State of Green Business
8 guiding principles for building ethical global supply chains
The rise of the socially conscious consumer is changing the way businesses across all industries compete and operate. Today, over three in five consumers feel it is important to buy from socially responsible companies and have done so in the past 12 months.
Following the rise of organic products in the food and beverage market, mindful consumption is taking the personal care industry by storm. The global organic personal care market, comprising cosmetics and skin, hair and oral care, is expected to more than double in a decade, from about $10 billion in 2015 to over $25 billion by 2025.
As consumers continue to demonstrate a desire to pay a premium for natural products, it creates a need for more responsible sourcing by companies in this space. Indeed, throughout the world, there’s an opportunity to generate positive impact in local communities by putting the right principles and processes in place. Agricultural development is one of the most powerful tools to end extreme poverty, boost shared prosperity and feed a projected 9.6 billion people by 2050.
At doTERRA, rather than cultivating plants for our essential oils closer to home, we go straight to the regions of the world where the plants grow best. This not only lets us tap into the knowledge and traditions of farmers passed on for centuries, but also gives us room to make an impact in the lives of individuals in need.
As part of our mission to build and support ethical supply chains, we developed and adhere to eight Sourcing Guiding Principles. These principles offer a framework for other companies to implement sustainable, socially and environmentally responsible supply chains on a global scale.
1. Ensure environmental stewardship
Encourage your partners to be good stewards and do their part to minimize their carbon footprint and greenhouse gas emissions. That could mean shipping products by sea whenever possible or adopting energy-efficient and renewable energy technologies, such as solar panels. It also helps to practice what you preach.
2. Generate jobs
Employment is imperative to transitioning from income insecurity to economic self-sufficiency. Although you might assume a workforce in a developing country may not be as sophisticated as one in a more established economy, the opposite tends to be true. In our case, the expert knowledge of the local farmers we work with, accumulated from nurturing essential oil plants for generations, surpasses any expertise we could ever hope to attain.
3. Provide fair and on-time payments
Economic self-sufficiency requires a steady source of income that reflects fair compensation. Three key elements define fair pay: it is contractually agreed on by all parties; remuneration is considered fair by the workers themselves and by socially acceptable standards locally; and women and men receive equal pay for equal work. Companies also should be prepared to provide pre-payments or loans to help supply chain partners manage cash flows and stabilize incomes throughout the year.
4. Build supplier capacity
As with employees, companies can maximize returns from supply chain partners by investing in them. Increasing their capacity delivers a win-win — It increases their incomes and your profitability. We recommend working with local non-governmental organizations (NGOs) to deploy solutions that increase capacity, such as technology improvements or agricultural training for your partners.
5. Sustain long-term partnerships
In addition to empowering your partners to build capacity, you can build a strong foundation for growth through long-term contracts that do not maximize profit at their expense. You also should find appropriate ways to involve your partners in the decision-making process and ensure communication channels are always open. True partnerships also go beyond just business transactions. Donating to local charities, participating in fundraisers and supporting community projects are all great ways to develop deeper bonds with your partners.
6. Ensure fair labor conditions
Too often companies take advantage of supply chain partners by paying them unfairly or requiring excessive hours on the job. The working environments of your partners should match those in your own workplace — they should promote health and safety, and be free from exploitative practices, harassment and discrimination. A best practice is to require your partners to comply with national and local laws and International Labor Organization conventions on health and safety, working conditions and labor laws.
7. Promote cooperatives
Responsible enterprises support the rights of their supply chain partners to form and join cooperatives and bargain collectively. Becoming a collective organization unlocks numerous benefits for your partners, from obtaining better pricing on agricultural inputs to enhanced access to collectively owned equipment.
8. Facilitate community development
The well-being of your supply chain partners is linked to the strength of their surrounding communities. You can support community development projects, such as the construction of schools, health clinics, training facilities and clean water systems, by dedicating a portion of your sales to these causes or designating contributions from your charitable foundation. It also can be beneficial to provide your employees with opportunities to participate in efforts to improve living standards in these communities.
In a growing and increasingly competitive organic personal care market, a surefire way for companies to gain a competitive advantage is to promote their shared values with socially conscious consumers. But companies can do more to market their efforts to build a better supply chain: 40 percent of consumers said the biggest factor preventing them from being more socially responsible was an inability to determine which companies to support. Building a sustainable, socially and environmentally responsible global supply chain is no small feat, so make sure you share the impact of your differentiated approach.