Sustainability and Social Responsibility in the Supply Chain

Companies need to emphasize the importance of incorporating environmentally sustainable practices, ethical sourcing, and social responsibility into their supply chain management strategies. 

Organizations can create a strategic sourcing model that includes social responsibility as part of their supplier selection criteria. The buying organization, and even the individual buyer, has the power to select sources that are socially responsible. And while the strategic sourcing model is primarily focused on supplier performance, being socially responsible is part of that performance.

The Institute for Supply Management (ISM) defines socially responsible procurement as: “a framework of measurable corporate policies and procedures and resulting behavior designed to benefit the workplace and, by extension, the individual, the organization, and the community.”

Socially responsible procurement includes diversity and inclusion through support for historically underutilized businesses (HUB) and small business, environmental protection, ethical considerations, health and safety for employees and the respect for human rights throughout the supply chain.

Businesses are now recognizing that a responsible approach to the supply chain not only benefits the planet and their communities but also contributes to their long-term success and profitability. Socially responsible procurement is not just focused on the behaviors of an organization, but those of its suppliers — and theirs — throughout the global supply chain.

The traditional supply chain has often been associated with significant environmental harm, including excessive carbon emissions, unnecessary waste generation, and general resource depletion. Adopting sustainable practices throughout the supply chain can lead to reduced environmental impacts. 

Social responsibility within the supply chain extends beyond environmental considerations. It also encompasses ethical sourcing and labor practices. Ensuring that suppliers adhere to fair labor standards, safe working conditions, and human rights principles is essential in promoting social justice and well-being throughout all levels of the supply chain. 

Embracing sustainability and social responsibility in the supply chain can enhance business resilience and reduce risks. By diversifying suppliers, adopting sustainable sourcing practices, and investing in local communities, companies can reduce their exposure to potential disruptions caused by resource scarcity, geopolitical instability, or social unrest. 

An increasing number of suppliers have embraced sustainability as an operational philosophy, and that has changed pricing and market strategies. By holding suppliers accountable and providing support for improvement, buyers can encourage positive changes in supplier practices. To ensure ethical sourcing and labor practices within the supply chain, buyers should conduct regular supplier audits and assessments. These evaluations should include compliance with labor standards, health and safety measures, and environmental regulations. 

As the supply chain expands globally it may be tougher to determine the sustainability actions of an extended supply base. A supplier’s sustainability plans are an important part of its financial and operational performance. Just as a supplier might have a key performance indicator (KPI) related to their support of supplier diversity, they might also have several KPIs centered on sustainability.

Supply management professionals have the opportunity to shop with a social conscience. It is a power that is often unrecognized, underutilized and marginalized. professional buyers often are caught between social responsibility and economics. 

Those working in low-cost-at-all-cost operations are often forced to make procurement decisions that violate their own personal sustainability and social responsibility beliefs. Far too many in procurement are judged by cost containment and reduction, often giving short shrift to any focus on sustainability. Socially responsible sourcing in many organizations is only acceptable when it can be justified as a cost effective alternative.

Thankfully, the gap between sustainable and low-cost procurement is narrowing. Buyers have greater choices in sourcing sustainable products from suppliers with a strong belief in corporate social responsibility. They need to exercise that discretion. 

Procurement professionals can create and communicate clear codes of conduct that outline their expectations regarding supplier related social responsibility and ethical practices. These requirements should be incorporated into supplier contracts and serve as a basis for collaboration. By setting ethical standards and expectations, buyers can align their suppliers with their companies, and their own, commitment to social responsibility and sustainability.

Sustainability and social responsibility have become imperative considerations in supply chain management. Adopting environmentally sustainable practices, promoting ethical sourcing, and embracing social responsibility not only contribute to a more responsible future but also offer tangible benefits to businesses. Look to those suppliers that support your sustainability interests. As buyers take proactive steps to integrate sustainability and social responsibility into their supply chains, they play a vital role in shaping a more sustainable and equitable global economy.