Ethical and Social Purchasing

Background

With the globalization of the economy and off-shoring of manufacturing and servicing, the purchasing spotlight is focused on “ethical sourcing” – the integration of human rights, health, safety and environmental considerations in a company’s supply chains.  A concurrent social responsibility purchasing trend is towards local purchasing and purchasing to support a local community’s economic development objectives to foster social and economic inclusion, referred to as “social purchasing” in this guide.  Rolled up with green purchasing, ethical sourcing and social purchasing become “sustainable purchasing”:  the integration of social, ethical, and environmental considerations in buying decisions.  Green Purchasing is addressed in another section; this section focuses on Ethical Sourcing and Social Purchasing.

Ethical Sourcing

Ethical sourcing is the process by which businesses seek to improve the working conditions of the people who make the products they buy.  Often these workers are employed in factories around the world, many of them in developing countries where laws designed to protect workers’ rights are inadequate or un-enforced^{Footnote 1}.  Typically, a business committed to ethical sourcing will adopt a “Supplier Code of Conduct” which sets out their minimum expectations of suppliers regarding wages, hours of work, health and safety and environmental conditions.  Supplier adherence to the codes is regularly monitored and gaps in performance signals the need to engage suppliers in programs that can improve their performance.  Such efforts support healthy workplaces and communities in developing countries, while helping the business to manage its reputation risks and improve employee morale. 

Social Purchasing

Businesses seeking to integrate social responsibility into their purchasing program have a number of approaches to consider, in addition to ethical sourcing, such as:

• social enterprise purchasing
• Aboriginal purchasing
• local purchasing
• fair trade purchasing

Unlike charitable donations which are a cost to the organization, social purchasing can be a way to contribute to your social goals without generating additional expenses.  It basically involves using a common business practice – purchasing – to channel some spending towards businesses that generate social benefits.

Social Enterprise Purchasing

Some non-profit organizations, in an effort to increase their funding base or to create employment opportunities for people with employment barriers, launch “social enterprises” – non-profit businesses whose purpose is to advance a social cause.  Small businesses – and large – can consider opportunities to source goods and services from social enterprises in order to directly enhance local social conditions.  Printing services, janitorial cleaning services, packaging, florists, customized wood products, property maintenance, and construction and renovations are just some of the social enterprise sourcing opportunities available in Canada.  More can be found at the Social Enterprise Marketplace, a directory of social enterprises from across Canada.

Toronto-based Tinto Coffee House sources its bread from local social enterprise St. John's Bakery. The organic artisan bakery provides employment for people with employment barriers seeking some work experience. Bakery workers have included refugees, people struggling with addictions, people with emotional troubles or mental illness, single parents struggling with poverty and people with developmental disabilities. Revenue from the social enterprise supports the St. John the Compassionate Mission, which provides meals, support and programs to homeless and vulnerable individuals and families.

Aboriginal Purchasing

Businesses located in regions where there is an Aboriginal (First Nations, Inuit, Métis) population may wish to find ways to support Aboriginal economic development and job creation by sourcing directly from Aboriginal-owned firms.  Industry Canada provides a list of directories of Aboriginal firms in Canada.

Lyall’s Drafting & Design Ltd. is an Inuit-owned professional design consulting firm, offering computer aided drafting & design support services to the engineering industry. Located in Happy Valley-Goose Bay, Newfoundland, they work to support aboriginal businesses through their sourcing practices. They purchase everything they can from other local aboriginal businesses, including:

• Computer and technical equipment from Labrador Specialty Services Inc.
• Office supplies from Mokteck 2000
• Courier services from Innu Mikun Airline
• Promotional products from Doris's  Designs & Engraving

Local Purchasing

“Buy-local” is the means by which a business gives preference to local suppliers.  In so doing, a business can help to “increase local tax revenues and civic infrastructure, local jobs, local economic diversification and enhanced community resilience while reducing the environmental burden of shipping goods long distance”^{Footnote 2}.

