Which strategy is effective in promoting supplier compliance with ethical practices?

Offering incentives for compliance is an effective strategy in promoting supplier adherence to ethical practices because it creates a positive reinforcement system. When suppliers are rewarded for meeting ethical standards, they are more likely to continue upholding these standards and strive for improvement. This approach fosters a collaborative relationship between the buyer and supplier, encouraging transparency and promoting a culture of ethical conduct.

Incentives can take various forms, such as financial rewards, preferential treatment in contracting, or public recognition for their ethical practices. This not only motivates suppliers to comply with ethical guidelines but also enhances overall supplier performance and loyalty, aligning suppliers' goals with those of the purchasing organization.

In contrast, neglecting small suppliers can create disparities and limit opportunities for ethical suppliers who may be smaller in scale but committed to responsible sourcing. Automatically renewing contracts without review can lead to complacency and may allow unethical practices to persist unchallenged. Dismissing suppliers without explanation can damage relationships and discourage open communication, making it less likely for suppliers to adhere to ethical practices in the future.