Creating a Sustainable and Ethical Supply Chain

By Abigail Smith Published on Aug. 03, 2021

The need to transform to a more ethical supply chain has become a constant movement within the last few years.  A 2015 survey from Cone Communications found that 9 out of 10 millennials would switch brands to one associated with a more ethical cause. The Software Advice report found that, for a $100 product, customers were willing to pay an average of $27 more if it were made under good working conditions, $19.50 more if the production's carbon emissions were offset and $18.50 more if the raw materials were ethically sourced.

These statistics show that businesses who are willing to invest in a sustainable supply chain are most likely to be market leaders by catering to driven and socially conscientious consumers. Consumers that are willing to pay up to 25% more for a product or service that is ethically sourced are more likely to have strong values and continually seek out more sustainable options putting more sustainable businesses at the forefront of change.

What is an Ethical Supply Chain

In reality, an ethical supply chain takes all the components from the beginning and end stages of production and produces the product or service in a way that ethically treats its workers and the environment. 

A supply chain is essentially a building block of networks between a company and its suppliers to produce and distribute a specific product or service from the beginning and end stages of the process. This process can begin from transforming raw materials into finished products, transporting those products and distributing them to the customer. The functions in a supply chain include product development, marketing, operations, distribution, finance, and customer service. Now, the question presents how the components of a supply chain versus an ethical supply chain differ. 

Current supply chain trends

Some current supply chain trends can be categorized into four major categories consisting of emerging technologies, focusing on supply chain visibility, sharing economy and evolving customer channels. Additionally, the development of corporate social responsibility (CSR) managers hired to maintain humane and ethical working conditions is a large trend in the ethical supply chain. Since ethical supply chains have become a huge responsibility for the company and all third parties involved, CSR is steadily becoming more important to businesses due to the internal and external pressure from businesses and consumers to be more ethically sourced.

Advantages of an Ethical Supply Chain

There are many advantages to an ethical supply chain from both a moral and economic standpoint.

  • Protection against reputational damage: An ethical supply chain directly benefits companies by protecting them against any reputational damage. In recent years, many companies have felt pressured to move towards a more sustainable supply chain. This pressure also comes directly from stakeholders who believe that an ethical supply chain would greatly benefit a company's reputation in addition to benefiting the company financially. 
  • Easier collaboration: An ethical supply chain gives companies the ability to collaborate with their suppliers and provides them with tools and resources to guide them on company best practices. This is seen within many companies, such as Texas Instruments. They post their code ethics in 12 different languages to give suppliers from all over the opportunity to abide by their code. This not only gives companies room to grow but also saves them time, money, and resources by not constantly seeking new suppliers. 
  • A better hiring experience: An ethical supply chain also creates a better hiring experience through establishing the values and desires of the company. This not only allows for a smoother hiring process but also enables better company morale. The most successful companies going forward will be the ones that look for this attitude from the very first interview especially with the new desire to search for companies who are committed to social responsibility.
  • Reduced costs: Lastly, sustainable companies are decreasing environmental impact by reducing costs. Walmart is a prime example: they pledged to reduce their corporate greenhouse gas emissions by 20 million tons by the end of 2020. In making this announcement, Walmart noted that their supply chain represented 95% of their overall carbon footprint. Once Walmart made the conscious decision to reduce their emissions, they were able to reduce their environmental impact, in addition to saving their suppliers 12.4 billion dollars in 2016.

Companies adopting an Ethical Supply Chain

There are many companies paving the way in understanding the importance of an ethical supply chain. Walmart’s sustainability initiatives started in 2005 when Lee Scott, the CEO of Walmart, laid down three long-term sustainability goals. His goals were:

  • to produce zero waste
  • to use 100 percent renewable energy
  • and to sell products that allow sustaining the Earth's natural resources.

In order for Scott to accomplish this goal, he had to do establish a more sustainable workplace ecosystem. And, to do that, he had to first ensure that Walmart’s business and supply chain was more environmentally efficient and also ensure he can sell more sustainable products. 

Additionally, Walmart has attempted to replace misleading food labels such as “best if sold by” in order to help reduce food waste by allowing customers to purchase perfectly safe food that may be undesirable due to these inconspicuous labels. Walmart has also publicly voiced that they plan on selling safe products that may have been misshapen and any food left unsold will be put towards donations, animal feed, and composting. A report conducted by the Center for Biological Diversity stated that Walmart was the highest-scoring company out of America’s top largest grocery companies in regards to food waste reduction. Lastly, Walmart also expanded programs in order to refurbish their old equipment in their stores and warehouses in order to recycle waste. 

As sustainable practices become more prevalent and accessible, it is important to continue to explore new ways to maintain an ethical supply chain. Understanding ways to mitigate ethical supply chain problems, gives hope to many companies to move towards a greener manufacturing process.

As we’ve already seen, some major corporations have started to move towards a more ethical supply chain process. With this in mind, the goal within the next few years is to see more ethical manufacturing and sustainable practices within the supply chain process.

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