Businesses of all sizes are under pressure to behave more ethically. This guide explains how small business owners can create and maintain an ethical and sustainable supply chain, focusing on good practices and choosing suppliers.
Gone are the days when all customers cared about was the price. An increasing number now also expect the brands they support to do good for the planet and its people. A survey of online consumers in the UK and US by GlobalWebIndex found that 7 in 10 people would or might stop using a brand because of its social or environmental wrongdoing.
Similarly, a 2018 study of almost 30,000 consumers in 35 countries by Accenture revealed that more than half of UK customers “want companies to take a stand on issues they care about such as sustainability, transparency and fair employment practices”. Younger consumers, particularly Gen Z, are driving this trend.
Businesses also can’t ignore regulatory pressures. The UK has committed to achieving net zero carbon emissions by 2050, and companies of all sizes will be affected. The Government’s Ten Point Plan for a Green Industrial Revolution includes expectations on businesses such as sustainable buildings and green technologies.
All this means that small companies are increasingly being expected to develop more sustainable supply chains. With their larger resources, it might seem easier for big businesses to make the change. Still, with many corporates having large and complicated legacy supply chains, the more flexible smaller firms have an opportunity to lead the charge.
What is a sustainable and ethical supply chain?
A sustainable and ethical supply chain comprises suppliers with high levels of ethical behaviour and working practices across all of their operations.
When selecting your suppliers, you should examine their economic, environmental and social impact. You should investigate how a supplier operates, including activities such as:
- Hygienic and safe working conditions for all employees.
- Fair working hours for all employees.
- No discrimination or bullying of employees.
- No child or slave labour.
- No abuse of human rights.
- Anti-bribery and corruption.
- Environmental sustainability.
- Ethical sourcing of ingredients and other materials.
Six ways to make your supply chain more sustainable
1. Communicate your values
When setting up an ethical supply chain, you should first clarify your own values to find suppliers who match them. A good place to start is the United Nations’ 17 sustainable development goals. Decide which ones are most important to you and your business.
Once you’ve decided your values, communicate them in a supplier code of conduct. This document should outline your objectives, how they will be implemented and how you expect your suppliers to reflect your values by operating in a socially, ethically and environmentally friendly way. Your code should cover areas including your commitment to human rights, ethical and safe working practices and conditions, good environmental standards and anti-corruption.
A strong supplier code of conduct will help you attract suppliers that share your values and guide employees when making their own ethical decisions.
2. Choosing suppliers
One of the best ways to select a supplier is to visit them. It provides the perfect opportunity to check their ethical and sustainable standards.
Physical meetings might be challenging for international suppliers, so set up video calls, ask for a virtual tour of their premises and speak to employees and clients.
You can also decide if a potential supplier is ethical by checking that they have been audited by an industry standards body or are an accredited member of an ethical initiative, such as:
- Global Organic Textile Standard
- Better Cotton Initiative
- World Fair Trade Organisation
- Rainforest Alliance
- Economic Dividends for Gender Equality
- Forest Stewardship Council
- Worldwide Responsible Accredited Production
3. Evaluate your carbon footprint
According to a 2016 report by McKinsey, “the typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80 percent of greenhouse-gas emissions and more than 90 percent of the impact on air, land, water, biodiversity, and geological resources.” That means starting with a sustainable supply chain can have a significant impact on reducing your carbon footprint.
Examine your suppliers and check their energy efficiency processes. Assess what type of power they use, how products are shipped, and the distances travelled for deliveries. Work with them on adapting their processes and hold them to account. Seek out suppliers that are more environmentally sustainable if they’re not up to scratch.
Simplifying your supplier range by using companies closer together can significantly reduce your supply chain’s impact on the environment.
4. Source locally
If you source supplies locally, you will reduce shipping and storage, cutting carbon emissions and energy usage. The environment will benefit, and it can bring you commercial advantages, too. Local sourcing is an increasingly key consideration for consumers choosing which brands to do business with. This is particularly true in the food and drink sector. Paymentsense’s Restaurant Insights 2020 report found that 66% of consumers believe ethical behaviour matters when eating out, with restaurants stating when local produce is available a key consideration for 36% of customers.
Working with local suppliers also makes it easier to determine how ethical they are. The longer your supply chain is, the harder it becomes to check their sustainability credentials.
5. Understand the full chain
To have a truly ethical and sustainable supply chain, you need to understand every part of it. You should trace all the parts, materials, and companies used to get the supplies to you and the product to your customer. You also should know that all the links in the chain treat their employees fairly.
Knowing every part of the supply chain means you’ll be able to identify any areas where standards are falling short. Supply chain management software can help you to map and track suppliers.
6. Measure your impact and stay committed
You need to stay committed for the long term, so you should regularly measure the impact of your efforts. If, for example, you’ve switched to organic products, how has that made a difference? If you’ve adopted more sustainable shipping practices, how has that impacted your carbon emissions? The SME Climate Hub lists some tools for measuring your carbon footprint.
Keep your code of conduct updated and stay in constant contact with your suppliers. Strong communication across your supply chain is vital. Feed into your code what your suppliers are doing to improve processes and take note if standards drop.
Telling your customers about your ethical standards will show your commitment and help you win new sales. Be transparent about the activities of your business and your supply chain. Tell customers where the products they’re buying have come from and shout about your sustainability commitments on social media and your website.
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