Understanding the ethical issues with the global supply chain

Global Supply Chain

Global supply chains will always be dependent on how people interact with one another, regardless of how much we, as a society, are able to use and apply technologies into business.

Local, but mostly global, supply chains can be troublesome and provide obstacles for buyers and suppliers that want to conduct business ethically and engage with organisations that have a solid code of ethics. Poor working conditions, low salaries, forced labour, modern slavery, gender discrimination, and negative impacts on climate change are just a few of the issues that can occur.

The importance of an ethical supply chain

Were you aware that 83% of supply chain professionals consider ethics to be extremely or very important to their businesses?

Consumer demand, profitability, and visibility are driving ethical supply chain management. Over the last four years, the concept of ethical sourcing has grown in popularity, with phrases related to the topic generating an average of 6,530 monthly searches in January 2022, compared to just 2,640 monthly searches in February 2018. (Source: Google)

For businesses aiming to improve their social position, ethical supply chain management technologies are especially important.

Ethical risks you need to be aware of

Amid the pandemic, two high-profile examples involving global supply chains and forced labour came to light. The Supermax Scandal came after a Malaysian palm oil company, which was intended to supply Nestle, Loreal, and Unilever, was accused of exploiting workers. Supermax is a Malaysian company that just secured a £316 million NHS contract to supply 88.5 million rubber gloves. After the manufacturer secured the contract, the US forbade them from selling their products after an investigation revealed that they had utilised forced labour in the rubber glove manufacturing.

When it comes to supply chain ethics, according to Delta eSourcing, getting to know your suppliers should be your first priority. You can successfully manage any associated risk and make educated decisions if you know your suppliers are verified.

Knowing what to look for is maybe one of the most difficult aspects of dealing with the problems that plague modern supply chains. While companies may claim to be actively working to eliminate unethical behaviour from the supply chain, how are they supposed to stop it if they don’t know what the issues are? And how can a corporation in the United Kingdom maintain track of what’s going on in another country?

The Chartered Institute of Procurement and Supply (CIPS) points out that technology can help reduce the risks associated with global sourcing and, in turn, enable buyers or those further up the supply chain to gain a better understanding of how ethical your suppliers are despite the fact that you’re not physically close to them.

To begin, you can reduce ethical risk by implementing structured, well-written contracts that spell out what standards are expected of all parties and what will result in a contract’s termination. These contracts can be stored electronically, making them easily accessible and referenced as needed.

Finally, blockchain is being used a way of storing unchangeable records of contractual agreements which improves visibility and transparency. According to CIPS: “each new and existing supplier would guarantee compliance by submitting key documentation through the blockchain.”

Damage to the environment

According to McKinsey, supply chains are responsible for 90 percent of a company’s environmental effect.

Deforestation, excessive energy use, harmful pollutants, and water contamination are all environmental concerns.

The consequences of global supply inefficiencies are severe: “eight global supply-chain inefficiencies account for more than 50% of all carbon emissions,” according to a World Economic Forum analysis.

“Global supply networks must get smart – and sustainable, in 2022,” according to Wired journalist Alex Rinke.

Rather of allowing their actions to have negative consequences, businesses can act ethically to support environmental protection and make the world a greener place.

We’ve just touched on a few of the challenges that buyers may face while sourcing internationally. While avoiding ethical pitfalls is difficult, contact with and knowledge of suppliers must be at the forefront of all choice. The topic of our next blog will be what you can do to ensure that your global supply chain is morally sound.

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