5 Ethical Outsourcing Mistakes New Businesses Make (And How to Avoid Them)
- 02 Mar, 2025
Starting a business is exciting, but when it comes to outsourcing, things can get tricky. Many new business owners jump into outsourcing without thinking about ethics. They focus on saving costs but end up making serious mistakes that harm workers, damage reputations, and even cost more in the long run.
Want to get outsourcing right? Let’s go through five ethical outsourcing mistakes new businesses make—and how to avoid them.
1. Choosing the Cheapest Option Without Checking Labour Standards
It’s tempting to pick the lowest bid. After all, why pay more when you can get the same work done for less? The problem? Cheap outsourcing often means poor wages, terrible working conditions, or even child labour.
Take the case of a well-known fashion startup that outsourced clothing production to a factory in Bangladesh. Everything seemed fine until an NGO revealed that workers were earning less than $2 a day. The brand faced public outrage and lost loyal customers overnight.
How to avoid this mistake:
- Check if the vendor follows fair labour standards like SA8000 certification.
- Ask for worker wage details and conditions before signing a contract.
- Work with vendors that have third-party audits to ensure ethical practices.
Image: Edited from Unsplash – factory worker in a well-lit, clean workspace
2. Ignoring Local Fair-Trade Certifications
You might think fair-trade certifications only apply to coffee or chocolate. But many industries—textiles, agriculture, IT services—have local fair-trade standards that ensure workers get fair wages and humane conditions.
A small Indian organic textile brand made headlines for the wrong reasons when their ‘ethically made’ cotton bags were traced back to factories violating local fair-trade rules. They assumed ‘organic’ meant ‘ethical’—a costly mistake.
How to avoid this mistake:
- Look for fair-trade or ethical sourcing certifications in your industry (like FLO-CERT for textiles, or Fairtrade International for various products).
- Work with vendors that display their certification details publicly.
- If unsure, consult local NGOs that monitor fair-trade compliance.
Image: Edited from Unsplash – farmer holding organic cotton
3. Not Setting Ethical Standards in Your Contract
Many businesses assume that once they hire a vendor, ethical practices are their responsibility. Wrong! If it’s not in the contract, there’s no guarantee they’ll follow ethical guidelines.
An Australian tech startup outsourced customer support to a firm in the Philippines. Everything seemed smooth until reports surfaced about employees working 16-hour shifts without overtime pay. The startup had no legal grounds to demand better conditions because their contract didn’t mention ethical standards.
How to avoid this mistake:
- Include clear ethical clauses in contracts, such as fair wages, safe conditions, and work-hour limits.
- Require suppliers to sign an Ethical Responsibility Agreement.
- Conduct random compliance checks to ensure standards are followed.
4. Overlooking Environmental Impact
Outsourcing isn’t just about labour—it also affects the environment. Many suppliers cut corners by using cheap, harmful materials or dumping waste improperly.
A food startup that outsourced packaging to China faced backlash when customers discovered their ‘eco-friendly’ packaging was made from non-recyclable plastic. The company hadn’t checked where the material came from.
How to avoid this mistake:
- Choose suppliers who follow green manufacturing standards (ISO 14001 is a good benchmark).
- Ask vendors for their supply chain transparency reports.
- Consider local outsourcing to reduce shipping emissions.
Image: Edited from Unsplash – a worker handling sustainable packaging
5. Forgetting to Involve Local Communities
A business decision that seems smart on paper can backfire if it hurts local communities. Some companies outsource to regions where workers don’t get a say in how businesses operate.
A US-based construction firm outsourced labour to an African country without consulting local unions. The result? A community backlash, strikes, and major project delays.
How to avoid this mistake:
- Partner with local businesses that already have community trust.
- Hire local consultants to understand cultural and economic impacts.
- Support initiatives that give back, like funding local education programs.
Image: Edited from Unsplash – community meeting with business representatives
Ethical Outsourcing Isn’t Just Good—It’s Smart Business
Ethical outsourcing isn’t about spending more money—it’s about making smarter, long-term choices. Companies that outsource ethically build stronger reputations, attract loyal customers, and avoid costly scandals.
Have you faced any ethical outsourcing challenges? Share your experiences in the comments!
For more on this topic, check out our guide on ethical outsourcing mistakes to avoid and how to build a responsible supply chain.
