Responsible Sourcing

Every product has health and environmental impacts as a result of manufacture, use, and ultimate disposal. Today's consumers increasingly demand high-quality as well as safer, ethical, “green” products. This cannot be achieved by a company's processes alone, but depends on the processes of its suppliers. Businesses increasingly recognize that focusing on price and quality of inputs is one-dimensional, and sourcing is not only about unit cost and just-in-time. Responsible sourcing integrates the three pillars of sustainability—economic, environmental, and social—into the procurement process. It is an integral part of effective supply chain management, bundling health, environmental, social, and ethical considerations with the routine purchasing processes of price, product performance, and delivery schedule.

Responsible sourcing addresses upstream activities from raw material extraction to final inputs and should be complemented by sustainable operations and by extended producer responsibility addressing downstream activities such as use and recycling of products. Responsible sourcing builds on a variety of related concepts from traditional purchasing practices and must involve effective communication between buyer and supplier.

Responsible sourcing can stimulate demand for more sustainable raw materials and products leading to improved supplier efficiencies, thereby assisting in developing and strengthening markets for such products. Companies and governments have thus begun an attempt to foster sustainable behavior using their purchasing power, simultaneously reducing risks associated with their purchasing decisions.

Globalization has facilitated outsourcing to developing/emerging countries in search of a low-wage advantage. Through outsourcing, companies attempt to distance themselves from responsibility for the impact of their own operations. However, they are ultimately responsible for activities in their supply networks—from working conditions to corruption to environmental impacts—and should be held accountable. As the supply chain becomes longer and more complex, there is a greater likelihood of environmental, as well as health and safety, impacts. Corporations often don't have necessary information about supply points in a given country, and the scope of any monitoring often does not extended to raw material suppliers.

Effective supply chain management can allow businesses a competitive advantage, especially in sectors such as clothing, footwear, electronics, or food products where production is largely outsourced. For some companies, improving social and environmental standards in the supply chain has become a natural extension of their commitment to corporate responsibility, forming part of their overall business model. Other companies have continued to pay close attention to current trends in the fields of corporate social responsibility and responsible sourcing as part of their risk management strategy. Companies can demonstrate leadership by clearly stating ethical and responsible values and visions in their sourcing policy and strategy, outlining goals and implementation of the supply chain social responsibility program, and using sustainability reporting to communicate actions and their impacts to stakeholders.

Companies develop their own approaches demonstrating voluntary commitment to responsible sourcing. Such approaches include the use of codes of conduct, supplier questionnaires, social compliance auditing, and supplier capacity training as sources of supply chain monitoring. Corporate codes of conduct are often regarded as part of supply chain policy and are one of the most widely used formats expressing corporate social [Page 425]responsibility commitment. They typically state ethical standards the company claims to uphold—focusing mainly on local labor laws, working conditions, and the environment—as well as communicating company expectations to suppliers regarding wages, child labor, health and safety, and workers rights.

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