12 Oct 2023

Ethical Supply Chain and its Relevance in Today’s Time

An ethical supply chain, while benefitting the overall functioning of the value chain, acts as a brand calling card, too. Representing the virtues of an enterprise for all the good reasons – ethical methods can lead to business scalability and good repertoire amongst the customers.

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I do not wish any reward but to know I have done the right thing.

The line from Mark Twain needs no second vote to underline its heavy relevance in today’s society. In a world of transparency, the stakeholders now wish to know how their actions might impact the environment. An industry needs to be aware of its carbon footprint. A brand value stands to face heavy backlash if found to be floundering the operation norms—an authority steps in if any course correction is required for a conglomerate.

Such interconnectedness in actions for doing the right thing forms the gist of ethical practices in the supply chain (& beyond). With the value chain being a complex process with umpteenth stakeholders and management calls, regulatory compliance and ethical considerations of operation sometimes tend to get left behind. But as mentioned, we now live in an interconnected world where information knows no barriers. Regulatory authorities across the globe started placing the code of conduct for enterprises across the industry. The aim is for companies to be aware of their carbon footprint while being sustainably active for future generations. The need for organizations to set up an ethical practice is also a result of consumers, investors, and regulators being aware of the necessity of building towards more responsible operations for a better ecosystem and its inhabitants.

To understand the importance of ethics in supply chain management, let us first dive into the starting definition.

Table of Contents

What is an ethical supply chain?

An ethical supply chain of an organization monitors its end-to-end workflow by staying true to its corporate responsibility goals, sustainable manufacturing process, human rights, and environmental-first practices and applying fair-trade policies across its factions.

While this might not have been possible with dated supply chain practices of manual record keeping, with technology speeding up, information keeping and sharing have made it more viable for consumers to keep tabs on the brand they follow. Here are the key focus areas for a company to ensure its ethical practices.

Ethical Supply Chain
  • Environment Protection
  • Healthy working conditions
  • Adherence to human rights
  • No malpractices
  • Following regulatory compliance

With the definition laid down, let us now examine why exactly there’s a need for an ethical supply chain.

Why is ethics important in Supply Chain Management?

Supply chain ethics can build the foundation for a company’s eventual success. It’s essential first to understand that investing in beneficial practices like maintaining an ethical sourcing supply chain can open many new business ventures and a brand value that can simply edge out the competition, too. This importance can power a value chain into a beneficial prospect. If one has to highlight the benefits of an ethical supply chain, the below pointers will make it into the checklist.

  • Building a positive reputation

    We live in a world of instant connectivity. And the news indeed travels faster than one can anticipate. Be it a news byte that builds a reputation or does something of the opposite magnitude. A brand practicing ethical supply chain principles can be in the spotlight for all the right reasons.

    Its customers can become the most ardent fan base there ever is. Even vouching for the end-to-end value chain functioning the company endorses in its reports. This also contributes to building trust between the stakeholders and even the employees working for the organization. After all, it adds to the desirability factor for an individual to be associated with an enterprise committed to the social, environmental, and global sense of well-being.

  • Mitigates unwanted risks

    With unethical operations not being employed, a conglomerate steers clear of the unnecessary brouhaha that might impact its overall functioning. With the organization being compliant with the regulations laid down by the authority, the leadership rests easy that no fines or legal action will unnecessarily drive their attention. Similarly, enterprises that maintain fair working conditions and labor laws will never have to worry about any potential disputes or protests.

  • Achieves long-term sustainability

    Sustainability is a long roadmap requiring commitment and undivided attention. By sorting out all the potential ethical issues in supply chain management, an enterprise finds itself towards achieving boosted environmental-first practices right from ethical raw material procurement to mitigating carbon footprint across every value chain process, which keeps them on the right track for achieving the desired sustainability standards.

But how can a company implement the titular application in its value chain? Let’s have a look.

How can organizations implement ethical practices in their supply chains?

With the importance covered, knowing how exactly management can implement ethical practices in their supply chains is essential.

  • Setting a code of conduct

    It all starts by setting the correct standards to which every stakeholder and function must adhere. The regulation will comprehensively cover proper workplace practices, pro-environmental methodologies, and being mindful of human rights.

  • Due diligence for suppliersWhile internal policies are easy to implement, the majority of attention must be paid to the external stakeholders, a.k.a. suppliers. Suppliers actively involved with the daily value chain processes should be aware of the standards and regulations a company widely practices. Every stakeholder indirectly represents an organization's action plans and what they stand for, so it becomes equally crucial for diligence to be made mandatory.
  • Monitoring PerformanceConstant evaluation of the overall performance gives out key insights. These insights make the management aware of the shortcomings and the corrective actions required to improve the operations of the ethical supply chain.

In a gist, adapting an ethical supply chain not only bolsters an organization's brand value but also opens up many business prospects that make the enterprise more scalable and well-known in the market.

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