HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

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SUPPLY CHAIN MANAGEMENT

ETHICAL PURCHASING

Lecturer: Mr. Nguyễn Phúc Linh

Lecture time: 7:30 Saturday

Student name: Nguyễn Thị Trà My

Student ID: 2004000065

Summer semester, 2023

Essay question: Gather information on business ethics and ethical purchasing, and report on
several of the most current news items and controversies.

My answer

For many companies, there is a big wonder that to contribute to society, businesses must earn profit
to survive. It means that the company’s priority is to make profit, and then they take their social
responsibility. However, whether a company can support the community while it is doing business,
this essay would discuss about inclusive business model through two examples of ethical
purchasing, one is from a foreign brand and other is from Vietnam.

Firstly, some key concepts such as business ethics, ethical purchasing and inclusive business model
will be clearly defined to help audience understand better. Business ethics is defined as principles
(which set boundaries for behavior and should not be violated) and values (which are socially
enforced existing beliefs and ideals) in business (Ferrell, 2015). Ethical sourcing considers the
public consequences of organizational buying or contribute positive social change through
organizational buying behavior (Wisner, Tan, Leong, 2022).

According to G20, inclusive business model is one that engages the poor people as a part in the
supply chain of company’s core business as suppliers, distributors, retailers or customers. In
another word, inclusive business model can help company both earn profits and support the
disadvantaged people community. Hence, ethical sourcing is one part of inclusive business model
when the company buys goods from the disadvantaged people.

In reality, many companies expressed their business ethics by sponsorship or charity activities such
as donated foods, clothes and money to the poor or mountainous people. This only helps the poor
overcome the short-term hungry without maintaining their daily livelihood. Similarly, a popular
proverb “Give a man a fish” means giving a man a fish to eat for a day but teaching him how to
fish to feed him for a lifetime. The key solution is a job that can bring the income for the poor.

There are many social enterprises around the world who successfully apply this inclusive business
model to earn profits and support the community simultaneously. One foreign brand is Shokay
which directly sources yak fibres from Tibetan herders. Yaks are a valuable asset to the Tibetan
people, they are low- carbon emission animals thanks to their efficient digestive systems to emit
fewer greenhouse gases, but in the past, this did not bring the income for local people. Shokay
purchases raw yak wool from Tibetan herders to produce premium and knitwear and accessories
and then sells them to the global market. This not only enables the Tibetan herders to earn a living
but also preserves their traditional herding and community lifestyle. In addition, yak fibres also
make a reputation for Shokay with high-quality and sustainable products.

Figure 1. Shokay’s products and their characteristics

In Vietnam, this inclusive business model is successfully applied by TraphacoSapa company.

TraphacoSapa is a subsidiary of Traphaco which is one of the largest pharmaceutical companies
in Vietnam. TraphacoSapa is based in Lao Cao province in Northwestern of Vietnam. This area
has a large number of minorities with poor life conditions, unstable income and few options for
livelihood (Oxfarm, 2016). There were more than 130 supporting policies from government to
stimulate the local life but they were not applicable with indigenous culture and custom. After
realizing the great climate conditions of Sapa, TraphacoSapa developed “GreenPlan” project to
support more than 200 local households to plant herbs and undertake to buy all or portion their
products.
 Figure 2. The ethnic households’ sharing when planting herbs

As a result, the project brings tremendous value to both Traphaco and the ethnic community. For
Traphaco, it can actively control the raw material to produce drugs since the clean and qualified
herbs will ensure the quality of drugs. For community, this project creates jobs, sustainable poverty
eradication and brings incomes for indigenous households, hence, more children have chance to
go to school and ethnic life is greatly improved. The households in Lao Cai become strategic
suppliers when engaging in Traphaco’s supply chain to provide raw materials as herbs.

Vietnam is currently an attractive environment for inclusive business development that benefits
both the enterprises and our community through ethical purchasing from local people’s production.
In Vietnam, there are many organizations help social enterprises to think and act in inclusive
business model such as Oxfarm, CSIP, GreenHub, etc. since this model meets 17 Sustainable
development goals of United Nation.

In conclusion, every company itself needs to change the attitudes and behaviors about profits and
community contribution. There will be no trade-offs between corporate social responsibility and
corporate profits if the company innovates and rethinks its business for its competitive advantages
and sustainable development.
 REFERENCES

Ferrell, O. C., Fraedrich, J. & Ferrell, L. (2015). Business Ethics (11th ed.). Cengagelearning.

G20. Inclusive Business Framework. Retrieved from http://g20.org.tr/wp-

content/uploads/2015/11/G20-Inclusive-Business-Framework.pdf

Inclusive Business: The Future of ASEAN | Oxfam in Vietnam. (n.d.). Oxfam in Vietnam. Retrieved
from https://vietnam.oxfam.org/latest/stories/inclusive-business-future-asean

Ly T. H.-. P. (2022, October 12). Hành trình xây dựng vùng dược liệu xanh và bước chuyển mình
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Sun, Q. (2020). Corporate profits and business ethics: are they coexisting in current financial
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SUSTAINABLE DEVELOPMENT GOALS | SHOKAY. (n.d.). SHOKAY. Retrieved

from https://www.shokaytextiles.com/community-development

Traphaco Sapa và “bát cơm” của người DTTS tại Lào Cai (n.d.). Công Ty TNHH Một Thành
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Wisner, J. D., Tan, K. C., & Leong, G. K. (2022). Principles of Supply Chain Management: A
Balanced approach.