Sustainable sourcing, or ethical sourcing, is the integration of social, ethical and environmental performance factors into the process of selecting suppliers.
Sustainable sourcing is critical across all industries. As supply chains continue to expand globally into developing countries, seeking lower costs and greater production capacity, they expose companies to an even wider array of risks. These risks include the possibility of supply disruption, cost volatility, threats to brand reputation and challenges related to compliance with local laws and regulations. Companies must meet the growing expectations of stakeholders (customers, shareholders, employees, non-governmental organizations, trade associations, labor unions, government observers, etc.) and take responsibility for their supplier’s environmental, social and ethical practices. Thus, companies are increasingly incorporating sustainable sourcing into their procurement and supply chain management process to better understand and manage risks while tapping into significant opportunities.
The ultimate goal of sustainable sourcing is to build strong, long-term relationships with suppliers. Improving performance on environmental, social and ethical issues is vital to developing such relationships. Working toward this has become an extension of a company’s commitment to corporate responsibility and, as such, a key component of the overall business structure and model. Effective supply chain management can foster and build competitive advantages for companies, especially in sectors like food and clothing where production is mainly outsourced.