Ethical Sourcing

Many private sector organisations who are suppliers, strive to have an ethical approach to what they do. This means having a positive impact on society as well as thriving as a business. This is sometimes referred to as the Triple Bottom Line, or 3 P’s, in which People, Planet and Profit are all taken into account when you take decision about your business. The success of your organisation is measured by how it helps communities to thrive as well as by the level of business you win.

To have an impact, an ethical approach must be extended across the whole organisation. Every department and all employees, from senior managers to clerical workers, have a role to play.

The procurement process in both public and private sectors offers good opportunities to meet your targets for the triple bottom line. Each time you buy products and services for your organisation, you have an opportunity to make choices based on how and where the products are sourced or manufactured, as well as looking for good value for money.

This is what is known as ethical sourcing: it is the process of making sure that the products you buy have been sourced or manufactured using responsible and sustainable methods.

When you buy products and services ethically, you need to make sure that:

• your supplier’s workers are paid a fair wage
• their human rights are respected
• their factories are clean and safe
• raw materials and components caused little or no damage to the environment
• arrangements are in place for their disposal at the end of their useful life

Many organisations provide a supplier code of conduct to set out requirements of ethical conducts for awarding contracts. The code includes such things as the principles of corporate social responsibility that suppliers are expected to comply with, as well as how to manage their internal processes.

Requests for proposals (RFPs), also called tenders, should always refer to the supplier code of conduct. If you don’t yet have one, include a list of what you expect from your suppliers in terms of social responsibility if they do business with you.  For example, providing a safe working environment for employees or using products that can be recycled or disposed of safely.

If you ask your suppliers to follow high ethical standards, your own organisation should also be able to demonstrate that it abides by the same principles.

ISO 26000 is an international standard that gives guidance on how a socially responsible organisation can create the culture that supports ethical sourcing as part of its approach to corporate social responsibility.

It covers seven areas which can determine the impact your organisation has the community and the environment.  These are:

• Organisational governance
• Human rights
• Labour practices
• The environment
• Fair operating practices
• Consumer issues
• Community involvement and development

Cost versus value

Your organisation will always look at issues such as quality, cost and support when it decides which products or services to buy. Best value is often mistaken for the lowest price. But best value should be measured as the total cost over the lifetime of the product, including the potential cost or benefit in terms of its impact on the community and the environment. For example, it should include the cost of safely disposing of the product, once it is no longer of use. 

Organisations will have a different view of what represents best value. Those who have an ethical approach to sourcing and procurement will also take int account the impact of the supply agreement on the community, as well as the benefits to the business.

The nature of the social impact you have chosen for your organisation may help to determine the type of supplier you wish to use. For example, if you want to create jobs for people in marginalised groups, then you may consider an organisation with a track record of focusing on employment opportunities.  A supplier who is fully automated or who sources products from another country is unlikely to meet this criteria.