What is responsible sourcing?
Olivia Thomson
Communications Manager
21 Sep 2020
About 5 mins
What does “responsible sourcing” mean, what does it involve and what are the benefits for a business? Learn about this key element of corporate sustainability with our helpful overview.
What does “responsible sourcing” mean?
Responsible sourcing is an approach to procurement and supply chains. It’s when an organisation actively sources products and services for their operations in an ethical, environmentally sustainable and socially conscious way.
This means a company works to ensure its business practices — in its own business and across its supply chain – don’t have a negative impact, or have a positive impact, on people and the environment.
Why is it important?
Businesses today source products and services — both those that they sell, and those they use — from all over the world.
Businesses have a responsibility to understand the impact their activities and sourcing decisions can have, and to limit negative impacts. This includes understanding the impact of suppliers’ operations. This corporate or supply chain responsibility is a legal requirement in many countries for companies operating within a country or selling to its people.
However, working conditions and sustainability risks vary greatly across global regions. As supply chains have become more international, the importance of sourcing responsibly has grown. The complexity of these networks today makes it extremely difficult for businesses to know everything that happens in a globalised supply chain.
How can a business source responsibly?
To source responsibly, businesses need to understand how their business practices and their suppliers’ operations may be affecting people and the environment. Companies must look at different areas of business operations, including labour standards, health and safety, business ethics and environmental impact. They assess the social and environmental risks within these areas and take steps to address them.
Sedex recommends that a responsible approach to sourcing is guided by established principles from international development organisations, such as:
- The International Labour Organization’s (ILO) Fundamental Principles and Rights at Work. These principles cover core workers’ rights such as freedom of association, the elimination of forced labour and no discrimination. Countries confirm their commitment to these by building them into national legislation.
- The United Nations Guiding Principles on Business and Human Rights (UNGPs). These provide a framework for the measures nations and businesses should implement to protect and respect human rights.
Sedex helps our members to follow these guidelines and conduct supply chain due diligence. Our tools and services enable businesses to understand and mitigate the risks of negative impacts within their supply chains.
What are the benefits for businesses?
Sourcing more responsibly goes beyond legal requirements on business practices (though this is an important factor). Responsible and sustainable sourcing practices bring operational, reputational and financial improvements.
- Comply with national and international laws, securing the “social licence to operate”. Operating responsibly helps a company to meet or exceed the requirements set by laws. Failure to comply with these laws can result in sanctions being imposed on a company, in heavy fines or even imprisonment for company officials. Even without these sanctions, a poor reputation may affect a company’s ability to hire good people or get local authority permission to operate in an area.
- Protect business reputation and be an attractive investment prospect. Business practices that exploit people or the environment are a huge reputational risk. Poor practices and mistreatment of workers can turn into international scandals, generating significant negative press coverage and deterring both consumers and investors. Operating responsibly protects companies against these risks.
- Better business performance with reduced operational costs. Protecting workers by providing safe conditions reduces injury rates, absenteeism rates, employee turnover rates and worker error rates, all of which cost a company. Academic research has shown that companies with robust sustainability practices demonstrate better operational performance — which ultimately translates into cashflow.
Businesses can also be powerful agents for good, having a positive impact on workers and the environment. They can improve workers’ physical and mental wellbeing (building a more resilient workforce) and can help to safeguard resources and ecosystems for the future.
Discover the return on investment of responsible sourcing – read the study.
G’s Fresh – protecting workers’ rights and reducing exploitation risks
Sedex member G’s Fresh is a fresh produce grower and supplier to major UK and European retailers. They have farms and production facilities throughout the USA, UK, Europe and Senegal. Over the past 30 years, G’s Fresh has championed labour and human rights within the food industry.
G’s current responsible sourcing strategy is designed to protect workers’ rights and reduce the risk of labour exploitation within their operations. As part of this strategy, G’s uses Sedex to monitor ethical compliance standards across their global supply chain.
Their strategy has four areas:
Mitigation: Developing efficient labour management structures that protect both workers’ rights and business reputation. This includes creating ethical policies and procedures to manage labour risks correctly.
Detection: Implementing a collaborative approach to reporting at all levels of the business, to identify any breach of standards at the earliest stage. This includes creating ways for grievances to be reported, and providing channels for workers to anonymously report potential cases of exploitation, which are then investigated.
Management: Promoting best practice for management on any ethical or labour issue. This includes having a central Ethics department to develop, drive and manage a strategy for labour issues.
Ownership: Providing information and driving skills across the business to uphold ethical standards and company values.
This strategy has produced tangible benefits for the business’s reputation, its workforce and the communities where G’s operates. It has helped G’s to improve staff attraction and retention, and has significantly increased awareness of modern slavery throughout its workforce (including supply chain workers).
