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Tiers 1 2 and 3

Supplier Tiers 1, 2, and 3: Why the Difference is Important

There’s a concept in sociology, often thought of as a game, called Six Degrees of Separation. The idea is that, via social connections, any two people are likely no more than six connections away from one another. 

As an example, take the President of the United States. You might not feel like you have any sort of connection to whoever holds that role. But, you may have a friend locally who is a high-profile business owner, who is friends with the city mayor, who knows the state governor, who knows the state’s senator, who knows the President. Six degrees of social connections separate you from the most powerful person in the country.

This concept isn’t hugely important to the three tiers of suppliers, but it gives you an idea of what we’re talking about: the chains and networks of connections between you and people, businesses, and processes a distance away from you.

Supplier Tiers and Chains of Connection

In commerce, we generally divide the supply chain into three tiers, not counting yourself. To use ourselves as an example, take our t-shirts, which are USA-made, home-grown, and eco-friendly. We sell the shirts, but we’re not one of the supply chain tiers.

“Tier 1” would be the company that supplies you with the finished product to sell. In the case of our shirts, that’s TS Designs, the company we work with, to take blank t-shirts and imprint/dye them appropriately.

At “Tier 2,” you have the companies that supply your Tier 1 supplier with the base products. In our case, the shirts that TS Designs uses as base materials are assembled from fabric by Opportunity Threads, a company that transforms fabric into apparel.

At “Tier 3,” you have the raw materials that go into making the base products for Tier 2 suppliers. Opportunity Threads obtains their cotton fabric from producers local to them in North Carolina. As they say, “from dirt to shirt,” the entire process is as eco-friendly, sustainable, and domestic as possible.

Tier 1 2 and 3

Now, your supply chain will have a lot of suppliers at each tier.

  • Our Tier 1 suppliers include TS Designs for t-shirts, but we have others for things like mugs, canvas bags, and leather goods.
  • Our Tier 2 suppliers vary based on the Tier 1s. TS Designs gets its shirts from Opportunity Threads, but it gets its dyes from another source, its packaging materials from yet another, and so on. 
  • Our Tier 3 suppliers can also vary; whether it’s leather, canvas, nylon, recycled materials, cotton, or anything else, the raw materials come from a variety of different sources.

Any single business, even one that only has one product, can end up with dozens of Tier 3 suppliers.

Tiers can also be variable. If you were purchasing our t-shirts to resell, we’d be your Tier 1 supplier, and each of our suppliers would be either bundled together or bumped down. As such, sometimes the tiers are simply labeled by how many steps removed they are from the finished product (the degrees of separation), and, in some more difficult or complex products, that can be four, five, six tiers, or more.

Note: A big part of modern sustainability is actually reducing the number of tiers of suppliers involved in the creation of a product. The more steps it takes and the more companies are involved, the more chance there is for less sustainable production, and the more shipping and related emissions are involved. 

One of the goals of analyzing your whole supply chain, from the production of raw materials all the way to the finished product, is to look for ways to make it better. That can mean cutting out unnecessary steps to streamline the process, bundling products into single suppliers for lower impact, and, critically, understanding the environmental impact and sustainability of each tier.

Deferred Emissions, Greenwashing, and Obfuscated Tiers

One of the challenges in modern ethical merchandise production is how many companies are claiming they participate when they really don’t.

T-shirts remain a great example. Imagine you’re buying a t-shirt that claims to be made in the USA. The company that sells it is certainly based in the USA, and they do their shirt printing using a sustainable and ethical method. 

If you dig a bit deeper, though, you find that they get their raw shirts from companies in Vietnam that assemble them using cotton fabric produced in China, which is produced using cotton grown and harvested in India.

Sure, these suppliers may be the cheapest options available due to low costs of living and labor costs in those areas, lack of regulations, and other factors. Sure, they can be shipped relatively cheaply around the world using massive container ships or aircraft laden with products. Global commerce ships 11 billion tons of products by ship around the world every dayThat’s immense! And with it comes immense emissions.


