How can Procurement Professionals Navigate the Complexities of Balancing Ethical Sourcing with Supply Chain Disruptions, Profit, Costs, and Demand?
Placing sustainability and responsibility at its core, ethical sourcing is a principle-led approach to supply chain management and the procurement of goods and services. It focuses on minimising an organisation’s environmental and social impact on communities across the supply chain, including fair treatment of workers and attention to their safety.

Challenges in today’s global landscape when it comes to ethical sourcing include gaining true supply chain visibility, blurred lines of responsibility between buyer and supplier, and rapidly increasing regulator pressure. “There is also a feeling of urgency to get ahead of ethical sourcing before a non-compliance or issue arises in your supply chain, causing reputational and financial damage,” says Gemma Thompson, Senior Consultant for Strategy and Growth at Proxima (consulting firm).

She adds that while ensuring that procurement is ethical in its sourcing comes with its own set of unique challenges, it also must be balanced with profit, costs, and demand, “but it’s important to not let short-term vision cloud the longer-term,” she adds.

“The ‘quick fix’ that might generate a profit now, but risks non-ethical practices, may impact your ability to achieve sustainable alignment to evolving consumer trends and future demand of ethical as well as good value offerings.”

“Historically, business decision makers have had to choose to act ethically or operate profitably; it’s one or the other. Yet, today, the two can work in harmony. In fact, reports show that operating ethically is leading to increased revenue, better talent attraction, and improved supply chain resilience.”

As such, to truly gain traction and have an impact when it comes to sourcing strategies, procurement professionals must align their efforts with the overall business objectives, and in this instance the ethical objectives of the organisation.

“It is up to business leaders, therefore, to not only establish the ethical vision and contributing objectives of the organisation, but to communicate this effectively throughout the organisation. Cascading to key teams such as procurement allows them to act with clarity and purpose when developing and improving sourcing strategies,” explains Thompson.

Where does a procurement professional start when looking to improve their ethical sourcing standards?
Global supply chains are complex and often multi-tiered, presenting a serious challenge with limited visibility. As such, in the words of Kathleen Harmeston FCIPS, Supply Chain and Procurement Specialist - “start with the basics.”

She continues: “Create and mandate a supplier code of conduct, standardise tender questionnaires and launch a robust supplier audit program. Build the foundations, then target suppliers by category that may have the most challenging issues or may cause the greatest risk to your business or where you could have the biggest impact in terms of creating a solution. Then launch a focussed, cross functional team to assess these value chains and report the results. Learn from the first project round and repeat until most/all suppliers are under review.”

Adding to her earlier point, Thompson emphasises the need to effectively align culture, communication and collaboration to avoid poor ethical sourcing execution:

“Organisational culture needs to have buy-in at all levels, starting with the vision and commitment established at an executive level. This buy-in should cascade down and across the business, and reach externally with the supply base, making your organisation ethical stance and values known. Communication of the purpose and goals of the ethical sourcing initiatives within your organisation must be clear, consistent, and continuous.”

She continues: “Collaboration is also a key element of successful ethical sourcing, particularly the strategic and trust-based relationships you must develop within your supply base. When you are calling upon suppliers for ethical requirements, you must consider what investment you are prepared to provide in return to collaborate and achieve a mutual objective. ‘The whole is greater than the sum of the parts’.”


How can technology help?
A game changer for developing effective ethical sourcing strategies, technology can offer many benefits across the procurement lifecycle. Short-term, technology can help identify and engage suitable ethical vendors, conducting due diligence and automating onboarding processes. It can also cleanse data and improve contract management processes, helping procurement professionals to monitor supplier performance.

Long-term, organisations that have reached the necessary organisational maturity required to deal with the information returned, will see technology as the backbone of the supply chain. Real-time data between the procurement function and the supplier ecosystem will lead to greater transparency, end-to-end visibility, and traceability of product from origin to consumer.

Types of technology being used in ethical sourcing strategies:
Multi-tier supply chain mapping to record, store and gather supplier information
AI-powered reporting enables teams to keep track of supplier and product information - using global data sources from different countries, regions and languages
Analytics for supplier risk analysis
Blockchain to track all supply chain transactions, through to digitisation of key data linked to performance management in real time
While the benefits of technology and its role in ethical sourcing is clear, Thompson concludes with a warning that “technology is only as effective as the readiness of your organisation for its uptake. This will depend on where you are in your digital journey, your maturity, appetite for change, and more.”


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