Sourcing from ethical suppliers

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As a point of differentiation, small businesses can market themselves as being ethical and socially responsible. This entails business practices that show respect for human rights, seek to minimize environmental impact, treat employees and customers fairly, comply with regulations, are not misleading, and give back to local communities.

Building an ethical supply chain is a logical step for small business owners who want to build an ethical and socially responsible business that truly ‘walks the walk’. Even for small business owners who are not interested in positioning themselves in this way in the marketplace, unethical behavior by suppliers is a potential risk that needs to be actively managed.

Small business owners can identify ethical suppliers by asking suppliers for information on their labor practices, materials, and services used in the production process, and their corporate social investment activities. This does not necessarily have to be a formal questionnaire and can take place through casual conversation.

The small business owner can also visit the suppliers’ premises periodically and make general inquiries to find out what other small business owners think of the supplier. Small business owners can also communicate to existing or potential suppliers what they consider to be ethical or unethical behavior, and make clear the terms and conditions under which they are willing to do business with the supplier.

Where the small business owner has a code of conduct this should be shared with the supplier with the expectation that the supplier will abide by that code. Those suppliers willing to adopt new practices should be given the opportunity to do so, with timelines and milestones agreed to in collaboration with the small business owner. Given the power imbalance that may sometimes exist between small businesses and suppliers, persuasion rather than force may be the more sensible (and successful) strategy for small business owners to pursue in their interactions with suppliers.

One of the challenges that small business owners are likely to face is that there is no universally recognized standard of what constitutes ethical behavior. Business practices that may be acceptable in one industry or geographic area may not be in another. Personal standards also differ, influenced as they are by life experiences, religious beliefs, and other factors.

Consequently, setting the bar too high could exclude suppliers who in other ways are a good fit with the small business, making life unnecessarily difficult for the sake of principles.

Post By: Fadzai Munyaradzi

 

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