Whether considering the procurement of hardware, software or access to skilled people, there are numerous benefits to be gained from ethical procurement practices. The number of organisations prioritising ethical sourcing in their supply chain management strategies is certainly on the increase. However, implementation can take time and comes with challenges. In this article, we look at:
Ethical procurement has shifted from a ‘nice to have’ or something just for early social and economic equity adopters; to practice that is simply the right thing to do – Something expected, rather than optional. In the same way that businesses are now focused more than ever on their environmental impact, ethical procurement is an integral part of solid sustainable practices.
The change is widespread and seen in consumers and businesses alike. According to a survey by OpenText, some 81% of consumers claimed that they believed that purchasing ethically sourced products matters. Simply put, to be relevant, organisations now more than ever need to appreciate that cost and quality are only a part of the overall package. Whether B2B or B2C, for brand trust, customer loyalty and reputation protection; businesses need to react to customer expectations and demands.
As part of a sustainable procurement strategy, ethical sourcing takes net benefits to both the buyer (business) and the global community into consideration. In this ever-increasingly digital world, businesses need to make careful, well-informed decisions when choosing a technology partner. This is obviously to identify as an ethically conscientious, humanitarian organisation – protecting others who may not be able to protect themselves and avoiding inadvertently contributing to unacceptable practices. However, it will also protect their organisation against brand risk from exposure to and association with disreputable activity.
A brief scan of any social media platform will quickly identify that people are more confident than ever in calling out businesses that are linked to unethical business practices. Be it environmental, human rights or social values related. Integrity is key and in this digital world, reputations can take massive, immediate credibility damaging blows, affecting customer loyalty, propensity to purchase and employee engagement. These will all obviously result in financial risk in terms of profitability and valuation.
There’s a real balance to achieve that requires careful consideration. Common barriers to implementing ethical procurement are varied.
Some organisations find that driving cultural change in procurement behaviour is challenging and arduous. Shifting mindsets is difficult in any context. Culture is based on deep-seated values. Strategies need to reflect those values. Therefore, businesses need senior-level support to build on pre-existing foundations. Once identified, these can be expanded, enabling better adoption of cultural change.
There is a common perception that policy and process changes, particularly in procurement are time-consuming. Currently, supply chains are already being bottlenecked. Procurement professionals are handling daily delays and shortages – particularly with tech hardware. Financial pressures from rising overheads such as fuel, energy and interest rate increases are adding further strain. Time is precious and there’s a need for resources to be focused on the task at hand.
Technology provides procurement professionals with great opportunities in terms of data collation and analysis. It can:
However, a lack of coherent systems can impede progress when added to a lack of suppliers, assets, and solutions. Not having the right tools in place, combined with the other challenges can make the change seem daunting and difficult to achieve.
Organisations will be able to implement ethical procurement strategies easier with the right technology but need to source an ethical partner to implement that technology. Some may see that as a chicken and egg situation. However, when carefully considering the financial implications, the mid-long term ROI places tech implementation as a constructive starting point, worth the investment in time and money.
Businesses can certainly glean a host of benefits from ethical procurement practices. Risk mitigation – operationally, financially and reputationally – is key. However, the growth potential increases day by day. McKinsey reported that top ESG (Environmental, Social & Governance) performers enjoy faster growth and higher valuations than other players in their sectors. This can be by a margin of 10% to 20% in each case. Additionally, 83% of C-suite leaders and investment professionals state that they expect that ESG programmes will contribute more shareholder value in five years than today.
Ethical, sustainable providers, committed to good corporate and social responsibility will take a more robust, transparent approach to doing business. This is a definite bonus for anyone seeking to do business with them. Organisations can:
The lines between commercial profitability and social conscience have blurred considerable of late and businesses simply can’t afford to look at the purpose of ethical sourcing in isolation. We are all caring humans and have a responsibility to do the right thing. Be that at home or at work. Businesses are gifted a great opportunity to do ‘change for good’. Consumer expectations on businesses to act morally are high. In Edelman’s 2021 Special Report: Trust, the new brand equity, it was reported that 63% of people believe they have the power to force brands to change and that 78% of them wanted to exert that power to make society better. Furthermore, it noted that consumers are 4.5 times more likely to buy if a brand addressed human rights and 3.5x more likely if it takes on economic equality.
The reputational damage from stories that have cropped up in the news over recent years has proven to be a real millstone for the brands with which they’re associated. But the topics beneath the story have a real humanitarian toll which drives a strong emotional response. Women – mothers in third-world countries being exploited due to a lack of education. Dangerous working conditions in ‘sweatshops’ where workers suffer debt bondage, abuse and worse. The story isn’t restricted to developing countries though. Poor employment practices still rear their ugly head. Horror stories float around the internet of well-known brands with toxic work cultures, failing to deal with bullying and inequality, operating unfair pay schemes and ignoring the most basic health and safety protocol. In 2022, it’s hard to fathom.
