The role of technology in guaranteeing ethical supply chains

There is a fundamental conflict at play between the intention to have fully measurable, ethical supply chains, and the practice of doing so.

This is because ethics, when it comes to supply chains, are not homogenous to all sectors. Nor are they exclusively financial in terms of how they are measured. Patagonia, an American outdoor clothing company, has built a very strong reputation for being ethical, environmentally friendly, and using ethical sourcing. This positive reputation only strengthens its brand, and gives conscientious customers more incentive to buy. Ethics have far broader connotations, relating to labor conditions as much as the environment and the prevention of corruption, and are very hard to pin down, the further through the supply chain you travel.

In today’s internationally-connected business environment, global visibility, standardization and credibility are no longer optional. Companies know that they need to understand the ethical and sustainability working practices of each and every supplier connected to their chain. If companies cannot monitor the ethical or responsible sourcing practices of their suppliers, it will be difficult to manage the suppliers’ overall performance.

When discussing ethics in the supply chain, experts generally focus on a few key areas: freedom of employment; child labor; working conditions; pay and working hours; non-discriminatory treatment; and corruption and sustainability. But it covers far more.

A recent example happened earlier this year, when the Suez Canal crisis hit several supply chains in a number of ways, the obvious one being a significant delay in delivery times, resulting in low stock for a number of organizations. But, for the global coffee supply chain, it had further reaching ethical implications too. Jacobs Douwe Egberts (JDE), which owns brands including Carte Noire, Kenco and L’Or, saw its certified coffee from Asia and Africa held up meaning it was no longer be able to claim its products were Rainforest Alliance certified.

Stretching a supply base globally brings about many positives, but with increased exposure comes increased risks. What one country or continent values as a vital code of ethics may be less of a concern elsewhere. For example, some countries may value environmental issues, such as greenhouse gas emissions, as an important ethical matter, whereas others may not. This is driven by the society and culture in which the organization operates.

With this in mind, and knowing that companies are relying increasingly on global, more complex supply chains, their needs for verifiable ethical practices and supplier transparency grows.

Self-imposed and self-governed policies, while a positive step, simply aren’t enough to guarantee such extensive ethical compliance. Application or technology however, in particular the implementation of digital supply networks, has the potential to drastically improve global compliance, and promote better ethical and sustainability standards.

Imagine if all supply chains had digitized, automated ethical checks written into them? What if buyers or Procurement teams could have peace of mind that their suppliers meet the same Environmental, Social, and Corporate Governance (ESG) criteria they deem essential? Turkish company Jayanti Herbs & Spice is just one example of a company that considers ethical sourcing the key guiding pillar of sustainability, with its afforestation in the Oregano Supply Chain project in Denizli, Turkey.

New levels of transparency and accountability are possible by implementing a supplier network using a virtual connection - so long as that connection runs to and from every member of the chain.

A vital component in making this workable is keeping evaluation metrics comparable, standardized, and centralized. Not an easy task, given the aforementioned disparity between ethical considerations country by country. But by adopting a technologically-led process built around data and statistics in networks, it could improve competitor credibility and relationships, with competition often a strong motivator to encourage ethical performance.

Shared responsibility too, is a factor not to be underestimated. Within complex global supply chains trading partners have a role to play in ensuring ethical operations. Having access to data on-demand is critical to these responsibilities. This level of accountability, where companies can no longer avoid what the data shows, means they cannot absolve themselves of what happens at any point in their sourcing process. Business partners will demand visibility into whom they are dealing with, and their business practices, before building relationships and they will know that this information is available, accurate and persuasive.

This challenge can be mitigated against with the right deployment of the right technology and data management.

In order to guarantee ethical sourcing processes, organizations must have access to data about ethical working practices. They must collaborate and share with stakeholders and customers whenever appropriate and have clear, complete and unfiltered insights into information from every part of the supply chain.

Implementing a complete Source-to-Pay process can also help ensure an ethical supply chain. Deploying this, including streamlining and automating process for financial and procurement offers enhanced control, visibility and authorization of spend, allowing for greater control of supplier management.

Supply chains hold a more strategic role within corporations than ever before. So, while calls for more ethical chains are loud and widespread around the world, it is only though the adoption and implementation of sophisticated technology that can provide unequivocal transparency, that they can be guaranteed.