Is Ethical Soucing Souce of Competitive Advantage - Literature review Example

 Ethical Sourcing Ethical sourcing is a term that is created and defined by an individual organizations principles and practices. It’s a perfect blend of sustainability, values imbibed in a business practice and social responsibility which is built into an organizations supply chain process (Craine & Matten, 2007) . It aims to ensure that the products and services which are developed by the manufacturers are developed in safe and surroundings and an environment which is congenial to the health and growth of workers (Kubal, Baker, and Coleman, 2006). Ethical sourcing also refers to fair wages which must be paid to the workers for legal numbers of working hours (Roberts, 2003). Environmental friendliness and its protection are also considered an essential element of ethical sourcing of goods and services (Burt & Los, 1995). Ethical sourcing is all about making right decisions at right time (Davies & Crane, 2010). Infact, it is regarded as an integral part of Corporate Social Responsibility in the modern business regime (Hooker 2003, Wrobleski & Oza 2011). Advantages of Ethical Sourcing After analyzing the various aspects of implementing ethical sourcing in various organization such as Starbucks, Nike etc the common benefits that one can attain from adopting the means of ethical manufacturing sourcing generally relate to a wider market audience and conformance with pre-defined ethical standards and principles that facilitate an organization to create brand image and adhere to the corporate social responsibility. Risk management is better managed through ethical sourcing right at the source or the grass root level that creates a sense of responsibility among the suppliers in terms of organizational commitment towards ethical challenges and future goals (Wrobleski & Oza 2011). Ethical sourcing saves an organization from the anguish of its customers and negative image that it can create in future, for instance Nike hires child to saw the football, because they simply have no consideration for social ethics but only profit. Such kind of an attitude certainly has a negative impact on the customers. Adopting ethical norms and protocols can save the organization of such embarrassment. Ethics prove to be a facilitator in reducing exorbitant costs by adopting supply chain sources that focus on developing supplier relationship management and attain benefits of compliance management. Moreover organizations are self motivated to monitor their actions and carry on regular self assessment. Ethical sourcing is an effective medium to reward positive and constructive suppler behavior that consistently drives for growing business and at the same time a means to penalize negative and unpleasant conduct as well. Disadvantages of Ethical Sourcing Ethical sourcing however is a hindrance that suppliers face in their normal course of business for instance organizations hold varied perception issues that suppliers hold in terms of the tools and equipments that might need for ethical sourcing, thus they prefer to avoid it. Organizations find it expensive to adopt ethical supply chain and distribution networks thus generally face lack of coalition among business and individual objectives (Wrobleski & Oza 2011) Many authors have given varied viewpoint regarding ethical sourcing. For instance Cathy Mejia said that it is highly important for an organization to adopt ethical sourcing as it helps in communicating the strong ethical values an organization upholds for its stakeholders. Economists like Davies and Crane, 2003, Wadha (2009), have also commented on the significance of Ethical sourcing saying that fair trade policies of an organization can actually help to shape up the organization structure to achieve long term goals and positive company image. For instance in a research done by Gennarwilson (2009), it was found that child slavery exists in cocoa industry where children are made to work for long hours and parents avoid sending them for education. Almost 90 million bunnies, 27 million slaves are a part of such unethical work process (Gennarwilson, 2009. Even worse, the school teachers even cancel the classes to make children work in the fields. People prefer Nestle and Cadbury products, yet have apprehensions when the sourcing strategies and policies are checked, hence people tend to appeal such organizations that they must work in collaboration with EU to make proper sourcing plans. Big names like Hershey’s are few who do not have effective sourcing policies in place. On people’s recommendations and voice, products like Kit Kat etc have now been transformed into purely ethically sourced product (Gennarwilson, 2009). On the other hand eminent economist Milton Friedman sternly believed that the main aim for any business is to increase the organizational profit rather than concentrating on social issues, but at the same time he also stated that any firm must ensure that fair business practices are followed to avoid fraud or misleading practices without focusing on ethics more (Lomax, 2008). UK Ethic Laws Ethics is one term which has varied meanings in various countries worldwide. Every country has its personal code of conduct when it comes of business ethics (Helin & Sandstrom, 2008). For instance, in U.K a common TfL is used to refer to sourcing ethics which complies more on human and labor fair trade practices within the supply chain of a firm (Preuss, 2008). An Ethical Trading Initiative (ETI) Base Code defines the operational functioning that suppliers of an organization are required to meet. Sedex that is the Suppliers Ethical Data Exchange code is used to engage suppliers in ethical sourcing. Tfl in UK aims to work upon five main guiding principles for ethical sourcing. They are: