppliers, to cope with the changes in consumer behavior.

Supplier Empowerment

Wal-Mart, the giant retailer, takes both profits and social responsibility very seriously. Early in 2010, Wal-Mart introduced a training program to more than 60,000 female staff scattered across India, China, Pakistan and Central America. Through this training, Wal-Mart not only uplifted the technical standard of its workers and hence productivity, but also improved the long-term living standards of its workers, and having a positive impact at the individual and family levels.

In  November  2011, in addition to frontline training in production, Wal-Mart launched its Supplier Development Program with the aim of developing environmentally and socially friendly practices in its supplier factories.

Wal-Mart is convinced that accountability and transparency are crucial for a successful supply chain, and the new program was tailored around these two elements. Assessment was made against suppliers’ recruitment and employment practices, compensation, effective factory–worker communication, health and safety, and environment. By uncovering the weaknesses and problems of their suppliers, Wal-Mart is trying to eliminate those banes of modern sourcing, including under-age labor, dangerous working environment, and pollution.

As stated by Stella Bray, Wal-Mart director of ethical sourcing, in a media interview earlier: “What it does is make them (suppliers) a better resource. It gives peace of mind, so what we do is make sure we communicate back to merchandising, and back to sourcing, how well the suppliers are doing. Which ones are struggling, which ones are doing well, and which ones don’t want to participate.”

Over 100 suppliers have taken part in the voluntary initiative since launch, in which both participating suppliers and Wal-Mart have observed enhanced productivity, better worker retention and improved product quality.

Love from the Coffee Bean

As regards the beverage industry, Starbucks, the coffee lover’s best friend worldwide, has implemented a holistic approach to CSR. Its program, referred to as Coffee and Farmer Equity (C.A.F.E.) Practices, includes ethical sourcing for coffee beans, tea and cocoa, as well as farmer loans and forest-conservation schemes. Through some 200 social, economic, and environmental indicators in C.A.F.E., Starbucks was hoping to ensure quality delivery of its beverage to each consumer, as well as to protect farmers’ interests and Mother Nature, thus making everything balanced in a sustainable manner.

The same policy was prioritized to purchasing of other items such as in-store furniture, merchandise, and so on.

With the help of third-party verifiers on some of those inspections, Starbucks was able to conduct more than 500 factory assessments since the launch of C.A.F.E. in 2006. Some 26 factories not meeting its standards were discontinued, making sure that Starbucks blended, roasted, and packed fresh quality coffee only.

The right thing to do

Doing ethical sourcing might sound somewhat redundant at first glance. Yet, it is not something that buyers and suppliers can overlook in a globalized market where consumers can get hold of information easily – they want to know who produces their milk powder or sofa and, in some cases, they are actually able to trace this information on their own. Preventing corporate disaster and being nice to both humans and the environment—this is a simple and smart choice.               


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