To support farmers and the local economy, Vancouver’s Small Potatoes Urban Delivery (SPUD), an organic grocery home delivery service, sources over 50% of its products locally, compared to 15-20% local products found in the average grocery or natural foods store.^{Footnote 3} The company publishes “food miles” indicating the distance that products travel, and profiles local suppliers on their website, so that customers can buy as close to home as possible, and get to know the farmers that produce their food.

Fair Trade Purchasing

Fair trade products are those which have been third party certified as paying producers in developing countries a “fair wage” to support their families and contribute to the economic development of their local communities.  Fair trade also often supports access to loans and technical assistance, health care and education, training, and environmental farming practices.  Typical fair trade products include coffee, tea, sugar, cotton, fruit, flowers, chocolate and cocoa.  In 2008 the Fairtrade Labelling Organizations International estimated that “over 7.5 million producers and their families were benefiting from fair trade funded infrastructure, technical assistance and community development projects worldwide”^{Footnote 4}.  By buying fair trade coffee and tea for your lunchroom, for example, your business can directly support sustainable livelihoods in the third world. 

There are other ways to support your social goals through your purchasing program, depending on your priorities.  For example, you could also source from minority-owned firms, firms owned and operated by people with a disability, women-owned businesses, etc.

Action

See Green Purchasing for general ideas on establishing a sustainable purchasing program.

Specific to ethical and social purchasing, you could start by identifying some low-hanging fruit areas to focus your initial efforts, such as buying fair-trade coffee or switching to a local supplier.

Beyond these quick wins, you will want to think through a broader approach, which will depend on the nature of your particular supply chain, what your major purchases are, where you are likely to have the greatest influence, where you have the greatest risks, etc.  Your broader approach should be informed by any important social goals you have already prioritized for your company.  If you already focus on strong employee relations in your firm you may wish to ensure your purchasing doesn’t support sweatshop labour in your supply chain.  If you have prioritized Aboriginal economic development as a key opportunity area for your firm, you may wish to focus your buying efforts on identifying and sourcing from Aboriginal businesses. If you have strong connections to the local community, you may wish to focus your efforts on creating a local supply network and supporting locally owned businesses. It’s important to first draw out what your company’ s existing social goals are, and then refine your approach based on matching your goals to the opportunities that various suppliers can provide.

See the Resources section for more information on how to get started on social purchasing.

Benefits

Ethical and social purchasing can enhance your brand with your employees, consumers and local communities.  They allow you to align your values with your purchasing decisions and help you to avoid the reputational risk that your sourcing is contributing to worker exploitation in developing countries. 

Companies that invest in building their social goals into their procurement program can engender strong supplier relationships and enhance their social responsibility overall.

Resources

General

Buy Smart Network is a national resource for buyers interested in integrating ethical, social and environmental considerations in purchasing.  Resources, tools and learning opportunities are available.

Industry Canada provides resources on sustainable purchasing, including “10 Ways to Start or Enhance Your Sustainability Purchasing Strategy”.

Ethical Sourcing

Maquila Solidarity Network is a Canadian non-governmental organization focused on ethical sourcing.  Their website provides an overview of the issues, resources and links:

Ethical Trading Initiative is an international membership-based program promoting ethical sourcing.  Their website provides online resources and tools:

Social Purchasing

Enterprising Non-profits (enp) provides an online social purchasing toolkit:

The Canadian Aboriginal and Minority Supplier Council (CAMSC) is an association of companies committed to Aboriginal and visible minority procurement:

The Business Alliance for Local Living Economies (BALLE) is a North American association of businesses committed to “local living economies” and buying local:

Canadian fair trade organization, TransFair, provides information and resources on buying fair trade:

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Footnotes

1 referrer  Ethical Trading Initiative.

2 referrer Buy Smart Network. 2006. Guide to the Business Case and Benefits of Sustainability Purchasing, p. 35.

3 referrer SPUD! No Date. Our Buy Local Program.

4 referrer Wikipedia.2010. Fair Trade.