Ethical sourcing refers to when your company purchases its products from suppliers who abide by ethical standards, including treating workers fairly and limiting environmental impacts. Why does ethical sourcing matter? With consumers demanding more sustainably sourced goods, businesses must make ethical sourcing their top priority.
1. Environmental Sustainability
As natural resources around the world are diminishing rapidly, environmental sustainability should be an essential consideration for business. Consumers and regulatory authorities increasingly demand transparency and accountability from businesses regarding energy management efficiency, greenhouse gas emissions, water conservation efforts, and other sustainability metrics.
Adopting eco-friendly practices not only protects against future operational risk but can also attract and retain talent; according to research conducted by Gallup, 7 out of 10 employees would prefer working for companies that prioritize sustainable sourcing practices and address their environmental impacts. It also plays an integral part in recruiting talent; seven out of ten workers prefer working for organizations with environmentally conscious values over those without.
2. Social Responsibility
Ethical sourcing is just one component of corporate social responsibility (CSR). CSR initiatives also include tree planting, recycling programs, and the reduction of paper waste. Consumers want to be assured that the products they purchase were produced by companies who care about more than simply making profit; they want assurances that those responsible were treated fairly during production.
Fair trade ensures farmers and artisans receive an agreed upon minimum price for their goods, plus an extra payment that allows them to invest in improving their communities with features like clean drinking water and modern toilets.
3. Economic Viability
Fair trade emerged as a response to unfair trading practices that often leave farmers, workers, and children without livelihoods and rights. Consumers can reap the rewards from companies prioritizing ethical sourcing with their suppliers through fair trade practices.
Ethical sourcing promotes innovation within organizations by pushing them to seek sustainable materials and processes, which may help save on operational costs, decrease wastefulness, and create new business opportunities. By prioritizing local suppliers and small businesses, companies can help create economic viability in underprivileged communities, leading to improved brand image, increased customer loyalty, and expanded market share.
4. Human Rights
Human rights issues have become more prominent within today’s globalized business environment, and companies are under increased pressure to respect them by investors, employees, customers, communities, and advocacy groups alike.
Companies often rely on global supply chains as a method for procuring goods and services, yet international operations pose many human rights risks that must be managed early on to avoid negative campaigns and legal liability claims in the future. Prioritize local suppliers and small businesses, as this will create a more resilient supply chain while contributing to sustainable development in your community.
5. Corporate Social Responsibility
Businesses are realizing the need to consider corporate social responsibility (CSR) as part of their overall business strategies, in part due to consumers who place great importance on purpose-driven spending or investing decisions and look at a company’s environmental, social, and governance policies before purchasing or investing with it.
Fair trade brands provide artisans, farmers, and small producers a platform to sell their goods in North America. Fair trade standards set forth by FLOCERT can include handwoven baskets, rugs, and textiles; fresh fruits; tea; coffee; cocoa beans; and flowers as examples of products that meet fair trade criteria, but the principles behind them remain the same.
6. Increased Brand Reputation
Ethical sourcing is an increasingly essential factor for businesses, as it fosters consumer trust. Consumers today are becoming more purpose-driven and willing to pay more for products that align with their values; this trend can increase brand loyalty, which in turn boosts revenue and customer satisfaction.
Ethical sourcing practices can also help mitigate supply chain management risks, such as violations of labor laws or environmental impacts, environmental regulations, or regulatory compliance requirements. By being proactive about ethical sourcing practices in supply chain management, you can minimize reputational damage, financial losses, or legal complications while making your company more appealing to investors who prioritize corporate social responsibility (CSR). Aligning sourcing strategies with ESG goals is integral for the long-term success of any business.
7. Increased Sales
Recently, fair trade products were only widely available through specialty worldshops located throughout Europe and North America. But with the launch of the first fair trade certification initiatives, these products became mainstream, drawing in new consumers while creating sales opportunities and expanding consumer markets.
Ethical sourcing has quickly become a consumer priority, and more consumers are more willing to pay higher prices for goods sourced ethically. Ethical sourcing helps businesses meet regulatory standards, monitor unethical business practices, and protect themselves against supply chain disruptions, human rights violations, and other risky scenarios. Furthermore, ethical sourcing gives visibility into all stages of product creation processes.
8. Increased Employee Satisfaction
Ethical sourcing is an essential element of business that can boost worker happiness and retention. By guaranteeing fair wages for workers under safe working conditions, companies can attract and keep talent.
Ethical sourcing also plays a crucial role in safeguarding against human rights abuses, such as worker exploitation. By making sure their workers are not being exploited, companies can avoid negative publicity and possible legal issues with greater awareness from consumers regarding their buying choices. Furthermore, ethical sourcing forms an integral component of corporate social responsibility and the triple bottom line framework.
9. Increased Customer Satisfaction
Who knitted my sweater and where was my cell phone manufactured are no longer idle inquiries; modern consumers want assurances from businesses they support that they are committed to transparency, sustainability, and ethical sourcing practices.
Ethical sourcing is one element of corporate social responsibility, which states that businesses should consider all stakeholders beyond shareholders when making business decisions, including employees, suppliers, and communities they operate in. Companies that prioritize ethical sourcing can have an enormously positive effect on their supply chains, contributing to improved employee satisfaction, reduced legal risks, and enhanced customer loyalty.
