Levi Strauss’ Smart Thinking On Supply Chain Ethics

Kudos to Levi Strauss, which announced last week that it will partner with the International Finance Corporation to reward suppliers in developing countries who score highly on environmental, health, safety and labour standards.

The reward for such ethical activities will be lower cost rates on working-capital financing.

The apparel manufacturer’s efforts are a great example of the economic benefits that can accrue to companies that pursue sustainability and promote ethics in their supply chains.

A generation or more ago, cynics would have told us that the words business and ethics couldn’t be used in the same sentence. Businesses weren’t concerned with ethics, only profit, they would say. They were wrong then and any who would say that today would be wrong now. That’s in part because corporate executives know that their customers care about ethics.

Recent surveys by consultancy Software Advice showed that consumers would pay more for ethically made products. One set of surveys sought to determine which specific initiatives in different links of the supply chain would entice consumers to pay a premium for products that would normally cost $100.

One group of respondents said it would pay an average of $18.50 more if the raw materials were sourced ethically. Another said it would pay $19.70 more if the product had a carbon emissions offset, and the third group said it would pay $27.60 more for a product made in a facility with good working conditions.

Consumers Split on Broad Ethical Initiatives

We ran another survey, this time asking respondents which of three broad ethical initiatives would make them more likely to purchase a company’s products: improved working conditions, reduced environmental impact and more involvement in the community. The results were essentially evenly split, with each choice getting about one-third of the vote.

Ethical Initiatives That Would Convince Consumers to Pay More

To drill down even further, our final survey asked respondents which specific effort in each broad category would make them more likely to purchase a company’s products, with the chance to provide their own, open-ended response.

The consultancy admits there can be a gap between what survey respondents say and what they will actually do. Still, says Forrest Burnson, market research associate at Software Advice, procurement and supply chain professionals can’t ignore the fact that consumers are aware of where and how their products are made and who made them. And that awareness can even extend to perceptions of outsourcing.

Burnson says that while consumers rarely complain about the quality of some products manufactured offshore they do complain about the conditions under which those products are made.

Additionally, respondents to one Software Advice survey said that firms’ community-involvement efforts to open factories in areas of high unemployment would prompt them to buy the firms’ products.

Even the conservative Forbes Magazine has written that globalization of supply chains requires “more robust” corporate citizenship by companies and their contractors, even if the latter are on different shores.

Moreover, consultancy Capgemini says that companies embracing ethical sourcing are more likely to succeed in the long run.

That’s an attractive prognosis. It seems that Levi Strauss and other firms pushing ethical practices in their supply chains are onto something.

About the Author
Paul Teague is US contributing editor for Procurement Leaders. He is the former editor-in-chief of Purchasing Magazine and has provided quality journalism to the US purchasing community for more than a decade.

Source: Procurement Leaders™