The challenges of building ethical supply chains on a global scale

Consumers are demanding more social and environmental responsibility from producers than ever before. Building an ethical supply chain for your business is not only doing good – it’s good business.

Companies are under growing pressure to prove their sustainability credentials. Key to this is the creation of a transparent supply chain, one that clearly demonstrates a commitment towards social and environmental goals. But the sheer scale and complexity of today’s global supply chains makes this a challenging task.

What is an ethical supply chain?

An ethical supply chain focuses on the impacts supplied products have on the people and communities who create them. Companies that support an ethical supply chain incorporate social factors such as human rights, health and safety, workers’ conditions and governance into their decision-making processes. They also factor environmental considerations into how they do business across the world, as a necessary element of what it means to be a responsible business.  

Why now?

Governments, consumers, NGOs, and other stakeholders are placing increasing pressure on companies to divulge more information about their supply chains. The reputational risk of failing to meet these demands can be high. One only needs to think back to the infamous ‘horsemeat in burgers’ scandal that rocked Europe in 2013, with brands ranging from Burger King to Tesco suffering huge reputational damage for unknowingly selling contaminated meat. 

Operational costs from issues with poor ethical performance are also a key factor – for example shipments that are missing origin documents are being held up and turned away at ports, causing costly disruptions that ripple through supply chains. And consumers and NGOs are now quick to call out companies that fail to walk the talk.

Food companies are facing more demand for supply-chain-related information about ingredients, food fraud, animal welfare, and child labour (*1). One study found that 93% of consumers surveyed believe that social and environmental issues are more critical than ever, and 88% percent now consider the sustainability impact of a brand and its supply chain before buying (*2).   

Indeed, searches for sustainable goods have increased globally by 71% since 2016 across all retail sectors (*3). In the food industry, almost half (49%) of global consumers now consider sustainability when purchasing food and beverages – particularly in the dairy, meat, and plant-based equivalent categories (*4).  Most notably, 83% of Gen Z buyers – who are the emerging big spenders – want brands to take a stance on social issues (*5) and are more willing to seek out goods differentiated as sustainable.

Simply put, prioritising fair pay for workers, tolerable workloads, and ethical work conduct, along with sound environmental practices, all makes good business sense.

Rising to the challenge

To build more ethical supply chains, companies need better visibility into how the producers they work with operate. Key to this is access to reliable, timely data.

Yet the problem is, supply chains were not designed to be transparent. Historically, suppliers may have feared that divulging too much information could undermine their competitive advantage or expose them to criticism. And, even today, relevant information such as details of upstream supply chain practices may not be collected, or if it does exist, it may be incorrect.

Yet keeping a close watch on all elements of the supply chain is imperative. For example, greater transparency may have helped prevent the 2008 baby formula scandal in China, which saw the chemical melamine slipped into the product to mimic protein – leading to the tragic deaths of six infants and serious illness in tens of thousands of others. In this case, inadequate provenance checking exposed these babies to serious risk.

Adding to the issue is the fact that, when supply chain data is collected, its quality is sometimes compromised by being self-reported, without verification, stored in different places, or by using different schema or outdated technology. Some organisations collect retrospective, static data on supplier sustainability, but have no way of using the collected data to inform and drive supply chain sustainability improvement activities. 

Collaboration is key

To understand the current ethical position of your supplier or grower base, you need full transparency and visibility into their supplier networks and assurance processes. 

Understanding what to look for and how to identify poor standards is the first step in creating an ethical supply chain. Then, working in partnership with suppliers and verifiers to improve standards is the next step. Instead of closing the door to ‘unethical’ suppliers – which can reduce the available pool of suppliers and push up prices – it can be more beneficial for all involved to work collectively to improve systems and processes. Consider that some suppliers that have not achieved a desired ethical standard may be highly willing to reach that level, but without the immediate means or know-how to fulfil all the administrative and practice obligations of the standard. Upskilling and other support mechanisms makes more commercial sense.

To get there, companies and suppliers need to collaborate. They need to share ethical practices, certifications, contracts, shipping information, and more. And they need to jointly resolve issues and challenges on the path towards creating more ethical supply chains. Get these things right, and everybody wins. 

TELUS Agriculture & Consumer Goods can help. We support the production of safer, more sustainable food, with traceability and transparency on ethical sourcing, using technology that delivers insights, drives better decisions, and enables collaboration across global supply chains. Find out more here.