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As companies are increasingly held responsible for the way they treat their suppliers, it is becoming clear that the focus on ethical and sustainable behavior surpasses the organizational boundary and extends to the level of the supply chain. Therefore, to become more sustainable, individual companies need to collaborate with their supply chain partners. This is also reflected in the growing attention toward Sustainable Supply Chain Management.

Ethical Sourcing is the process of ensuring that the products made are obtained through responsible and sustainable methods. This includes ensuring that the workers who make the products are paid a fair wage and all human rights are met, the factories are clean and safe environments to work in, and that all social and environmental impacts of production to the workers and the surrounding communities are considered. In recent years, demand for ethically sourced and sustainable products has grown to a great extent. Scandals in the 1990s and 2000s had led to increasing awareness of the unethical and unsustainable effects of globalized production and consumption patterns. As a result of globalization, consumers have become far more aware of the effects that the manufacturing of products has on supply chains.

The business case for supply chain sustainability for a particular company depends on a variety of issues including industry sector, region of operation, stakeholder expectations, business strategy, organizational culture, and past performance. One of the benefits of ethical sourcing is improving the reputation of the brands your business produces. This is due to the positive environmental and social impact ethical sourcing has on the total sourcing management systems within companies. A company’s reputation for ethical behavior can help it create a more positive brand image in the marketplace, which can bring in new customers through word-of-mouth referrals.

When a company behaves ethically, it can attract customers to their products and services and sway them towards loyalty. This is indicated by a Unilever survey which found a third of consumers (33%) choose to buy from brands that are making a positive social or environmental impact. In addition to this, according to a 2019 study by Nielsen, the majority (73%) of global consumers say they would definitely or probably change their consumption habits to reduce their impact on the environment. On the other hand, a reputation for unethical dealings will greatly affect a company’s chance at obtaining new customers, particularly in this age of social networking whereby negative publicity can cause long-range damage to the company’s reputation that is even more costly than legal fees or fines.

By mitigating and responding to sustainability risks in the supply chain, companies can control costs, protect their market share, and reduce risk premiums. Companies can protect themselves from potential supply chain interruptions or delays associated with a suppliers’ environmental, social, or governance challenges by ensuring suppliers have strong management systems and regulatory compliance programs. For companies that have a single source for key inputs, reducing social and environmental risks is even more critical to ensuring access to those resources. Similarly, a supplier with poor water management practices could face unexpected shortages and cause delays in sourcing. Managing these risks helps companies meet the demands of their customer bases, thereby protecting their market share, and controlling their costs. In addition, strong management of social and environmental issues can help companies address reputational risks that could impact their market share.

In terms of supply chains, transparency and accountability are major components that play an increasingly important role. There should be measures in place so companies can ensure suppliers are maintaining the ethical sourcing standards that companies have put in place. By focusing on conservation and ethical and sustainable sourcing to improve supply chains, companies ensure that those resources will be available in the future - a critical step for companies to continue their connection with consumers and the world around them.