What does ethically sourced mean?
Ethically sourced means that products and services from each point of a business’s supply chain are obtained in an ethical way, which includes upholding rights, decent working conditions, health and safety, good business ethics and more.
Whether you are a manufacturing company, a food processor, a retailer, or any company that sells a product or service, you rely on a supply chain to source the things you need to deliver what you sell.
Ethical sourcing definition
Ethical sourcing is an approach to sourcing and supply chains. Sourcing ethically means that when businesses purchase products from suppliers, they consider the impacts those products have on the people and communities who create them.
Often, the further you go down the supply chain, the less visibility you have over ethical risks, like poor working conditions and child labour. So, it is important to have complete visibility and responsibility for each phase of your supply chain. For your product or service to be ethically sourced, it means meeting certain ethical standards – for example, that your organisation, your direct suppliers, and your entire supply chain have decent working conditions, good business ethics, and fair wages.
Companies that prioritise sourcing ethically take responsibility for the impact that their business decisions may have on the people and communities of their supply chains. It is their due diligence to not only ensure that their business has a positive, rather than a negative, impact on the world, but that the businesses they source from do as well.
How does it differ from responsible or sustainable sourcing?
There is not an official, agreed-upon differentiation between the terms responsible sourcing, ethical sourcing, and sustainable sourcing. Many people use these terms interchangeably to mean that the products and services from each point of a supply chain have been obtained through ethical, environmentally sustainable, and socially conscious ways.
However, the term ethical sourcing tends to have more of a stress on the social impact and humane working conditions within supply chains over the environmental side. Sustainable sourcing tends to emphasise the environmental impacts of a supply chain. Responsible sourcing is an umbrella term that refers to all aspects of both ethical and sustainable sourcing.
Ethically sourced products vs. Fairtrade, organic, and cruelty free
It has become increasingly common to see companies marketing their products and services as ethically sourced, especially in industries like clothing, diamonds, coffee, and palm oil, which have well-known histories of unethical practices. But with so many product labels that have similar meanings to “ethically sourced,” it can be hard to keep track.
A makeup product may be labelled as cruelty free, which usually means that they are not testing on animals to make the product, but that does not cover labour rights and the conditions that the human beings involved in making the products experience. It is important to know the difference between each of these labels, scrutinise what companies are saying, and hold them accountable for all kinds of ethical considerations when creating the products and services that you pay for.
Here is what each of these terms mean and how they are typically used:
- Ethically sourced is not a coined label with a standard legal definition. There is no official institution approving its use in consumer marketing. Because ethical sourcing is not a term from an institution with a specific set of standards, it can encompass a wide range of ethical considerations.
- Fairtrade is a global certification system of farmers and workers used in almost 80 countries. Companies can receive the Fairtrade certification for their product when they meet the Fairtrade social, economic, and environmental standards for the production and supply of the product. When a product has met this standard and received the Fairtrade certification, the Fairtrade label will appear on their products packaging.
- The term cruelty free is most widely used by cosmetic companies to say that the product and the product ingredients were not tested on animals when being manufactured. It does not necessarily mean that the product is vegan, which refers to whether there are ingredients from animals in the product. In many countries, like the United States, there is no standard legal definition of cruelty free, and no institution approving its use in consumer marketing. In the European Union, selling products that have been tested on animals or that have ingredients that were tested on animals was banned in 2013, making the label “cruelty-free” redundant and unnecessary.
Organic has many different definitions depending on the product and the source. In the US, the label “organic” is governed by the United States Department of Agriculture (USDA), and it means that federal organic standards for the growing and processing of foods are met in terms of soil quality, animal raising practices, pest and weed control, and use of additives. The EU has their own certification for the organic label. Unlike ethical sourcing, the term organic never refers to working conditions or labour rights.
Ethical sourcing legislation
Many countries have established their own legislation for ethical sourcing, including the EU as a whole, the UK, Australia, France, Germany, India, Italy, the Netherlands, Norway, Switzerland, and California within the US.
The UK became a leader in ethical sourcing legislation by establishing the UK Modern Slavery Act in 2015. The Act sets legal requirements for companies to identify, prevent and mitigate modern slavery in their own operations and supply chains.
While the United States as a whole is far behind Europe in this sort of legislation, California passed the California Transparency in Supply Chains Act in 2010. This Act requires large retail sellers and manufacturers who do business in California to annually disclose their efforts to eradicate human trafficking and modern slavery from their supply chains.
How businesses can source ethically
What steps should businesses be taking to source more ethically?
Ultimately it comes down to due diligence. Companies should assess their suppliers and look at the inherent ethical risks in their supply chains. For example, if you are buying palm oil, it is known that there are more environmental risks in that industry. If you are buying from a particular region or country that has less legal protection for workers, that is also an inherent risk.
After identifying the parts of your supply chains that are ethically riskier, you can then focus on understanding the employment conditions and workers’ experiences at individual sites. You can do this with activities including risk assessments, questionnaires, on-site social audits like SMETA (Sedex Members Ethical Trade Audit), and surveying or interviewing workers.
Once you have collected this data, you can take the results and identify the ethical issues at individual sites and use this information to create a corrective action plan to help your suppliers improve conditions for workers.
How Sedex can get you started with ethical sourcing
Using technology to assist with your ethical sourcing program can help your activities be more efficient, which could save you money in the long run. Sedex’s tools and services allow businesses to understand and manage the risks of negative impacts within their supply chains. Here are some of the ways we can help you:
- Sedex’s Self-Assessment Questionnaire (SAQ) gathers data about activities, working conditions and work sites from businesses.
- Our risk assessment tool helps you assess ethical risks across your supply chain. Study inherent risks in relevant countries and sectors and build custom risk profiles for every work site that you have data for.
- Our ethical data exchange platform allows you to access, store, share, analyse and report on supply chain information, including data from the above tools.
- And if you are not sure where to begin, Sedex’s Consulting service can help you identify and develop a plan.
Interested in getting started with ethical sourcing?