Several world leaders may be in denial about climate change (and there are some who aren’t such as Tuilaepa Sailele of Samoa), but a growing number of businesses across the world are embracing sustainability in an attempt to reduce the impact of their business activities on the environment.
In this blog, we will focus on the sourcing industry and how as a business that sources from low-cost regions such as China, you can also take several steps towards sustainable sourcing across all stages of sourcing including manufacturing and shipping.
But first: What exactly is sustainable sourcing?
Sustainable sourcing is the process of taking environmental and social costs and ethical factors into consideration along with traditional parameters like financial factors while procuring assets, supplies or services for your business needs. The objective is to reduce the negative impact of sourcing on the environment and society.
Sustainable sourcing is also referred to as sustainable procurement. It forms part of the UN’s sustainable development goals that several countries are moving towards.
The United Nations explains sustainable procurement thus:
“Traditional procurement has focused upon value for money considerations. The aim and challenge of sustainable procurement is to integrate environmental and social considerations into the procurement process, with the goal of reducing adverse impacts upon health, social conditions and the environment, thereby saving valuable costs for public sector organizations and the community at large.”
Sustainable procurement is virtually impossible without supply chain sustainability.
“Between 40% and 60% of a company’s carbon footprint resides upstream in its supply chain – from raw materials, transport, and packaging to the energy consumed in manufacturing processes. For retailers, the figure can be 80 percent,” said a McKinsey study.
Why should my business choose sustainable sourcing?
Businesses opt for sustainable sourcing for different reasons. Some are self-motivated because they are concerned about the environmental and social impact of their business activities, others go down that road because their customers want them to do so (market demand), while others go green because they believe it helps them cut costs and become more competitive (economic factors).
Caring for the environment is indeed good for business. Research has shown it can help businesses attract consumers worldwide – particularly millennials – who are increasingly becoming aware of their impact on the environment and society and are consciously choosing brands and companies that embrace sustainability.
Seventy-three percent of Millennials are willing to pay more for sustainable goods, said a 2015 study by Nielsen. The study of 30,000 consumers in 60 countries found that consumer goods brands with a demonstrated commitment to sustainability grew more than those without.
Another study by Accenture Strategy in 2018 had similar findings. Consumers overall are increasingly choosing brands that are environmentally conscious, said this online survey of nearly 30,000 people.
These are the other findings of that study:
- 66% of customers say they are attracted to buy from companies that are transparent about where they source their materials and whether they treat employees fairly.
- 62% said they are attracted to companies that take a stand on current and broadly relevant issues like sustainability, transparency or fair employment practices.
- 52% said they would choose companies that genuinely stand up for societal and cultural issues and related causes.
How can I source sustainably?
Given the fact that a chunk of a company’s carbon footprint resides upstream in its supply chain, it’s no surprise then that an increasing number of companies worldwide are collecting environmental data from their suppliers in an attempt to determine how to reduce their own carbon footprint.
According to a study, the companies interact with their suppliers at different levels – basic, transactional and collaborative. They use the data to:
- Measure the greenhouse gas emissions of their suppliers (basic).
- Calculate the carbon footprint of their suppliers as well as identify opportunities for improvements, providing their supply chain with targets and incentives and even warnings of non-compliance with pre-agreed goals (transactional).
- Work with suppliers to develop shared goals and values around sustainability (collaborative).
A report on the study says:
“Measuring emissions across the whole value chain can be incredibly complex for a company like Walmart with its thousands of suppliers around the world. The amount of data involved is probably why we see tech companies leading the way in reducing their carbon footprint. Their data analytics skills mean it is natural for them to collate data and put it to good use and work up and down the supply chain.”
As a business that sources from China, you can start sourcing sustainably by paying attention to the environmental and social impact of sourcing that we detail below. It helps that China has been looking at ways to develop green supply chains for the past few years. It seems to have been motivated to go in this direction on its own as well as because of prodding by western companies who manufacture in China and are keen on improving the environmental performance of their supply chains.
