Is it time to add an ethical policy to your company war chest?

“Sustainability” is no longer just a buzzword. Instead it has become a mainstay in the social political mainstream. With savvier shoppers who are better informed, the failure to demonstrate a sustainable supply chain may reduce trust in a brand and even ultimately contribute to the demise of many retail businesses.

The effect of this shift in the public consciousness on a legal or contractual level is still undetermined. Other than a gamut of fairly out-dated environmental laws, the Bribery Act 2010 and the Modern Slavery Act of 2015 (which each require businesses to contractually obligate their suppliers to comply with certain requirements) nothing has yet been codified when it comes to sustainability and ethical sourcing. It may never happen. Nevertheless, a consistent pressure from consumers is forcing businesses across the board to examine their position and policies when it comes to sustainability and this is particularly true in the retail sector.

The response of this increased pressure on many of our clients is the introduction of an ethical policy. Once a mainstay for luxury brands, this new policy being woven into supply contracts and displayed proudly next to the Privacy Policy and Terms of Use online is now becoming the norm.

The use of an ethical policy is perhaps even more pertinent for online brands whose character and image are known solely through their digital presence. An ethical policy offers the opportunity to document in clear terms what the brand stands for and the expectations that it has of its supply chain.

As ethical policies become commonplace, we anticipate that customers will expect them and may even opt to only shop with those brands that do have clear ethical standards. For example, recommends to its readers that consumers only purchase from brands with a clear ethical policy.

So what does an Ethical Policy look like? What should it include?

The content of your ethical policy will depend, of course, on the products you are offering, the stance and values of your brand and the extent to which you source products and materials from third parties.

That said, the list below is a useful, albeit non-exhaustive, indication of matters that we have included in ethical policies for our clients:

  • Materials: Are any restrictions imposed as to derivation (e.g. no materials from any endangered species)? Do you require suppliers to provide full information about the origin of all component materials (enabling you to offer the same to your customers)? Do the materials supplied need to be organic, fair trade or energy efficient? Do you have any requirement as to quality?
  • Employment: Consider requiring all suppliers to ensure that all their employees are hired and managed in compliance with local, applicable law. This could include restrictions on forced, bonded or involuntary labour and physical, mental, verbal or sexual violence, as well as in relation to minimum wages. Are there any training requirements? What about health and safety standards and conditions? Should equal treatment be mandated?
  • Environment: Consider requiring suppliers to impose systems which minimise risks to human health and treat the environment with respect? What about policies for hazardous waste? Consider obligations to conduct environmental reporting or restrictions on the use of palm oil.
  • Taxes: Should your suppliers be held to account in the payment of their taxes?  Do your contractual auditing rights accommodate this?
  • Cruelty fee processes: What about restrictions on animal testing, factory farming, animal rights and cruelty?
  • Irresponsible marketing: Consider including prohibitions on irresponsible marketing (for example to the vulnerable or children).
  • Arms and military supply: Do you want to work with suppliers that also supply arms or to the military?

Once you have an ethical policy in place you can incorporate the terms proudly on your website to ensure the policy is truly effective your supplier contracts must incorporate the terms of your ethical policy to ensure that those in your supply chain are bound by the restrictions and obligations. It is then up to you to enforce the policy – if you find your supplier to be in breach of the policy will you (and indeed contractually, can you) terminate the agreement?

Ethical policies are becoming more common and more expected. Retail business who want to avoid being left behind should follow this direction of travel, taking into account a wide range of considerations. But one last golden rule must not be overlooked. You must, as a brand, comply with the terms of your own policy.

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