4 Ways to Build an Ethical Supply Chain

Ethical issues are at the heart of supply chain management. The term encompasses everything from environmental and social issues, to agricultural standards. Having an ethical supply chain is both an opportunity and a responsibility for businesses – large and small – in 2017. A lapse, or even the perception of one, can have irreversible damage for a company’s reputation and sales.

We outline four steps CPOs can take to ensure they maintain an ethical supply chain.

1. Establish a clear ethics policy and communicate it

A code of conduct, supply chain management policy, or corporate social responsibility guidelines. Whatever name it goes by in your organization, this is a crucial step towards cementing your ethical supply chain.

You should share your policy not only with your staff, so that everyone involved in your supply chain is observing best practice, but also with prospective suppliers.  Present your ethical expectations to prospective suppliers as early as possible, so they’re aware of your requirements before negotiations begin.

2. Check credentials and certifications

Reputable suppliers will be able to back up their claims with certifications and accreditations.

That said, suppliers who aren’t certified aren’t guaranteed to be an immediate risk. Elevate Process exemplify Patagonia, a long-term sustainability leader, and how they collaborate with suppliers. Patagonia use third-party auditors to regularly review their suppliers. In any instances where the supplier isn’t compliant, Patagonia then work with them to meet standards.

The benefits of such practice are twofold. Firstly, it is more cost effective to collaborate with existing suppliers and bring them up to meet standards than it is to find new ones. At the same time, it commits to ethics by providing work through partnership.

3. Audit your suppliers

Following on from the point above, if your supplier is not yet certified it does not mean they cannot still be audited.

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Audits are beneficial for a number of reasons: they check compliance, the provision of resources and the ability to maintain supply to your company later down the line. They’re also an excellent way to document the development of your suppliers for easy comparison and review.

As a company’s supply chain grows, so does its exposure to risk. Regular audits maintain the ongoing integrity of your supply chain. If you’re unsure where to start, Ecratum have a useful step-by-step guide for creating an effective audit.

4. Visit facilities

If you search for best practices for handling prospective suppliers, “visit them” is almost always featured high on the list. But, your visit shouldn’t only be a one-time occurrence during the early stages of your partnership.

Patagonia have a page on their website dedicated to how they work with their manufacturers. One activity is to regularly visit their factories:

Dedicated SER [Social and Environmental Responsibility] field staff visit our factories regularly to assess compliance with our Code of Conduct Benchmarks, local laws and collective bargaining agreements […]. The team also follows up on corrective actions from previous audits […].

The benefit of regular visits can’t be overstated. You have the opportunity to see premises and conditions first hand by visiting your suppliers. As well as that, you also have the chance to speak to employees and find out how much weight your code of conduct carries throughout their organization. Visits provide an opportunity for learning and communication that might otherwise be difficult.

Conscious consumption is on the rise. Customers are increasingly demanding transparency from the businesses they buy from. So, in order to retain customers, businesses need to ensure they do everything they can to create genuine sustainable and ethical supply chains.

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