This is what’s called greenwashing. The company selling the shirt boasts that it’s locally made and is at Tier 1. But at Tier 2 and beyond, it very much is not. The company knows that they’re just ignoring it so they can use green, eco-friendly, and sustainable terminology in their marketing.

Unfortunately, there’s very little in the way of regulations to prevent this false advertising. It’s rampant amongst companies, both large and small, all around the world.

This very effect is the reason why we embrace transparency as much as possible. The t-shirts we sell, as linked above, have QR codes you can scan to see the entire supply line, from dirt to shirt, and can examine every link in the chain for sustainability. We do the best we can to build sustainable, eco-friendly supply lines from Tier 3 on up.

Many companies either intentionally hide their lower-tier suppliers or deliberately don’t pay as much attention as they should so they can claim plausible deniability over their emissions. Far too often, companies claiming to be ethical and green are only looking at the most surface-level reading of the situation.

Note: While we’re not going to dig into it here, this is also a global justice issue. Very frequently, the companies selling so-called green products are sourcing from Tier 1 suppliers in the “first world,” but those companies source from “third-world” or otherwise economically impoverished countries, often in the global south. South America and Africa often feel the brunt of this “carbon colonialism” and suffer for it.

Beyond Emissions: Examining Human Rights

Climate change is among the biggest issues we as a species currently confront, but it’s not the only global issue that needs to be addressed for ethical commerce.

While emissions, pollution, and sustainability in the production of products are a big part of why you should perform supply chain analysis and know your suppliers, it’s not the only reason.

Human Rights

Another issue that runs alongside all of these concerns is the injustice in the treatment of human beings involved in the entire manufacturing process. From the people who harvest cotton to the workers at the gins and factories producing the fabric to the workers handling the sewing and dying, there are many, many people involved in producing a single product like a t-shirt.

How are those people treated? Are they paid fairly for their labor? Are any of these companies involved in less savory actions, like child labor, human trafficking involved in labor trafficking, or simple impoverishment?

There are also broader local concerns. The farm that grows cotton; is it ethically maintained? Where does the water for the crops come from? Even an ethically staffed and managed farm might not be sustainable if it’s draining aquifers that other people need to live or being grown to the exclusion of the food people need to survive.

Needless to say, there’s a lot to consider. With so many different factors at play across different areas of ethics and justice, it’s enough to boggle the mind, both at the depths to which people will sink to make money from exploitation and to the extent that people will turn their gazes away if it benefits them to do so.

The Benefits of Knowing Your Suppliers

Almost no matter where you are in the supply web, it’s valuable to know your suppliers.

Know Your Suppliers

It goes beyond social justice and sustainable practices, though; there are practical, business-relevant concerns as well.

  • The more distant a supplier is and the further removed you are from them, the less influence you have over quality control and other practices.
  • The ethics are, of course, important, as we’ve detailed extensively above.
  • There are also potential legal ramifications. You can’t simply ignore violations of human rights happening beneath your nose; you can even be held liable for the actions of your suppliers, as your continued business is in support of their actions. This is likely to be increasingly common as the focus on economic, social, and environmental justice increases.
  • There are even security concerns; what information is passed to your suppliers, and are they secure in protecting it?

Protecting yourself while providing the most ethical and sustainable possible products and services is what we all strive to achieve.

The Potential Drawbacks and Liability of a Toxic Supplier

Navigating the vast network of suppliers is more than just a logistical challenge. It holds reputational, financial, and legal implications that can either uplift or damage your brand in significant ways. 

Drawbacks and Legal

When one link in your supply chain becomes compromised or acts irresponsibly, it can reverberate throughout the entire network and even tarnish your business’s reputation.

