Insights into Ethical Supply Chains – from Software Advice

I was interviewed by Forrest Burnson from Software Advice — a company providing SCM software research and reviews — earlier this month on insights related to sustainable supply chains.

This is an area that is proving to be a challenge for marketers and supply chain types alike.  Forrest captured my thoughts and a number of other sources, combined them into a very interesting article that addresses an important question:  Will consumers be willing to pay more if the product they buy comes from an ethical supply chain?

Consider the following question:  Would you be willing to pay double for your iPhone if you knew it was produced in the US under stricter labor standards?  “Uhhhh I’m not sure”….is the typical response I get from many people.  So, maybe you wouldn’t pay double – but the research shown here suggests you might be willing to pay 20 or 30 bucks more for it!  In fact, the research suggests that consumers are more likely to buy ethical products than ever before.  For instance, the research found:

1. On average, consumers say they would pay 27 percent more for a product normally priced at $100 if it was produced under good working conditions.
2. Consumers were split on whether improved working conditions such as: community involvement or environmental efforts would most convince them to buy from a firm.
3. Twenty-eight percent of consumers said reducing water usage was an environmental initiative that would make them more likely to purchase a company’s products.

All of the survey results generally point toward consumers caring most, perhaps unsurprisingly, about labor conditions for the workers who make their products. For businesses with overseas operations, labor conditions can be one of the most difficult facets of the supply chain to maintain high standards on.  

In general, these facts are surprising to many of us.  However, it is clear that this message has not yet filtered down to the people who make decisions on Wall Street.  Most of the analysts and investment types still don’t “get it”…  My initial observations are that the analysts and people who buy stocks are still buying purely based on return, regardless of the risks associated with an unethical supply chain.  There are certainly exceptions: people like Rick Frazier at Concinnity Advisors have been investing in firms that behave in a manner conducive to “conscious capitalism” for years, and his portfolio has been beating the market…

In general, people are thinking more as they become more knowledgeable about their supply chains.  Who is making their stuff is becoming more important – and people are speaking with their wallets.

So next time you buy an iPhone, a cup of coffee, or a pair of running shorts….think of the supply chain!