Ethical Sourcing – Everything You Should Know In 2024

As a procurement manager, ethical sourcing is a must. Because we are not just working towards growing our business, but it is also our responsibility. We can all do business without endangering the one planet where we live.

In this article, you will learn all about ethical sourcing and its importance. You will define what it is, why it is important, and why sourcing responsibly should be adopted in the procurement process by every company.

Ethical Sourcing Definition

Ethical sourcing is the practice of ensuring that products are procured in a responsible and sustainable manner, emphasizing fair treatment of workers, safe working conditions, minimized environmental and social impacts, and adherence to specified standards throughout the supply chain.

It is the sustainable and responsible approach to managing your supply chain and sole sourcing. While most companies nowadays are practicing it, the public also has a lot of organizations who are always keeping a watch on procurement processes to make sure that the sourcing of products, goods, and services are done responsibly and ethically.

In simple terms, ethical sourcing is about making sure everything is done in a good way when buying products. It’s important for companies to think about people, nature, and communities when they do business.

Whyis Ethical Sourcing Important?

Far from being just a strategy to mitigate business risks, protect brand integrity, or sidestep superficial environmental claims, ethical sourcing offers businesses a distinct edge over their market peers. Ultimately, by embracing ethical sourcing, companies can cut down on emissions, bolster sustainability, and even witness a surge in their profits.

In the current era, marked by the challenges of climate change, the significance of ethical sourcing has been amplified. Businesses are recognizing that success isn’t solely defined by volume and cost-effectiveness. Both consumers and investors are increasingly aligning with enterprises that proactively address environmental concerns.

Difference Between Ethical and Sustainable sourcing

Ethical sourcing emphasizes the fair treatment of people in the production process, ensuring fair wages, safe conditions, and upholding human rights. It addresses broader social issues, like community well-being.

Sustainable sourcing, on the other hand, focuses on environmental impact, ensuring resources are used without jeopardizing future needs. It considers the entire product lifecycle and long-term resource viability. While ethical sourcing centers on human welfare and sustainable sourcing on environmental concerns, there’s overlap: environmental harm affects communities, and long-term environmental health requires fair treatment of workers. Many companies integrate both principles for holistic responsible sourcing.

Examplesof Ethical Sourcing

Some of the best examples of ethical sourcing are often found in companies and organizations that deal with the procurement and sourcing of food and commodities:

• Fair Trade Products: Companies sourcing products like coffee, chocolate, or bananas might opt for Fair Trade-certified suppliers. This ensures that farmers receive a fair wage and work under decent conditions.
• Conflict-Free Minerals: Companies might source minerals like tantalum, tin, tungsten, and gold from mines that don’t finance armed conflict, particularly in regions like the Democratic Republic of Congo.
• Sustainable Timber: Furniture and paper companies might source wood from sustainably managed forests, ensuring that deforestation is minimized.
• Cruelty-Free Cosmetics: Cosmetic brands might commit to not testing their products on animals, ensuring no harm is done in the name of beauty in many places, however, there is no standard definition or legislation for this label rendering it seemingly meaningless.
• Organic Cotton: Clothing brands might source organic cotton, which is grown without harmful pesticides and chemicals, ensuring environmental health. Organic does not refer to working conditions, this needs to be checked separately.
• Living Wage Commitments: Companies might ensure that their suppliers pay workers a living wage, which is enough to meet basic needs and provide some discretionary income.
• Safe Working Conditions: Brands might audit factories in their supply chain to ensure they meet safety standards, especially in industries known for hazardous conditions, like clothing manufacturing in some Asian countries.
• No Child or Forced Labor: Companies might actively monitor and audit their supply chains to ensure that no child or forced labor is used at any stage of production.
• Local Sourcing: To support local economies and reduce carbon footprints, some companies prioritize sourcing goods and services from local suppliers. This makes it easier to make sure the product is ethically sourced.
• Seafood Sustainability: Restaurants and grocery stores might source seafood from fisheries that practice sustainable fishing methods, ensuring marine ecosystems are not over exploited. However, there is some controversy about the labels the industry uses.

How to ImplementEthical Sourcing

Ethical sourcing is implemented in the procurement process by adopting policies that monitor the ethical procurement and sourcing of products. Define standards related to labor practices, environmental sustainability, human rights, and other relevant ethical considerations.

The foundation of ethical sourcing lies with the buyers of a procurement team or those responsible for selecting suppliers and materials. They must consider the commitment level of potential suppliers through thorough assessment. Use questionnaires, interviews, and site visits to gather information.

Embed ethical standards and requirements into supplier contracts. Ensure there are clauses that allow for monitoring, reporting, and addressing non-compliance.

Be transparent by communicating your ethical sourcing practices to stakeholders, including customers, investors, and the general public. Publish regular reports detailing your efforts, achievements, and challenges in ethical sourcing.

Regularly review the effectiveness of your ethical sourcing strategy. Adapt and refine your approach based on feedback, audit results, and evolving global standards.

Companies That Can Help YouSource Ethically

In today’s procurement industry, there are companies that can help you source ethically. Take a look at these companies and see whether they’re the one you need:

1. Sedex

Sedex’s tools and services allow organizations to manage and understand the risks of negative impacts in their supply chain. The risk assessment tool of Sedex assists organizations to assess ethical risks across the supply chain.

Estee Lauder is committed to sourcing high-quality ingredients and materials from around the world. It works tirelessly to source responsibly with attention to possible impacts on people and the environment.

It collaborates with a wide network of suppliers and aims to continuously enhance and strengthen its sourcing practice while remaining sensitive to the communities where it operates.

Delta eSourcing is an efficient supplier management tool can help businesses to achieve ethical procurement goals. This is where Delta eSourcing can help you. It helps organizations maximize the value of interactions with suppliers.

Procurement Expert’s Advice on Ethical Sourcing

For this article, we asked a seasoned procurement professional to share his insights regarding ethical sourcing practices.

In Conclusion

To conclude, ethical sourcing stands as an important process in modern procurement practices. It is a commitment to responsible and sustainable procurement, ensuring fair treatment of workers, safe working conditions, reduced environmental and social impacts, and compliance with predefined standards across the supply chain.

Ethical sourcing not only protects brand integrity and mitigates risks but also presents businesses with a distinct competitive edge in an era where consumers and investors increasingly prioritize ethical considerations.

Implementing ethical sourcing requires a proactive commitment from procurement teams. Companies must establish robust assessment processes, integrate ethical standards in supplier contracts, and transparently communicate their practices to stakeholders.

Regular reviews and adaptations ensure that ethical sourcing strategies remain effective and aligned with evolving global standards.

Furthermore, ethical sourcing goes beyond transactional exchanges, embodying a conscious effort to harmonize business objectives with societal well-being and environmental protection.