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Home » Blogs » Think Tank » Establishing an Ethical Supply Chain Is a Business Imperative

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Establishing an Ethical Supply Chain Is a Business Imperative

Sustainable Grocer
Rice, oats and other grains at a waste-free market. Photo: Anna Tarazevich/ Pexels.
December 8, 2021
Mark Morley, SCB Contributor

Consumers increasingly demand social and environmental responsibility, as well as transparency, from the companies they support. And they’re prepared to put their wallets behind those that are leading the way. Consumers overwhelmingly say they’re more likely to buy from companies that share their values across environmental (80%), social (76%) and governance (80%) concerns, according to a survey by PWC.

To be successful long-term, supply chain leaders and businesses must listen to this call from consumers and stay ahead of the ethical shopping trend. 

Ethical Purchasing on the Rise

To better understand this shift in consumer expectations, information management software company OpenText conducted a global survey of 27,000 consumers, including 3,000 U.S. consumers. It found 82% of Americans feel strongly about shopping for products that are ethically and sustainably sourced. And consumers don’t just want lip-service, they want brands to be transparent about their operations and their partners’ operations. Two-fifths (39%) of U.S. consumers judge a brand based on not just its actions, but the actions of its suppliers as well. Three in four consumers (77%) believe online retail sites should clearly mark whether products are ethically sourced.

Brands that fail to ensure their supply chains are ethical from a labor, materials and sustainability standpoint risk reputational damage and loss of customers. Almost half (45%) of U.S. consumers would never buy from a brand again if it was accused of working with unethical suppliers. Instead, they would look to find an alternative brand that engages in responsible sourcing.

Consumers are also willing to make some sacrifices to support brands aligned to their values. A majority (79%) of U.S. consumers are willing to compromise convenience, such as accepting slower delivery, if they can be sure an item has been ethically sourced or produced. Sustainability has also come to the forefront of many consumers’ minds, with more than half (52%) of Americans saying they prioritize buying from brands that embed some aspect of the circular economy in their processes, such as reducing waste and focusing on re-using and recycling materials. 

The Business Case 

It has become clear, especially after a tumultuous 2020, that environmental, social and governance (ESG) concerns are here to stay. A Harris Poll survey found a significant majority of Americans (60%) want well-known brands to take a stand on social issues. That number was even higher, 70%, among Gen Zers and millennials. 

Consumers do not simply see this as a personal responsibility. In fact, the Harris poll found a majority (53%) of Americans believe companies have “more platforms and tools at their disposal to speak to and influence a large number of people.” Similarly, OpenText found over half (58%) of U.S. consumers agree the government should introduce regulation that holds businesses more accountable for responsible sourcing. In the U.S., the Securities and Exchange Commission (SEC) is already moving this way as it weighs ESG related disclosure requirements. 

Businesses that act swiftly today to establish an ethical supply chain can create a competitive advantage in their markets. A global report from HSBC found nearly all (96%) of businesses said that they are feeling increasing pressure to become more sustainable, and 86% expect their sales to grow over the next year through a greater focus on sustainability. Fortunately, our survey suggests businesses can see an ROI on investments for ethical supply chain initiatives, with two in five consumers saying they’re willing to pay a premium of more than 25% for something they consider an ethically sourced product. 

Empowering the Ethical Supply Chain

In the era of social media, companies that fall short of expectations are often quickly exposed, which can result in significant reputational damage. Companies also risk jeopardizing relationships with partners who are looking to strengthen their ethical standards as well as relationships with investors, governments, regulators and other key stakeholders. 

To start making changes, supply chain leaders should first take some time to review their own customer base and their ethical priorities to ensure efforts align. Next, businesses must establish high levels of transparency and end-to-end visibility into their organization’s operations and the operations of its suppliers and their suppliers. Leveraging technology systems that capture and manage information across the supply chain is key to making this possible. 

Read more: Six Steps to an Ethical and Sustainable Supply Chain

Ultimately, organizations able to demonstrate their supply chain operations are meeting the highest standards will be better positioned to win and maintain customers, partners and investors, which in turn, can fuel business growth. By investing in an end-to-end digital supply chain, organizations can quickly establish an ethical supply chain and establish a competitive advantage in the market.

Mark Morley is senior director of product marketing for Business Network at OpenText.

Sourcing/Procurement/SRM Supply Chain Visibility Business Strategy Alignment Global Supply Chain Management HR & Labor Management Sustainability & Corporate Social Responsibility Consumer Packaged Goods Retail

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