ETHICAL AND SUSTAINABLE SOURCING

Introduction
Purchasing departments contributes in product design, quality, cost of goods sold,
manufacturing cycle time. Ethical and Sustainable sourcing practices have become
area of concern over the past five to ten years. Global population growth,
increasing environmental awareness, consumer’s desires for better corporate
responsibility, and declining worldwide levels of natural resources has pressured
companies to effectively implement these practices.
Creating and implementing strategies to support ethical and green purchasing can
benefits firms. It may fail because of misaligned strategies, lack of commitment,
unrealized goals, and loss of trust in buyer– supplier relationships. Purchasing
managers managing their firms’ supply chains must understand that some
sourcing strategies are better suited to some supply chains than to others. Some
of these supply chains may be driven by a low-cost overall strategy, while others
may have the environment, quality, or service as the principal objective.

Ethical sourcing
In recent years, demand for ethically sourced and sustainable products has grown
tremendously. Globalization has caused consumers to become more aware of the
affects manufacturing of products has on the people that make them all over the
world. 
Ethical Sourcing is the process of ensuring that the products made are obtained
through responsible and sustainable methods. This includes ensuring that the
workers who make the products are paid a fair wage and all human rights are
met, the factories are clean and safe environments to work in, and that all social
and environmental aspects of production to the workers and the surrounding
communities are considered.
Although there are many reasons for an organization to want to ethically produce
their products, companies often take the first step to ethically produce their
products for the following reasons:

 to mitigate their risks,

 to reduce operating costs,
  to protect their brand image and meet customer demands in order to grow
sales.

Ethical sourcing can be defined as

“That which attempts to take into account the public consequences of
organizational buying or bring about positive social change through organizational
buying behavior.”
Ethical sourcing practices include promoting diversity by intentionally buying from
1. Small firms,
2. Ethnic minority businesses,
3. Women-owned enterprises,
4. Sourcing from firms with good labor treatment,
5. Environmental protection credentials.

Purchasing goods from suppliers in developing countries can be risky in that if

human rights, animal rights, safety or environmental abuses become associated
with the firm’s suppliers or foreign manufacturing facilities, this could lead to
negative publicity for the buyer, along with product boycotts, a tarnished
company image, brand degradation, lower employee morale, and ultimately
lower sales, profits and stock prices.

Sustainable Sourcing
Globalization of supply chains and pressure to lower production costs have
negatively impacted environments and communities around the world, especially
in developing nations where production of high demand goods is increasingly
taking place. Since the 1990s, awareness of these negative impacts has grown,
leading stakeholders to push companies to take responsibility and actively work
to improve the sustainability of their supply chains.  It has come to be understood
that a company is only as sustainable as the start of its supply chain, bringing
about the need for sustainable sourcing.  Sustainable sourcing refers to the
inclusion of social, environmental, and economic criteria in the sourcing process.
Sustainability, as applied to supply chains, is a broad term that includes green
purchasing as well as some aspects of social responsibility and financial
performance. It can be defined as
“The ability to meet the needs of current supply chain members without
hindering the ability to meet the needs of future generations in terms of
economic, environmental and social challenges”.

Environmentally challenges
Supply chain activities mainly impact the environment in two ways: natural
resource depletion and/or production of harmful pollutants. These impacts have
further implications for the natural world, leading to biodiversity loss, habitat
destruction, soil degradation, and disruption of natural cycles. To mitigate these
impacts and meet the 'environmentally responsible' component of sustainable
sourcing, a company may take steps such as requiring suppliers to use certain
materials, and evaluating various environmental metrics when selecting suppliers.

Socially challenges
Supply chains activities also have a social dimension. Companies often fall short in
ensuring fair treatment and safe working conditions for workers, especially in
developing countries where a large portion of production happens. Furthermore,
previously mentioned environmental impacts also have health and wellbeing
implications for communities. To mitigate these impacts and meet the 'socially
responsible' component of sustainable sourcing, a company may take steps such
as mandating labor standards among suppliers, and evaluating multiple social
metrics when selecting suppliers.

Economically challenges
In traditional sourcing practices, the focus is put on getting the best quality
product possible at the most reasonable price, with little consideration given to
the impacts of producing such a product. Sustainable sourcing requires companies
meet high environmental and social standards while continuing to provide
good economic value at a competitive cost.

