Ethical Supply Chains May Become Competitive Advantage

By Patrick Burnson, Executive Editor
August 21, 2014 - SCMR Editorial

Software Advice, a consulting firm recently acquired by Gartner, Inc., has produced a report suggesting that consumers may be judging how “ethical” a company is before buying its products.

“Key Priorities for Ethical Supply Chains,” is a report based on surveys conducted by the consultancy. The report also contains insights shared by researchers at MIT and Harvard.

“Ethical” supply chains invariably mean higher costs for raw materials and labor. It has been estimated, for example, that the cost of an iPhone could effectively double if it were manufactured in the United States, under stricter labor standards. But despite the higher costs of having more ethical supply chains, some believe that it ultimately pays off for companies, as such efforts can improve reputation among consumers and produce greater loyalty from employees.

Some key findings include:

  • On average, consumers said they would pay 27% more for a product normally priced at $100 if it was produced under good working conditions.

  • When asked which of three ethical initiatives would make them more likely to purchase a product, consumers were nearly evenly split among improved working conditions (34%), reduced environmental impact (32%) and more involvement in the community (31%).

  • When focused on labor efforts, consumers were most persuaded by fair compensation for workers, with 45% saying this would be the ethical effort that would most convince them to pay more for a product.

Forrest Burnson, managing editor for Software Advice, admits that there may be a disconnect between what buys say they will do, and how they actually behave.

“Of course, what people say in a survey won’t always line up with what they will do in real life.,” he says. “All things being the same, I’m not sure that consumers will necessarily pay significantly more for a more ethical product, unless the product is explicitly marketed that way.

Forrest Burnson adds that people do get that “warm glow” when they buy products that are supposedly more ethical.

“So the important takeaway for businesses is not just that they should make their products more ethical, but they should also be proactive in informing the consumer of that fact in their marketing and advertising campaigns,” he says.

Forrest Burnson added that Harvard research suggests people sometimes respond more to marketing campaigns that highlight the ethics of a product compared to marketing campaigns that highlight the features of a product.

“In regard to younger people, it’s plausible to me that millennials are more concerned than previous generations with the ethics behind the products they purchase,” says Forrest Burnson.

Having more choices and more information may also be shaping their buying decisions, he added.



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The long-simmering court battle over whether FedEx Ground’s workers are independent contractors or employees appears headed to the appellate courts—and maybe the U.S. Supreme Court.

Carload volume headed up 4.3 percent to 298,376, and intermodal units, at 273,376 containers and trailers were up 4.8 percent annually.

In light on various service-related freight railroad service issues, the Department of Transportation’s Surface Transportation Board (STB) recently announced it is now requiring Class I railroads to publicly file weekly data reports on service performance. These weekly reports are slated to begin on October 22.

According to its data, spot market volume for the month of September was up 32 percent on an annual basis and set a new record for the 14th straight month, with gains for each of the three equipment categories it tracks, including load availability for: dry vans up 42 percent; refrigerated (reefer) up 24 percent; and flatbed volume up 46 percent.

FedEx Freight and Con-way Freight, two of the largest non-union LTL carriers in the nation, are battling organizing efforts by the Teamsters union in a closely watched unionization effort.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.