Should You Worry About the Ethics of Your Supply Chain?

Most entrepreneurs try to optimize their supply chains by making them more efficient, cutting down on costs and logistical hurdles to accomplish things faster and more profitably. But you may also optimize your supply chain in ways that make it more inherently ethical.

So why are supply chain ethics becoming a more popular focal point, and are they worth your time and money to consider?

Sustainable warehouse staff

The State of the Modern Supply Chain

Today’s supply chain is much different than it was in the past, thanks to three main factors:

  • Real-time analytics. Today’s supply chain managers have access to real-time analytics, and data visualization platforms that make it easier than ever to truly understand how your supply chain works.
  • Historical insights and growth. Supply chain management has been a field since the 1950s, and people have been trying to optimize those processes ever since. Thanks to decades of historical data, supply chain optimization is, in some ways, easier.
  • Social media and transparency. In the modern era, companies also need to think critically about their public image, especially with regard to social media. Any bit of bad press that leaks on social media could seriously compromise your reputation—or solidify your standing with long-term customers.

The availability and interactions of these three factors put more attention on business owners, and enable more possibilities for ethical operations.

Photovoltaic panel powers production lines

Why Ethics Matter

Supply chain ethics can be considered as a part of your overall corporate social responsibility (CSR). So why would these ethical considerations matter in the first place?

  • Long-term optimization. Many ethical practices are referred to as “sustainable” because they have a higher chance of being useful or operational long-term. For example, a process that draws on renewable energy sources, like solar power, will remain operational far longer than those that rely on non-renewable sources, like fossil fuels. Optimizing your supply chain for sustainability, in many cases, reliably sets you up for a longer, healthier future.
  • Flexibility. Adopting an ethical mentality with regard to your supply chain forces you to remain flexible and adaptable. For example, if a material used in your manufacturing process is found to be harmful to human health, you can quickly adopt new practices to avoid its use (as was the case with BPA a few years ago). That flexibility is important if you want to remain competitive.
  • Employee appeal. Adopting ethical practices can, in many cases, foster employee loyalty. People will be more willing to work for an employer with socially responsible practices, and you’ll end up keeping those employees longer, reducing turnover.
  • Consumer appeal. Many customers make purchases based in part on ethical considerations. If you’re able to advertise the fact that your supply chain is ethical, at each link in the chain, your customers will be more willing to buy from you. And if your supply chain is more ethical than a competitor’s, you may be able to win some customers from them.
Eco-friendly Walmart hybrid truck
photo credit: Walmart / Flickr

Key Ethical Considerations

It therefore makes sense for many businesses to optimize their supply chain for sustainable ethical practices—but what ethical practices need to be incorporated?

  • Partner practices. Consider what practices your supply chain partners are adopting. For example, if you get your materials from a source with unfair labor practices, all it takes is one bad piece of PR to turn some of your customers against you. You may also look at how your partners use energy, and which materials they rely on.
  • Environmental impact. Environmental impact is another major consideration, for both you and your partners in the supply chain. How are you transporting goods from one location to another? What methods of energy generation are you using at each step of the process? The closer your carbon footprint is to zero, the better.
  • Health and safety. Health and safety matters not only to your customers (as your products may positively or negatively affect their health), but also to your employees (as irresponsible processes may put them in danger).
  • News and developments. What counts as ethical today may not remain ethical tomorrow, since a news report could deem a new material unsafe or condemn a previously accepted approach. Make sure a CSR representative is always on standby, watching for new developments so you can act on them quickly.
  • PR and transparency. Your ethical practices will mean far less if nobody hears about them. Invest in your PR strategy, and be transparent, so your customers understand how your supply chain works, and how you’re managing it. Controlling your PR strategy also gives you authority over the narrative, so you can shape how it manifests in the public eye.

It’s up to you whether you want to change your supply chain to make it more ethically sound, and which strategies you adopt to make it so. What makes sense for another company may not make sense for yours, but many ethical strategies you adopt do have the power to positively affect your bottom line.

Treat the ethical supply chain seriously, and remain on the lookout for new ways to improve.