In today’s interconnected world, supply chains are the backbone of global trade and managing them is critical for any organization. Products and services from across the globe find their way into our homes, workplaces, and everyday lives.
The complexity of supply chains, increasingly modern and efficient, encourages companies, governments, consumers and other actors to reassess their roles and responsibilities in relation to the ethical aspects underlying the way in which they acquire, distribute and/or dispose of their products and services, depending on the stage reached in the chain. After having outlined some ethical challenges within supply chains, it would be appropriate to address their implications within organizations and then to highlight good ethical practices applied to the supply chain.
What is ethics and how does it relate to supply chain management?
The Larousse dictionary defines ethics as “a set of moral principles that are the basis of someone’s conduct”. In the world of business and other types of organizations, ethics is often integrated into the concept of CSR – Corporate Social Responsibility – or that of ESG factors – “Environmental, Social and Governance”.
CSR occurs when companies voluntarily take into account social and environmental concerns related to their activities and their relationships with their various stakeholders. Similarly, ESG factors are used internally or externally by investors or other stakeholders to assess a company's operational performance based on its social and environmental impact.
More specifically, the ethical landscape of supply chains covers several issues such as respect for human rights, fair behavior towards stakeholders as well as respect for their interests or compliance with environmental requirements.
When it comes to human rights, one of the most common ethical dilemmas concerns the treatment of workers in a supply chain. Reports of sweatshops, child labor, and unfair wages are often highlighted. In 1998, Michael Moore's documentary "The Big One" highlighted the responsibility of the Nike company, whose success is often associated with offshoring and subcontracting with deplorable working conditions for employees.
Ethics would require companies to ensure that workers who produce their goods and/or services are treated fairly and have safe working conditions. When it comes to stakeholders, transparency and the ability to provide complete and reliable reporting are essential to ensure ethical supply chain management.
Fairness, honesty and integrity must be fundamental principles in interactions with different stakeholders: suppliers, customers, employees, shareholders, public authorities and other partners. One of the difficulties in supply chains, where circuits can sometimes be complex and opaque, lies in being able to permanently guarantee the traceability of the origin of products or the implementation of fair commercial practices.
Compliance with various regulations regarding transportation, storage or packaging standards is also an aspect to be taken into account by stakeholders. Finally, with climate change at the forefront of global concerns, the environmental impact of supply chains is under scrutiny.
Natural resource extraction, the environmental impact of transportation and waste disposal are all areas where ethical considerations play a significant role. Ignoring these ethical considerations in an organization's supply chain can have damaging consequences for the organization.
The costs of an unethical supply chain
The impact of ethical misconduct in a supply chain can be of different natures and degrees. The damage can be to the reputation and image of the company. Due to consumer awareness and activism, unethical practices are likely to lead to negative public reaction and/or boycotts that can impact an organization's turnover or image.
This is particularly the case of the Zara brand of the Inditex company, which in 2020 had to face numerous calls for a boycott following revelations concerning its practices of internment, assimilation, forced labor and physical abuse of Uighur populations in the Xinjiang province in China in order to obtain cotton at a lower cost. This activism and an investigation also led the Bordeaux Departmental Commission for Commercial Development to refuse the extension of its sales area on a street in the city.
Ethical violations involving labor laws, environmental regulations, or fair trade agreements can result in lawsuits, costly legal battles that can result in regulatory penalties. Supply chain disruptions, resource scarcity due to environmental mismanagement, or increased production costs can all affect a company’s bottom line.
On the other hand, an international study conducted in April 2021 by OpenText reveals that 82% of consumers say they are willing to pay more for a product that they are certain comes from an ethical source or production. 32% would even be willing to pay significantly more for an additional cost for ethical products.
The HSBC Report Made for the Future already indicated in 2019 that 96% of companies consulted as part of this study say they feel increasing pressure to become more sustainable and 86% expect their sales to increase in the coming years thanks to an increased focus on sustainable development. Thus, the significant impact that failures or awareness of ethics can have in the supply chain cannot be ignored.
With these possible implications and opportunities, it makes sense to implement good ethical supply chain management to ensure transparent, responsible, environmentally friendly business practices that respect the rights of stakeholders.
What are the best ethical practices in the supply chain?
A solid foundation for ethical supply chain practices starts with a clear strategy with well-defined issues and priorities. The establishment of an ethical charter or code of conduct highlighting ethical principles, strict compliance with current regulations and laws on CSR or ESG aspects in the conduct of operations, and the establishment of incentive policies for suppliers to encourage them to adopt these standards are all measures that can support this approach.
From an environmental perspective, actions to reduce or recycle waste, reuse materials, use eco-responsible means of transport and logistics and/or use renewable energy sources help reduce the carbon footprint at the supply chain level.
With technological advances that have revolutionized supply chain management, transparency can be enhanced by implementing “responsible” supply chain tools to ensure the traceability of products and services. This means that it is possible to track each step of the chain, from the sourcing of raw materials to the delivery of the finished product to the consumer. This transparency strengthens the trust of customers and other partners.
Audits and certifications also play a vital role in validating ethical practices in the supply chain. ISO 26000, Ecocert, Fairtrade and Energy Star certifications and labels are examples of internationally recognized standards.
Regular assessment of environmental, social and governance performance through bodies such as EcoVadis or through audits such as Sedex's SMETA (Supplier Ethical Data Exchange) allows organisations that obtain these certifications or labels to demonstrate their commitment to sustainable and ethical practices.
This strengthens their credibility in the market and can also foster new partnership opportunities. Furthermore, to encourage innovation and reward excellence in ethical supply chain, awards such as the “Sustainable Innovation Logistics Strategy Awards” from the France-based company Eco Class Logistics are given.
These awards recognize companies that demonstrate leadership in adopting sustainable, ethical and responsible practices. These awards encourage companies to push the boundaries of innovation in the supply chain while respecting ethical values.
As consumers become increasingly aware of the ethical dimensions of their purchases, organizations are recognizing that ethical supply chain practices are not only a moral imperative, but also a strategic necessity in today's interconnected world.
Thus, those who prioritize ethical management of their supply chain not only protect their reputation and their turnover, but also contribute to a fairer and more sustainable global economy as well as less degradation of the planet.
Oulématou CAMARA: Supply Chain Specialist
(Did you know magazine No. 9)
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