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Why a supplier assessment is important to avoid ethical issues

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Supply chain dynamics have never been more intricate, impactful, and complex. Within this complexity lies a critical concern: ensuring ethical standards are upheld throughout the supply chain. This is where the utilisation of a supplier assessment emerges as a vital tool for businesses to safeguard not only their ethical integrity but also their bottom line. But what is the purpose of supply chain assessment?

By evaluating and scrutinising the practices of suppliers, companies can mitigate the risk of encountering ethical issues such as labour exploitation, environmental degradation, or human rights violations. As awareness and expectations regarding corporate responsibility continue to evolve, there is a growing demand for transparency and accountability from businesses at every stage of the supply chain.

In this article, we delve into why incorporating a supplier assessment into manufacturing strategy is paramount in safeguarding ethical standards and meeting the increasing expectations for transparency and responsibility. It is also for fulfilling a strategic business imperative, as companies increasingly recognise the importance of ethical supply chains in maintaining competitiveness and business advantage.

According to Gartner’s 2023 Future of Supply Chain Survey, 47% of leaders say they view their supply chain as a vital enabler to drive business value, but that number is continuing to rapidly grow.

The rise of ethical consumerism and ESG prioritisation

Manufacturers can no longer ignore the notable shift in consumer values towards ethics and sustainability. Today’s buyers are not only concerned about the quality and cost of products but also about the ethical practices behind their production. This trend, called ethical consumerism or consumption, reflects a growing awareness and concern for issues such as environmental sustainability, fair labour practices, and social responsibility.

Thus, unethical practices within the supply chain can have profound consequences for brand reputation and consumer trust. In today’s interconnected world, where information spreads rapidly through social media and digital platforms, companies must be acutely mindful of the reputational risks associated with unethical behaviour.

Moreover, numerous statistics and studies underline the compelling business case for ethical supply chains. A survey conducted by PwC revealed that over 70% of buyers surveyed said that they would pay more for sustainably produced goods by varying degrees. Consumers are increasingly voting with their wallets, consciously choosing products and brands that align with their values. Therefore, investing in ethical supply chains is a moral imperative and can become a competitive advantage if savvy manufacturers take heed.

Practical steps for effective supplier assessments

Effective supplier assessments comprise various components to evaluate suppliers’ compliance with ethical standards and legal requirements. These components include:

1. Criteria for evaluating suppliers: Establish clear criteria for assessing suppliers based on environmental performance, labour practices, and ethical conduct.

2. Compliance with international and local laws: Ensure suppliers adhere to relevant laws and regulations governing environmental protection, labour rights, and anti-corruption measures.

3. Adherence to environmental standards: Assess suppliers’ adherence to environmental standards and certifications, such as ISO 14001, to promote sustainable practices.

4. Commitment to labour rights and fair wages: Evaluating suppliers’ commitment to upholding labour rights, including fair wages, safe working conditions, and non-discrimination policies.

5. Methods and tools for conducting assessments: Employing various techniques and tools for assessing suppliers, including audits, site visits, surveys, self-assessment questionnaires, and third-party certifications.

By incorporating these key components into supplier assessment processes, companies can effectively identify and address ethical risks within their supply chains.

Strategies to overcome challenges

Implementing thorough supplier assessment recommendations present companies with several challenges. Firstly, the complexity of global supply chains, with suppliers scattered across multiple countries and regions, makes it difficult to track and monitor all aspects of the supply chain effectively.

Additionally, companies often face limited visibility and control over their suppliers’ practices and operations, which hampers their ability to assess compliance with ethical and environmental standards. Moreover, conducting comprehensive supplier assessments requires significant financial and human resources, posing a challenge for companies with constrained budgets or manpower.

These obstacles underscore the need for innovative strategies and technologies to overcome the challenges associated with supplier assessments and ensure ethical and sustainable practices throughout the supply chain. Consider these top three strategies for overcoming these challenges:

1. Leveraging technology for better transparency

Utilising software platforms and digital tools can enhance visibility and transparency within the supply chain, enabling companies to track and monitor supplier performance more effectively.

2. Building strong relationships with suppliers

Cultivating open and collaborative relationships with suppliers fosters trust and cooperation, making engaging them in the assessment process and implementing necessary improvements easier.

3. Collaborating with NGOs and industry groups

Partnering with non-governmental organisations (NGOs) and industry associations allows companies to access expertise, resources, and best practices for supplier assessment and sustainability initiatives.

By adopting these strategies, companies can overcome the challenges associated with supplier assessment and strengthen their efforts to promote ethical and sustainable practices throughout the supply chain.

Good for the business, good for the environment: Patagonia case study

Out of the 100 visible brands in America, Patagonia stood out as number one in terms of reputation due to its supply chain programme, and other organisations could replicate its success.

Patagonia’s Supply Chain Environmental Responsibility Program aims to assess, minimise, and eliminate the environmental footprint of manufacturing its products and materials. The program is implemented globally across supplier facilities and covers various impact areas such as environmental management systems, chemicals, water and energy usage, emissions, and waste.

Patagonia continually evaluates supplier facilities to ensure compliance and performance, integrating this assessment into supply chain decision-making processes. Through collaboration and training, they have seen improvements, including advanced wastewater and air emission treatment systems, the elimination of hazardous chemicals, and the adoption of safe chemical management procedures. Facilities unable to meet Patagonia’s standards are not approved as suppliers. Patagonia’s success is one of strategy intent but also technology and processes that enable this success.

Sustainability maturity assessments can further enable organisations to make strategic choices aligned with their sustainability goals and is designed to empower manufacturers of all sizes and industries to embed sustainability across their operations.

Unlike traditional approaches, COSIRI is a sustainability framework that stands out by having the capability to compare the company’s performance across all 24 dimensions and benchmark against industry peers, enabling a holistic assessment of supply chain practices. Serving as an independent benchmarking system, COSIRI not only evaluates the sustainability maturity of manufacturers but also aids in charting future sustainability roadmaps while enhancing ESG transparency and reporting.

To learn more, watch our video which provides an in-depth explanation of how COSIRI helps manufacturers and their suppliers meet their sustainability goals.

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