Article
Written by Kady Potter
Posted on 19/09/2014

The conundrum of ethical supply chain management and brand reputation

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With consumers increasingly concerned about the ethics of the companies they buy from, your supply chain management may be under intense scrutiny. It’s been suggested that customers can never be certain that the product they buy is 100 per cent ethical – can you guarantee them that?

The Chartered Institute for Purchasing and Supply (CIPS) claimed earlier this year that UK businesses are “sleepwalking” into a new supply chain crisis. This is being attributed to a lack of internal chain visibility and external transparency.

Retail

The low-cost fashion sought by consumers has impacted on the working conditions of those who produce the garments. Fashion brands did however act quickly following the collapse of a factory in Bangladesh, and over 150 businesses from 20 countries have signed the Bangladesh Fire and Safety Accord.

A surprise leader in the sector is Primark, a brand known for its more affordable pricing. It has a code of conduct based on the Ethical Trading Initiative Base Code, and all suppliers must follow this to the letter. It specifies a living wage, safe working conditions and a complete ban on child labour. H&M and Inditex – owner of Zara – have similar practices.

Food and drink

The horsemeat scandal hit supermarkets hard, and allegations of slave labour within supply chains are not helping. Those who dine out can choose an establishment which claims membership of the Sustainable Restaurant Association. Some suspicion remains around both restaurants and food retailers.

Big names can look to lesser-known British brand Premier Foods for hints on how to present more reassuring information to consumers. It has also established an ethical supply chain working group to carry out internal audits.

Automotive

It’s easy to look up details on a new vehicle’s efficiency levels and performance, but harder to determine whether parts and components were ethically sourced. The UK Society of Motor Manufacturers and Traders covers supply chains in its annual sustainability report, yet does not mention ethics.

The information can be found, but typically buried within a manufacturer’s own CSR reports or a sub-section of their website. One notable example is Ford, which lays out its approach to human rights and working conditions and the tracking of raw materials through the supply chain.

Technology

Some of the most high-profile reports on ethics in supply chains have been on technology companies. Brands such as Apple and Samsung are constantly under intense scrutiny. As a result, tech company websites are ‘overflowing’ with ethics and sustainability information – it is not always highly visible and clear, but it is there. Microsoft also “requires 100 per cent identification of all materials used in its packaging and hardware to the component level”.

There is a growing trend in the industry for conducting supplier audits, and Samsung dropped a supplier this year for using child labour. Apple has also taken the step of verifying that its tantalum smelters are sourced from conflict-free minerals.

The ultimate consumer perspective

For all the controversial headlines and outcries on social media, many consumers don’t put ethical concerns front of mind. Yes, incidents do happen, and yes they should be mitigated. However, a Trade Extension survey of UK and US consumers found that just two per cent made the ethics of a company or brand the main factor in their purchase decision. Only 12 per cent of the 2,000 respondents named it as a top-three consideration.

80 per cent believed that businesses should behave ethically, yet 40 per cent would base their choice to buy on price and 30 per cent prioritise value for money. With those figures in mind, companies have multiple concerns to juggle in the pursuit of sustainability.

 

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