How startups can manufacture ethically

Whether you’re manufacturing in the UK or elsewhere, ensuring that your product is made ethically and sustainably is an increasing focus for startups. Ethically-made products are manufactured under conditions that include no child labour, no forced labour, a safe environment, and minimum standards of pay.

There are lots of benefits to ethical manufacturing – empowering communities, creating jobs, helping the environment, providing safer options for workers in developing countries. And there are benefits to startups too, beyond helping make the world a better place. So how can startups take steps to manufacture more ethically? We asked Toby Abbott, the Entrepreneurship Programme Manager at Virgin Unite, for some advice on how startups can manufacture more ethically.

What are the benefits for startups who manufacture ethically?

 

There are two main benefits for companies that manufacture ethically. Firstly, you get brand benefits. You can use your ethical status as a way to promote your brand, and you protect your brand from negative press related to unethical manufacturing conditions.

Secondly, you have operational benefits. A stable supply chain, with low factory turnover, means operational efficiency -always great when you’re a startup working with strict deadlines and limited cashflow.

Is it more expensive?

The expense isn’t in having a better factory – factories that are organised and more efficient, with happy staff and trade unions, should actually be more cost-effective in theory. It’s running an monitoring and improvement programme which is the cost – auditing and making changes, keeping on track of things, and ensuring that ethical standards are adhered to. You don’t own the factory, so you have to be conscious of making that positive change.

Contrary to popular opinion, the price point of a product doesn’t always have an impact. Just because something costs more, doesn’t necessarily make it more ethical – one of the most ethical retailers is H&M, and their price point is relatively low.

Is it more or less easy for small businesses?

 

There is a correlation between the influence you have on a factory and the percentage of output. If you are 70% of their output, you have influence; if you’re 2%, you’ll have no say. So big organisations can demand change, or remove their business, which gives them a powerful bargaining position. If you want to have control over the environment in which your products are made, eg using a factory that pays a living wage, look for manufacturers where you’re important to them (or have the potential to be.)

How can small businesses find ethical manufacturers?

Factories are generally sourced through small and large agents. Identify a sourcing agent who specialises in your sector, and that deals with ethical trading as a priority. You should stipulate what you expect, and factories can prove their ethical credentials by the following means:

  • Audit reports – reports by external bodies advising on the conditions, standards and practices.
  • Certified SA8000 – a certification standard that encourages workplaces to practice ethically.
  • Choose Fair Trade certified products and manufacturers.
  • Be clear to your sourcing agent about what your priorities are. The first step would be to take on the ETI base code – a base code of nine laws protecting workers that are globally recognised.

What are some things that small businesses can do to become more ethical?

 

First off, adopting the aforementioned ETI base code is a good start. Look at the ETI website (www.eti.org), and make a plan for how you can incorporate these laws.

You should also map your supply chain and tier one factories. Make sure you maintain transparency in your supply chain – who are your suppliers, and what are they doing? Becoming Fair Trade certified as well, if it’s an option for your business, is a good step to take for small businesses.

Case study: Tessa Holladay, SAINT LUKE

Tessa is the founder of SAINT LUKE, a business we funded. SAINTLUKE create bags which don’t just look good – they do good too. Every bag provides clean water for 40 people for 5 whole years. Pretty amazing. SAINTLUKE are also committed to producing ethically. Here’s her experience finding an ethical manufacturer.

“It’s true that it’s easier for big companies to work with ethical partners because the size of their production is typically very large, so they have such a vast range of people they can work with.  Being so small is very difficult because not only is it near impossible to find good quality manufacturers and suppliers, but once you do, many of them have such high minimum order quantities that it's not an option to work with them.

SAINT LUKE took about 18 months to set up - not because the product is particularly complex, but because I was so adamant about each aspect of the bag and where it came from.  I had a list of requirements I needed from suppliers which included:

  • They had to meet various ISO (International Organisation for Standardisation) requirements
  • I had to be able to visit if I wanted
  • They had to produce a high-quality product
  • They had to be willing to produce small order quantities

Bearing in mind the general difficulties in sourcing any suppliers, this made it even harder to find the perfect partners.  The intensive searching paid off eventually, but it required a lot of patience, determination and some pretty creative thinking to get there!

Because SAINT LUKE is still small, I have excellent personal relationships with all my suppliers and try to visit them when I can.  Aside from obvious benefits of visiting such as standards checking, nothing beats the feeling of standing on the factory floor with the talented staff and watching your idea come to life in front of your eyes!”

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