• Compliance
  • Supply Chain
  • Consumer Goods

Business Ethics Has Growing Impact on Customer Purchasing, Supply Chain Concerns

Written by Michael Clark
November 14, 2016

Consumer opinions about business sustainability and ethics are influencing the supply chain.

Consumer opinions about business sustainability and ethics are influencing the supply chain.

The pattern of consumers valuing sustainable and ethical decisions made by companies is nothing new in the business world. The notable shift involving this long-term trend has to do with how many consumers are either passively influenced by information about sustainability or actively seek out such data before making purchasing decisions. Because the desire to purchase ethically sourced, produced and distributed products is generally gaining strength among the public on a worldwide level, those preferences have a larger impact on operations in general.

That higher visibility of ethical decision-making by companies includes a range of workflows and components commonly viewed as being more in the realm of business-to-business operations and less important to individuals. That includes the supply chain, inventory control, warehouse management and many associated practices that were nearly invisible to consumers in the past.

Majority of Consumers in Developed Countries and Worldwide Influenced by Ethics

A recent poll conducted by HSBC Holdings presented findings that allow organizations to determine the level of interest consumers have in ethical business practices and the actions they will take in response. According to a poll conducted by Trajectory Global Foresight Surveys for HSBC, 58 percent of consumers in advanced countries – contrasted with emerging nations in the survey results – classified ethical brands as important or very important to their purchasing decisions. That means close to 6 of every 10 potential customers are swayed to a medium or large degree by the way businesses address issues related to sustainability, ethical production and delivery and similar concerns.

For enterprises that do business in emerging countries as well as more-established ones, the consumer preference for a set of business ethics is even stronger. In all, 77 percent of consumers in developing nations view ethical business decisions as having an important or very important influence on their purchasing habits. The trend is stronger in developing nations in part because, as HSBC pointed out, people with increasing incomes are looking for ways to differentiate themselves from others in the same economic and social brackets.

“There is a notable demand for green consumerism in Asia, particularly with wealthier consumers, who are looking to differentiate themselves not just through consumption alone but through some form of improved consumption,” said Francis Sullivan, HSBC deputy head of global corporate sustainability, in the report. “Companies must engage more on ethical issues, which are complex. Good companies engage people in debate and don’t just respond to customer questions. Open and honest two-way conversations with consumers are the way to ensure the ethos and reality of how a business behaves is sustainable.”

While these considerations are more prevalent in developing nations, a strong majority of consumers in established nations like the U.S. carry similar sentiments. The advice Sullivan shared is important for companies to consider as they look for ways to appeal to consumers and maintain relevance in a changing market, both on the national and global levels. For many organizations, that means looking at the sustainability and ethics of less immediately visible components like the supply chain.

ALSO READ: Geopolitical Risks and the Global Supply Chain »

Understanding What Drives Ethical Supply Chain Considerations

Supply Chain Dive discussed the need for businesses to consider all aspects of operations, including the elements that stand at the very end of a company’s reach, when assessing sustainability efforts. With access to a wide range of diverse information provided by many sources, consumers have never been more informed than they are in the present day. If a company is found to work with a partner or supplier that has a serious issue in terms of ethics or sustainability, this can have substantial negative effects. That’s true even when a business is operating with the best intentions and isn’t aware of a partner’s problems.

Prioritizing more sustainability and ethical considerations in supply chain efforts can mean investing more money into them. Higher costs can be incurred by a variety of needs, recommendations and actions, from thoroughly vetting current and potential suppliers to using an expensive but significantly more environmentally friendly mode of transport for raw materials or finished goods. Just the research needed to make an informed decision about a more ethical or sustainable choice can require significant time, labor and expense. To account for these costs, businesses should look to areas where efficiency and effectiveness can be improved in the supply chain.

Utilizing automated data collection and enterprise mobile solutions to improve supply chain operations and cut down on costs is one such strategy. Using technology to improve warehouse and supply chain logistics management, reduce turnaround times and make other advances internally is generally a good approach for businesses looking to cut down on inefficiency and become leaner. When the costs of increased consumer focus on ethics and sustainability in the supply chain comes into play, this method can help organizations make positive changes as well.