Suppliers, Responsible Sourcing, and Your Company's Reputation

June 26, 2013

If you have been following the garment manufacturing tragedy in Bangladesh, you are well aware of the outrage expressed over the factory collapse. You also are aware of the pressure likely to be exerted on retail outlets and clothing labels to ensure such deplorable and unsafe working conditions are not used in the creation of their garment lines.

Consumers have always wanted lower prices for goods and services, but today they also want businesses to be ethically and socially responsible, which includes responsible sourcing.   

Regardless of company size, sourcing responsibly isn’t easy. You may identify vendors who verbally commit to standards but whose operation may not comply with the agreed-upon principles. Or, the supplier may aspire to meet the required social and environmental criteria, and being afraid to lose a major account, they decide not to share their shortcomings.

This means you must do our homework to locate suppliers that meet your requirements. And, you must develop procedures to ensure your social, ethical, and environmental expectations are met.

MillerCoors adopted responsible sourcing principles in 2008. In 2011, the company asked a number of its top suppliers to join the Supplier Ethical Data Exchange (Sedex). Sedex is a nonprofit that provides a standardized format, based on internationally-recognized protocols for companies to report their sustainability practices voluntarily. This information goes into a database that is shared with other companies in the hopes of identifying high-risk priorities in agriculture, packaging, and promotion. By taking a transparent approach and sharing socially responsible data with others, MillerCoors does more than demonstrate its commitment and accountability; it positions itself as a leader in corporate responsibility practices.

Cosmetic manufacturer L’Oreal’s strategy is to tackle sourcing on a four-prong platform: diversity, environment, fair trade, and social, health and safety. Suppliers are regularly evaluated on key performance indicators including social and environmental responsibility practices.

In 2011, Target conducted 1,859 unannounced social compliance audits with vendors. Any business partner producing privately-branded products for the company was required to participate in this program. In fact, each facility was only allowed 20 minutes after an auditor arrives before the audit must begin. After that time the auditor would leave and Target would consider the audit denied.

The outcomes of these audits were used to make improvements in the retailer’s processes as well as to share what it learned with governments and nonprofit organizations in an effort to improve social compliance across the industry. 

In countries such as Cambodia and Vietnam, Target joined forces with the Better Work/Better Factories. This organization represents a partnership between the International Labor Organization and the International Finance Corporation. By working closely with this group, Target is able to monitor and improve working conditions through collaborative actions and transparent reporting.

But such a serious and meticulous approach to responsible sourcing can be found in small businesses as well. Town and Country Markets, a small grocery store chain in Washington state, profiles suppliers on its company website. Whether it’s the organic dairy farmer who provides goat cheese from Montana or the California farm that supplies stone fruit, customers can see where a product originates and learn more about the vendor’s operation and how it conducts business.

Town and Country Markets’ responsible sourcing approach also demonstrates its commitment to supporting other small businesses, adding another dimension to its corporate social responsibility platform.

When it comes to expecting socially and environmentally acceptable behavior from the companies with which they do business, today’s consumers are savvier than ever. They read reviews. They check out web sites. They ask family members. They tweet. They post comments. They write blogs.

If you haven’t thought about responsible sourcing practices at your organization, you should. If you have developed protocols or procedures and put them into practice but haven’t shared this information with your customers, you’ve missed an important communication opportunity. If you have adopted such standards and publicized them but haven’t instituted an audit or check-up process with your suppliers, now is the time.

Reprinted with permission from The Business Journal.