  • Reputational Risks: In today’s age of digital connectivity, word spreads fast. If one of your suppliers is found to be engaging in unethical practices, your business can quickly come under scrutiny, especially if you advertise ethical practices yourself. With the rise of socially conscious consumers, brands are held accountable not only for their direct actions but also for the actions of their associates. A tarnished reputation can lead to lost sales, decreased customer trust, and potentially even boycotts.
  • Financial Risks: Engaging with a supplier that cuts corners or doesn’t adhere to regulatory standards can lead to recalls, returns, and lost revenue. Furthermore, the cost of replacing a supplier, especially at short notice, can be exorbitant. Additionally, legal proceedings due to the malpractice of a supplier can result in significant legal fees and settlements.
  • Legal Liabilities: As the end provider, businesses can sometimes be held legally responsible for the actions of their suppliers. If your supplier violates laws or regulations, even unknowingly, it could result in lawsuits, fines, or sanctions against your company. This can be especially concerning if you operate internationally, where the legal landscape can vary widely.
  • Operational Disruptions: A supplier that fails to meet its obligations, whether due to financial difficulties, logistical challenges, or ethical violations, can disrupt your operations. This can result in delays, increased costs, and loss of trust with your clients or customers.
  • Long-term Impacts: Relationships with suppliers often span years or even decades. If you’re tied to a supplier that becomes problematic, it can impact strategic decisions and long-term planning. You might find yourself stuck in contracts or obligations that are no longer beneficial or in line with your company’s values.

While it is essential to seek out suppliers that offer competitive prices and reliable services, it’s equally crucial to ensure that these suppliers adhere to the ethical, legal, and quality standards that your company stands for.

Remember, the actions of your suppliers can reflect on your organization, so it’s in your best interest to ensure they uphold the same values and standards that your organization does.

What Can You Do?

What can you do to participate in the conversation and do your part for climate justice and human rights?

It depends on where you are in the chain.

If you’re a consumer, the most you can be expected to do is make the most ethical choices you have given the information and resources available to you. Most individuals don’t have the time, knowledge, or resources to dig into the supply chains of every single company they purchase a product from. So, your goal is to identify companies that offer as much information and transparency as possible.

That’s what our goal is: to provide the most ethical, sustainable, human-rights-focused products we can.

Ethically Made

Supply chains get messy, and it’s often impossible to vet every single entity along every tier of the supplier map, but that’s not an excuse to greenwash. That’s why we use badges to describe our products according to what we can verifiably know. If we can verify that the entire process is sustainable, we’ll say so; if we can’t, we won’t make the claim.

  • If you’re a company purchasing products for your own sale or use as promotional items, you can do a little more due diligence. When you’re ordering on the scale of hundreds instead of individual products, you have more chance of getting a company to tell you more about their processes and suppliers and whether or not they can verify information about them. Certainly, some companies won’t be forthcoming, but then you can just choose a different one.
  • If you’re a manufacturer at any point along the supply lines, from Tier 1 to Tier 3 and beyond, you have more influence. You can make sure you source your raw materials from ethical, sustainable sources. And more importantly, you can provide information about your sources – and potentially even your customers – publicly so that others further along the chain can do their due diligence more easily.

In practical terms, what this involves at every level is mapping out the chains and relationships to the best of your abilities. At the very least, cover the major bases. You don’t necessarily need to dig into where your Tier 3 suppliers are getting their printer paper, but the major elements of concern are worth tracking down. 

It’s also worth periodically re-evaluating and refreshing your analysis. Sometimes, a company you’ve been working with changes hands and abandons some of its ethical policies. Sometimes, a company you worked with because it was the only option now has competition that comes out on top when analyzed from an ESG perspective. Sometimes, you have other reasons to re-evaluate, and finding an alternative is a solid step in the process.

At Ethix, we strive towards a sustainable future. We do the best we can to source our products at all levels of the supply line with ESG in mind. It’s not always possible to cover 100% of the chain, but we’re continually improving. If you have any questions at all about any point in the chain, feel free to ask us; we’re more than happy to provide any information we have.