Business ethics is no longer a compliance issue; it has become the epitome of business competitiveness. Recent studies show that ethical sourcing plays a prominent role in the following business strategies.
- Competitive edge strategies
- Customer retention
- Brand marketing
The three items play an integral role in doing business globally. Cutthroat business competition leaves major global brands out of options. Price competition is no longer sustainable. Modern companies have only one option; they have to embrace ethical standards. The rewards are noticeable. Research shows that customers are willing to pay an extra buck for an ethically produced product.
The Legal Framework
Profits drive businesses. Compliance with any regulatory framework is a cost that most companies prefer not to undergo. So, most of them cut corners. They shift operations to jurisdictions such as Indonesia, Cambodia, China and India that are not strict when it comes to human rights abuses. It is fair to say that statutes and guidelines have not been effective because they are not enforced with the same zeal globally.
Corporate Social Responsibility
With CSR, companies have shown an improved concern about sustainability standards, which has seen improved fortunes in ethical sourcing as a key driver. However, it has not enforced the belief that only things that translate to the bottom-line positively ought to get company approvals. At first, companies just decorated their CSR efforts with beautiful language while letting issues of child labor, slave-like working conditions, poor pay, wanton disregard of the safety of workers, pollution, and environmental neglect flourish.
At this global awareness and dispensation, the customer is aware of sourcing challenges. They are global citizens ready to condemn the abuse of fellow human beings. The information age comes with increased customer awareness. At this stage, it is becoming a battleground for players to endear their brands to the customer. The customer of today is also considered experience-centric. Brands that promote sustainable lifestyles are gaining global attention, which poses challenges to their competitors.
Companies Succeeding in Ethical Sourcing
Starbucks’ CAFE ethical guidelines include a system for verifying and auditing the supply network. They explain, “Helping people thrive helps ensure the long-term sustainability of the premium products we provide. Whether it’s arabica coffee, tea, cocoa or manufactured goods, we’re committed to offering ethically purchased and responsibly produced sustainable products of the highest quality.” It’s mutually beneficial to make sure a company’s sources are cared for.
The company has a clear guideline for sourcing raw materials including human rights compliance. H&M claims, “our products are made by independent suppliers, often in developing countries. It would be impossible for us to operate if we did not take responsibility for the people working for our suppliers. Everyone should be treated with respect and the suppliers should offer their workers fair wages and good working conditions.” As one of the largest clothing retailers in the world, it’s powerful to see them trying to set a good example.
The company uses networks of advocates to sell wellness solutions to customers. doTERRA’s ethical business practices have a global imperative in that they promote sourcing and distribution ethics. Additionally, doTERRA “seeks to reduce poverty through generating ethically responsible employment in essential oil production.”
Mark & Spencer
All their suppliers are subjected to a sustainability impact study. Those that don’t are disqualified. They also detail “Plan A” with their objectives for obtaining sustainability. They claim, “We’re committed to helping to build a sustainable future by being a business that enables our customers to have a positive impact on well-being, communities and the planet, through all that we do.”
It is committing to a full ethical sourcing disclosure for all its suppliers. Additionally, Adidas “is a step ahead of many other big sportswear brands when it comes to sustainability. They have committed to setting context-based targets, a recent thought process in sustainability that recognizes that water impacts are local and prioritizes focusing efforts in water-stressed basins.” With many countries abusing and polluting the water of their local plants and factories, it’s nice to see Adidas is working to prevent water abuse wherever they’re based.
Ethical sourcing is gaining attention and for a good reason. It is set to improve how modern companies operate. If you’re interested in making efforts to learn more about an ethical and sustainable way of living, check out our blog!