Tech Bytes: Three Business Reasons to Track Ethical Sourcing

Retailers invest in a variety of systems to track a wide range of supply chain and sourcing activities, but often overlook the need for technology to track ethical sourcing. Ethical sourcing refers to ensuring that products retailers sell do not involve exploitation or mistreatment of workers, unsafe facilities or production processes, stolen or counterfeit goods, or environmental hazards.



Technology used for tracking ethical sourcing can include RFID tags that verify product origins and chain of custody, direct video monitoring links to overseas facilities, databases that store, update and cross-reference information on known sourcing offenses and offenders, and secure, real-time mechanisms for anonymous reporting of violations.



Beyond any basic moral obligations retailers have to ensure the products they sell have ethical origins, there are sound business reasons to invest in this kind of technology, as well.



Here are a few:



Avoiding Lawsuits

Retailers who sell products that originate from questionable sourcing practices may expose themselves to lawsuits. Recently, a consumer filed suit against Costco for allegedly selling seafood from Thai providers that use slave labor and then misleading the public about the practice.



Earlier this year, retailers including Wal-Mart, J.C. Penney and The Children’s Place were named in a lawsuit resulting from a 2013 collapse in a Bangladesh garment factory that killed more than 1,000 people. Even if unethical sourcing conditions occur outside of the U.S. or a retailer’s direct control, retailers may still find themselves facing monetary damages.



Millennial Demands

Retailers love millennials – there are roughly 75 million of them and they are entering the sweet spot where they have a lot of disposable income and have not yet established lifetime brand loyalties.



Millennials are often cited as being different from previous generations. One important difference is their level of interest in the origins of the products they buy. According to Nielsen research, 51% of millennials are both willing to pay more for sustainable products and check packaging to ensure positive social and environmental impact.



No other consumer generation comes close to these levels of dedication to ethical sourcing. Upfront investment in technology can reap dividends for years to come in patronage from responsibly-minded millennials.



Ethics Equals Efficiency

Tracking of ethical sourcing practices inherently provides a side benefit of increased efficiency and oversight of sourcing and supply chain operations. Technologies that certify the origins of every item in a retailer’s supply chain also help to eliminate counterfeit and stolen goods. In addition, this type of transparency makes it more difficult for merchandise to disappear from the supply chain between source and shelf.



It also stands to reason that the type of sourcing providers who operate unsafe or inhumane facilities and conditions may not be the most reliable business partners. Eliminating these shady operators from the supply chain in favor of more ethical partners should result in higher-quality products that are delivered on time with fewer complications.

When a technology investment pays dividends that are both financial and karmic in nature, that investment is worth making.