Ethical procurement policies provide clear guidance for sourcing supplies and establishing internal and external relationships essential for daily operations and long-term growth. Today, more companies realise that providing a high-quality product or service is not enough to gain a market advantage.
What is ethical procurement?
Ethical procurement is a company’s code of conduct that drives everything from hiring and training talent to sourcing cost-effective supplies from socially responsible vendors. Guided by these principles, companies proactively eliminate unethical practices throughout the supply chain. In short, this honour code provides a clear pathway to meet exceedingly rigorous societal expectations.
How does a code of conduct in the procurement process benefit businesses?
A recent study reveals that 82 percent of workers report they “would prefer to be paid less and work for a company with ethical business practices than receive higher pay at a company with questionable ethics.” The research further found that one-third of employed UK workers left a job for ethical reasons. Hiring workers with shared ethical values strengthens workplace policy. Employee morale and brand loyalty also improve.
Enhanced compliance reduces legal risk for businesses
Eliminating unethical behaviours improves compliance in the supply chain. Unethical workplace violations, such as corruption or vendor favouritism, expose companies to legal challenges.
Defending a bad-faith lawsuit could cost a company tens or hundreds of thousands of pounds. Ethical supply management also reduces supply costs, as well as the excessive shrink in the manufacturing, inventory and delivery processes. Purchasing policies that mitigate risks enhance regulatory compliance. And, these policies work in conjunction with internal policy compliance that enhances internal workflow efficiency and quality control.
Ethics drive operational efficiency, productivity and financial performance
Building brand loyalty that results in repeat purchases is the goal of every business. Capturing that loyalty demands giving consumers what they expect and deserve.
Consumer surveys demonstrate the importance of transparency and brand loyalty. Seventy-six percent of shoppers say they will refuse to buy from businesses that do not share their ethical standards.
Furthermore, almost three-quarters of consumers (74%) say that they purchase products from businesses with shared values.
Ethical procurement is essential for brand loyalty
While maintaining a solid reputation is vital for business success, implementing ethical procurement delivers significant financial rewards as well.
By proactively managing the supply chain, ethical sourcing and manufacturing processes become more efficient and offer potential cost transformation. Environmentally responsible purchasing has been proven to increase net income and reduce overhead costs by more than 10 percent.
Conclusion: Leveraging the Power of Ethical Procurement
When you consider the benefits of implementing sound ethical procurement policies, it makes sense to embrace the concept. From streamlining operations to improving employee engagement, the benefits provide a clear path to ethical growth and stability.