18 Must-Have Negotiation Skills For Procurement Professionals
Responsible Sourcing — Everything You Should Know
Responsible sourcing requires a shift from the traditional way companies source their needs. However, what is responsible sourcing?
This article will discuss what responsible sourcing is. We will explain to you the importance and key drivers of responsible sourcing. Additionally, we will show you the benefits a company may gain when they source responsibly.
After you read this article, you will know what responsible sourcing is and how big it can impact companies. Thus, allowing you to start your way in responsible sourcing.
Responsible sourcing:What is it?
Consumers are starting to take action through their purchasing decisions and other initiatives to protect the environment. Due to this, responsible sourcing is gaining popularity in many industries. However, what is it?
Responsible sourcing or ethical sourcing is an approach to sourcing and supply chain done by companies to consciously source and procure products or services for their operations in sustainable and ethical ways.
It involves the voluntary actions and commitments of companies to take into consideration social and environmental factors when managing relationships with their suppliers. It lets you become aware of where you are sourcing your products and services without making a negative impact on society and the environment.
To simplify, responsible sourcing ensures that the business practices of a company do not have a negative impact on the environment and that people care for the world.
However, you must take note that responsible sourcing requires a great effort to shift the thinking and priorities of a company.
The Importanceof Sourcing Responsibly
The world faces a lot of challenges today be it environmental or social aspects. Thus, businesses have the responsibility to know the impacts they have and to limit those negative impacts. This includes knowing their suppliers, how they operate, and what standards they abide by.
By choosing to whom you are going to source your products, their business practices—whether good or bad—will be propagated by your decision.
According to a report by Gartner, the increasing complexity in globalized supply chains mean that responsible sourcing risks, such as environmental pollution, labor exploitation, and bad working conditions can go undetected.
Therefore, procurement leaders have the role to play to implement responsible sourcing activities to identify and correct those poor practices. Also, they have the responsibility to go a step further into encouraging suppliers to limit their social and environmental impacts that affect the world negatively.
Many companies look beyond cost factors to decide based on reliability, innovation, quality, and social and environmental practices. This is due to the fact that there is a growing trend among customers for responsible sourcing.
Also, large companies focus more on sustainable sourcing, sustainable finance, and the implementation of ESG goals into their everyday practice. Responsible sourcing is also getting popular due to the expansion of supply chains into developing countries seeking to lower costs.
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The DifferenceBetween Sustainable Sourcing and Responsible Sourcing
Responsible sourcing or ethical sourcing is all about ensuring that the products are purchased in a responsible way from ethical suppliers. Also, it requires the meeting or complying with accepted levels of responsible or ethical practices in areas such as pollution and human rights.
Responsible sourcing can be done when companies and their supply chain work to lessen the risk and negative impacts by meeting established principles and compliance criteria.
On the other hand, sustainable sourcing goes beyond companies to engage and enhance the conditions of sustainability which can include areas such as dignified livelihoods or practices that can help fight climate change.
You can think of sustainable sourcing as the cousin of ethical sourcing. It is about finding ways to benefit the environment and products of a company through sustainable actions or initiatives.
Key Driversof Sourcing Responsibly
1. Investors and consumers demand
Investors and consumers are being mindful of how much a company can impact the environment and society through their operation and products. Due to this, investors are more likely to invest in companies that have sustainable initiatives and customers will purchase more from companies that have a negative impact on the environment and society.
Companies that are able to report the success of their ESG are more likely to build trust in their brands and reach new customers. Additionally, A survey by Nielsen revealed that 81% of global respondents felt that companies should help improve the environment.
2. New legislations
New ethical trade legislation is being introduced around the world. Thus, companies changed the way they operate in countries that have ethical trade legislation.
Through global supply chains, many companies are starting to enhance their ethical and social standards around the world.
3. Climate breakdown
Companies have the accountability to take into consideration the environment and global ecosystems in addition to social and ethical factors in their supply chains.
Climate breakdown is now having an impact on people around the world. Companies need to take responsibility for the entire life cycle of products and protect the rights of workers during the production process in a company.
Benefitsof Responsible Sourcing
1. Meet national and international requirements
Companies that operate responsibly can meet or exceed the requirements easily set by national or international laws.
Failure to comply with the requirements of laws can result in sanctions that will be imposed on companies. Additionally, penalties may include imprisonment for company officials who do not follow the requirements.
2. Protect business brand
Business practices that exploit workers or the environment are a great risk to a company’s reputation. Poor practices and mistreatment of employees can turn into international scandals.
Thus, generating negative press coverage that will make you lose both your loyal customers and potential investors. Responsible sourcing can help you protect from these risks.
3. Reduced operational costs
When you protect your workers and provide them with a safe working environment, you decrease the risk of injury, absenteeism, and worker error rates that may cost the company greatly.
+ What is responsible sourcing?
It refers to activities in consciously sourcing and procuring products or services for the operations of a company.
+ What is the difference between sustainable sourcing and responsible sourcing?
The main difference is that responsible sourcing is about ensuring that the products are purchased in a responsible way from ethical suppliers. On the other hand, sustainable sourcing engages and enhances the conditions of sustainability that can include areas such as dignified livelihoods or practices that can help fight climate change.
+ What is the importance of responsible sourcing?
Responsible sourcing is important as businesses have the responsibility to know the impacts they have and to limit those negative impacts.
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