Appropriate applications that must be considered for ethical sourcing Improvement of labor conditions in supply chain management Consistent monitoring of labor conditions Suppliers active participation Conducting activities under the permissible range of the European Law (Myers, 2003) Most of the organizations in the current times want to adhere to ethical practices as they believe that organizations are respected for the consideration they give to human rights, ethical trading and environmental protection such as Nike and Marks & Spencer. Companies like Sanctus Mundo strongly believe in ethical sourcing and sternly stand against sourcing goods from countries like China where child labor is quite prominent; moreover the sourcing also raises issues such as environmental, labor and human rights degradation. Companies are able to create a positive image by presenting themselves as ethical towards there customers, consumers, the suppliers and all other stakeholders of the firm in all responsible ways that they can (Bowen, Cousins, Lamming, and Faruk, 2001). People on the whole actually value organizations which are truly ethical for instance leading organizations such IBM, Petagoni, Levi’s etc all have succeeded only due to a string public image that they have created for themselves based on firm ethical practices. Supply Chain Gains Competitive Advantage Ethical sourcing is another means to gain a competitive edge in terms of margin enhancement especially in the modern dynamic business world where amidst the tough economic issues and turbulences, sales of the company are getting stagnant. It gives a chance to the organizations to outshine the competitors and have a more strong long lasting impact on the consumers. Competitive advantage is the benefit that an organization derives when compared with its nearest rivals in terms of technology, efficiency, operational skills, economies of scale or any other distinct variable. Most organizations in the modern supply chain management for instance Toyota are inclining towards being more ‘lean’ in nature, that is reduction in waste, obstruction free flow processes etc (Riley, 2009). According to Michael Porter, firms can enjoy competitive edge only when there cost is low when compared to that of their immediate competitors, hence the two key variables that can help a firm attain a competitive edge is the cost leadership and differentiation in product line. Roberts in his study mentioned that firms compete in the market in terms of cost reduction and appreciation, product distinctness and especially on corporate reputation that they build (Bowen, Cousins, Lamming, and Faruk, 2001). These most of the firms are competing on the sustainability issue which comprises of the environmental safeguard and the social influences that organizations have on their supply chain networks. Hence it can be well said that the basis of competition in the modern business is based on CSR, company image and supply network scenario. Global supply chain is becoming highly important as flow of products one from location to another involves heavy costs to the firm which can be reduced if the supply chain is managed effectively (Carron, 2008). The supply chain comprises of many different trading people right from supplying raw material to delivery of finished goods. This process consists of exorbitant costs that can render effectual returns to the organization. Supply Chain as an Effective Strategy Ethical supply chain can be considered as an effective strategy as it involves all critical features that a strategy entails. For instance, the supply chain includes leveraging the main competencies of the firm which is an integral part of any organizational strategy (UPS, 2005). It also includes conceptual and analytical decision making in terms of products, the time of delivery, the market to be targeted and along with it a detailed competitive strategy as well. But on the whole it can be said that in the modern times companies are actually promoting their existence on the basis of ethical image that is created due to a public outcry aggravated by use of child labour or grounded on some published reports or due to the inner consciousness among organizations for exhibiting corporate social responsibility that enhances core values of a company such as Levi which has taken a better cotton initiative, Dell, Starbucks for coffee and farmer’s equity , IBM, Marks & Spencer, Green and Black etc (Tulder, Wijk & Kolk. 2009, Johnson, 2004, Green and Black, 2010). Customers are getting more aware about the soaring issues related to environment degradation (Shrivastava, 1995), child exploitation especially in Chinese organizations, low standards of living, economic growth, thus slowly but gradually the attitude of a common man is also changing (Zanden, 2007). Organizations are sternly opposed who adopt unfair trade practices and unwanted production and supply means. BIBLIOGRAPHY Burt, D. and Los, R., 1995. A value Chain Approach to Pollution Avoidance, Proceedings of the Strategic Management Forum, Univeristy of San Diego. Carron. P. M., 2008. Women Workers, Industrialization, Global Supply Chains and Corporate Codes of Conduct. Journal of Business Ethics. , Volume 83, Number 1, Pages 5-17 Crane. A, Matten. D., 2007. Business Ethics. Business ethics: managing corporate citizenship and sustainability in the age of globalization. 2nd Ed. Oxford University Press : UK Davies. A. I & Crane. A., 2010. Ethical Decision Making in Fair Trade Companies. Journal of Business Ethics. Vol 44: 2. Pg 79-92 Ethical Sourcing. 2010. Green & Black’s Organic Chocolate UK. [Assessed on 11th Oct, 2011]. Available at http://www.greenandblacks.com/uk/from-bean-to-bar/ethical-sourcing.html Helin. S & Sandstrom. J., 2008. 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