For businesses and their trading partners, sustainability is seen today as doing the
right things in ways that make economic sense. The objectives then are not only
to sustain the world we live in, but to sustain the organization as well. Like CSR,
social sustainability concerns involve worker safety, hourly wages, working
conditions, child workers, and basic human rights.

Sustainable sourcing is one activity then, within the larger umbrella term of
sustainability— it includes green purchasing, some form of financial benefit, as
well as aspects of ethical sourcing. Very simply, it has been defined as “a process
of purchasing goods and services that takes into account the long-term impact on
people, profits, and the planet”.
Leading companies practicing sustainable sourcing seek to:
• Grow revenues by introducing new and differentiated sustainable products and
services.
• Reduce costs by increasing resource efficiencies, avoiding use of noncompliant
suppliers, and rethinking transportation and distribution designs.
• Manage risk by managing brand and reputation, and developing approaches for
meeting regulations and for capturing socially and environmentally conscious
customers.
• Build intangible assets by further enhancing brand and reputation through
social and environmental responsibility.

Ethical Issues May Encounter In E-Commerce

1. Inadequate Social Media Management

2. Incomplete Products Information
3. Selling via Social Media Groups
4. Unmanaged Customer Support
5. Delayed Shipments
6. Exaggerated Marketing

Six Steps to a More Ethical and Sustainable Supply Chain

1. Reduce waste by simplifying supply chain processes
2. Ensure ethical sourcing and introduce transparency
3. Minimize overproduction through efficient supply and demand planning
4. Decrease fossil fuel consumption by optimizing routes.
5. Fully utilize containers and transportation to consolidate shipments. 
6. Monitor for existing environmental risks. 

1. Reduce waste by simplifying supply chain processes. Supply chains can be

improved through major changes, but it’s more common to see results
through small, iterative improvements. Good analytics and reporting
combine with machine learning to continually improve processes
throughout the supply chain. Every change that reduces waste, speeds up
delivery or enhances quality makes an incremental improvement to
sustainability.
2. Ensure ethical sourcing and introduce transparency. Supply chain
managers need visibility into how suppliers extract or produce raw
materials to ensure they’re following sustainability standards. Block-chain
technology is a useful way to capture and verify supplier sourcing practices.
Internet of things devices can monitor and report on working conditions
and environmental factors. Marketplaces can also bring transparency to a
company’s suppliers. The more interconnected they become, the more
visible they are to those that access them.
3. Minimize overproduction through efficient supply and demand
planning. Misalignment between supply and demand results in too much or
too little production of raw materials, manufacturing of goods and
distribution of products. This creates rework and waste. Artificial
intelligence, machine learning and predictive analytics can forecast likely
demand and ensure more efficient supply and manufacturing processes.
4. Decrease fossil fuel consumption by optimizing routes. Until logistics
moves to electric and other more sustainable vehicle options, route
optimization is one of the best ways to reduce the environmental impact of
transportation and distribution. A.I. can work with GPS devices to optimize
international, national and local shipping routes. Advanced analytics can
even update routes in real time, to take account of congestion and other
issues.
5. Fully utilize containers and transportation to consolidate shipments. An
empty container is a wasted container. Predictive analytics forecast where
and when goods will arrive, allowing for the consolidation of shipments
from multiple suppliers to multiple final destinations. This makes the most
 efficient use of assets and transportation, reducing the total amount of
greenhouse gases generated per unit of cargo.
6. Monitor for existing environmental risks. Many supply chains are already
impacted by climate change and other environmental factors. Issues such
as wildfires in the western U.S., rising sea levels, water scarcity and lower
agricultural yields have a profound impact on the efficiency, quality and
speed of the supply chain. Supply chain technology helps to predict these
risks, and allows supply chain managers to mitigate their impact and put
contingency plans in place.

Minimizing the environmental impact of supply chains will continue to be a focus

for companies, as consumers become more aware of how goods are sourced,
manufactured and distributed. A forward-looking supply chain strategy, combined
with the right technological solutions, will help organizations build more
sustainable, responsible and ethical supply chains. And that’s good for everyone.