What is Ethical Sourcing?

Public sector bodies, now more than ever before, understand that cost and quality are only a part of the overall package, and not only do they need to be seen to be doing more in the community, but they need to follow through on it to satisfy an increasingly savvy mass of potential critics.

Procurement is changing and buyers are no longer able to award contracts on cost without taking the wider impact of the procurement into consideration.

Given that procurement exercises can involve complex relationships between many different organisations, there is potential for many unethical practices to become involved somewhere in supply chain. These can range from illegal activities such as modern-day slavery and corruption, to broader issues such as disregard for the consequences of climate change

Ethical sourcing can support buyers to avoid these pitfalls as it focuses on conducting sourcing activities at the highest possible standards of responsible, sustainable, environmental, and socially aware business practice.

Learn more about ethical sourcing below.

 

Ethical sourcing explained

Ethical sourcing is a sustainable and responsible approach to supply chain management and sourcing.

Public sector organisations have the responsibility of ensuring that the products they are procuring are sourced in a responsible and sustainable way, and that the workers involved in the creation of these goods are making them are safe and fair environment. When a public sector organisation is deciding on suppliers to work with, environmental and social impacts should also always be taken into consideration.

Public sector organisations include ethical sourcing policies in their operational standards and principles. An ethical sourcing policy should also include details of the processes used at every stage of procurement from evaluating and engaging with a supply market through to managing relationships with suppliers.

Even if a company is ensuring good practice itself, it is perfectly possible that its supply chain involves an organisation engaged in unethical working practices. These issues are as relevant to exclusively UK-based supply chains as those that work internationally – for example, the Government estimates there are around 13,000 people working in slavery-like conditions in the UK.

 

Why is ethical sourcing important?

It is fundamental that purchasing professionals look out for signs of unacceptable practices in the supply chain such as fraud, corruption, modern-day slavery, human trafficking, and wider issues such as child labour.

Buyers should demonstrate integrity at all times and take the time to understand the fundamentals of ethical behaviour when selecting and managing suppliers. This includes having a policy in place that will help your team to ensure that the products/goods and services that they are procuring are produced and delivered ethically and responsibly.

The Chartered Institute of Procurement and Supply advises that a buyer’s supply chain should have an ethical sourcing policy in place and reveals that having one could be a deciding factor for buyers when deciding on contract award:

“Not only has ethical sourcing become a mantra for mitigation of operational risk and protection of brand reputation, but it also represents a means to gaining competitive advantage. If you are deploying best practice, your competitors’ failure to source ethically can result in your competitive gain.”

Buyers should always encourage (and if possible, mandate) best ethical sourcing practice among their suppliers and their vendors. This should be agreed as part of the contract and monitored as part of the supplier relationship management process.

CIPS also gives examples of what questions a buyer should be asking when making decisions about its supply chain:

“Traditionally, economic and qualitative factors are foremost to be considered when entering into contracts. Issues that are outside of the commercial arena are however now becoming increasingly important: non-economic factors, for example, where does the wood come from that we make our paper out of; how environmentally friendly are our contractors and suppliers; and are we benefiting our local economy in the wider sense when we procure?”.

 

What can your organisation do?

While it is, of course, important to report suppliers that are involved in unethical practices, where possible, buyers should work with suppliers to ensure their supply chains are as ethically robust as can be – helping them realise which issues are important and how to solve them. Ideally, buyers can help suppliers “to look again” and improve their supply chains.

When it comes to sourcing new products or services, it is important that your team is applying proactive, dynamic supplier vetting and auditing (including their supply chain).

If your organisation is serious about ethical sourcing, it should follow recommendations from CIPS and ensure that is employing best practice and learning from other public sector case studies.

CIPS recommends that buying organisation go beyond formal scheduled, clipboard-based site visits, by informing key suppliers that your organisation has the right to audit their business (physically or remotely) unannounced.

CIPS also suggest that buyers consider:

“Employing social media to communicate directly with staff employed by your tier one and sub-tier suppliers. For example, Adidas is encouraging workers at certain Asian suppliers to anonymously share possible grievances directly with Adidas via text.”

 

How can supplier management software help?

It is vital that your organisation balances auditing practice with relationship management and supplier management software can support your organisation to do this. Supplier relationship management software will discipline your organisation’s processes and help your employees to strategically plan and manage interactions with suppliers.

As a buyer may have hundreds or thousands of suppliers on their list, managing them and ensuring that they are following ethical policy could prove to be a huge demand on resource for some organisations.

Supplier management technology can support your business to achieve ethical procurement. Make sure you are using your eProcurement tools to consolidate, audit and analyse supplier capabilities.

Delta’s Supplier Management tool provides an easy supplier/vendor management service which drives suppliers to a single central hub where they register, store, and manage their details and to which buyers have instant access. The list building functions provide buyers with the ability to create and manage lists of suppliers.

Check out our blog What is Supplier Management?  to learn more.

 

Supplier management with Delta

An efficient supplier management tool can support an organisation to achieve its ethical procurement goals.

Communication is vital when it comes to ethical sourcing. Not only will supplier relationship management software discipline your organisation’s processes, but it will also support your employees to strategically plan and manage interactions with suppliers.

Choosing Delta eSourcing, we can help you to maximise the value of those interactions. Find out why thousands of public sector buyers choose Delta eSourcing today with a free demo.

Identify, invite, and manage suppliers more efficiently.

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