Sourcing in any context can involve intricate relationships between companies – sometimes multiple companies within a supply chain add to the complexity. For example, a business taking on a solution from a systems integrator where software development has been outsourced. The potential for unethical practices to be involved yet hidden at some point in the chain is omnipresent. The knock-on effect for the purchaser is that they are potentially complicit in (yet unaware of) illegal activities such as modern-day slavery, corruption, or a host of other undertakings.
Managing an offshore team brings a variety of operational intricacies. Time zones, cultural differences and lack of on/offshore integration are all part of this. When introducing extended teams via suppliers into the mix, the considerations become even more complex, particularly around ethical working practices. The level of trust organisations need to have in their partners to deliver on stated values is immense.
People should never be seen as just a resource. Yet it is something that we still see happening, however, the prevalence is still in economically developing countries. Despite more visibility of issues, through G20 country’s Modern Slavery Acts, UN Sustainability Goal 8.7 and widespread media coverage on poor working conditions – particularly in the developing world – the Global Slavery Index still gave a figure of 40 million people affected by this concerning topic.
But is Modern Slavery a topic we know enough about? Modern slavery is used as an umbrella term that covers several different forms of exploitation which can include human trafficking, labour exploitation, criminal exploitation, sexual exploitation, and domestic servitude. Finding out that you are associated with such appalling practices will have a strong emotional toll on any conscientious individual. The ramifications of being involved in such occurrences on a business can be devastating and hard to recover from.
We have already identified that consumers are now more attracted to ethical brands. Each of us in our own right is a consumer, so it is no real surprise that we are broadening this need for value alignment into other areas of our lives. Employment is one such area. There has recently been a shift in approach by jobseekers who are choosing their employers in a similar way to choosing the brands to which they are loyal.
Candidates want to work with ethical businesses that are aligned to their ways of thinking – their beliefs, principles and moral code. According to research by consultancy Global Tolerance, almost half the workforce (42%) now want to work for an organisation that has a positive impact on the world. This is even more prevalent with millennials at 62%. The same report suggested that 36% (and 53% of millennials) would work harder if their company benefitted society. Other industry reports suggest that ethical sourcing makes companies more attractive to employees, contributing towards employee morale, business process efficiency, and employee loyalty. Talent retention is obviously cheaper than acquisition. Additionally, UK hiring plans are on the increase whilst skills shortages are higher than ever (according to Monster competition for talent is high, with 87% of employers saying they’re struggling to fill positions), making employee retention critical.
Businesses need to take ESG and ethical values very seriously to be Employers of Choice. ROQ by way of example firmly believes this. We have transparent values of Straight-talking, Commitment, Passionate and Excellence that define how we work with each other and with our clients. Shared values alongside a shared vision. 100% of our employees feel ROQ Values reflect their own characteristics (as of April 2022). We look for our aligned values during recruitment and continue to nurture them throughout the team member’s tenure. We actively seek straight-talking colleagues with honesty and integrity. We believe this ensures better team dynamics, a positive working environment and a shared passion for positive outcomes for our team, our partners, and our customers.
Procurement professionals now need to factor in even more complexity to their roles – often supported by sustainability experts to help them navigate the intricacies – to identify suppliers that align to their organisation’s values and ultimately don’t put their business at risk.
Choosing the right trusted technology partner with aligned ethics will contribute to your CSR efforts and mitigate brand and financial risk. However, organisations should also consider the wider importance of ethical work practices, for Employer of Choice reputation, staff retention, wellbeing and subsequent efficiency from motivated, trusted people appreciating they are a valued resource.
The model of a truly ethical business is something we should all aspire to. Businesses should act with integrity, demonstrating respect for their customers and also their vendors. Fair buying practices, transparency and payment schedules should be a given. For us at ROQ, that also means a core focus on our values, particularly being straight-talking. We tell our clients the truth, quickly, good or bad. Equally, employees should be valued and treated with respect – opinions heard, communicated with fairly and openly, and nurtured in their development.
The actions of an ethical business will be felt widely across our global community, as growth opportunities for unscrupulous links in the supply chain are forced out, opening the doors for better, fairer treatment of workers around the world.
The topic of ethical procurement and particularly the wider impact of ethical working practices is something that ROQ firmly believes in. We’d like to invite you to get involved our Webinar on 7th June at 11 am, for a deep dive into ethical procurement and a discussion about the challenges facing organisations today. Our special guests will address the challenges and pain points when sourcing technology resources, ethical people management as a resource and the wider importance of ethical work practices.