What is responsible sourcing?
What does “responsible sourcing” mean, what does it involve, and what are the benefits for a business? Navigating the complexities of responsible sourcing can be tricky. Below we provide an introduction to responsible sourcing and what it means for business.
What does “responsible sourcing” mean?
Responsible sourcing is an approach to sourcing and supply chains. It’s when an organisation actively and consciously sources and procures products and services for their operations in an ethical, sustainable and socially conscious way.
This means that an organisation will ensure its business practices – both in its business and across its supply chain – do not have a negative impact or have a positive impact on people and the environment.
Why is it important?
Businesses typically source products and services – both those that they sell, and those that they use – from all over the world.
Businesses have a responsibility to understand the impact their activities can have, and to limit any negative impacts. This includes understanding the impact of suppliers’ operations. This responsibility is often a formal legal requirement for companies operating within a country or selling to its people.
However, working conditions vary greatly across global supply chains. The complexity of global networks makes it extremely difficult for businesses to know everything that happens in their supply chain.
What does responsible sourcing involve?
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 (e.g. labour standards, health and safety, environmental impact), understand the social and environmental risks within these areas, and take steps to limit these risks.
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 for 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 its members to follow these guidelines and conduct supply chain due diligence. Our tools and services allow 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 relating to business practices (though this is an important factor). Responsible practices can bring operational, reputational and financial improvements.
- Complying with national and international laws, securing the “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.
- Protecting business reputation and being 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 and providing safe working conditions reduce injury rates, absenteeism rates, employee turnover rates and worker error rates, all of which cost a company. Academic research1 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, and can help to safeguard resources and ecosystems for the future.
Example: G’s Fresh