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Consumers and investors alike are becoming increasingly focused on sustainability and the importance of reducing carbon emissions. They are clued in as to where their products come from and what exactly they’re made of. Not only this, they’re also looking to companies to step up to the mark when it comes to tackling climate change and other sustainability issues. Sustainable sourcing is one way for companies to address their environmental and social impact and to make changes for the better.
👉 In this article we’ll explore what sustainable sourcing actually means, how it can help to reduce carbon emissions, and how businesses can implement it when it comes to their own procurement practices.
Sustainable sourcing is the integration of social, ethical and environmental performance factors into the process of selecting suppliers. It aims to build strong, long lasting relationships with suppliers while also reducing a company’s impact on the environment and society through the selection of sustainable products and suppliers.
The world is now more interconnected than ever before and the global expansion of businesses and supply chains has brought about risk as well as opportunity. Risks such as price volatility, supply disruption, diverging laws and regulations across markets, threats to brand image etc. But perhaps the most pressing risk presented by a company’s supply chain is the threat to the climate and environment.
As the world wakes up to the impact of global warming and environmental deterioration, governments, individuals and companies alike are increasingly being asked to step up to the mark when it comes to the fight against climate change. Ambitious targets have been set to keep global warming under 1.5℃, and to reach net-zero emissions (compared with 1990s levels) by 2050. As a result corporate social responsibility and ESG (environmental, social and governance) factors are becoming more and more commonplace in the business environment.
Sustainable sourcing, also called ‘sustainable procurement’, ‘green purchasing’ or ‘social sourcing’ falls under a company's ESG strategy and is crucial if a company wants to reduce its greenhouse gas emissions. What many people don’t realise is that often, the largest portion of a company’s carbon footprint comes from their supply chain. Therefore, if companies are going to play their part when it comes to reducing greenhouse gas emissions they’re also going to have to address the issue of sustainable sourcing.
❗️ A couple of clarifications. Sustainable sourcing is different to ethical sourcing and supplier diversity, though the three are easily confused. Ethical sourcing is the process of ensuring that materials are obtained responsibly and ethically. Supplier diversity is where opportunity is given to suppliers or businesses owned by diverse individuals or groups (for example a minority-owned business).
There are three dimensions to sustainable sourcing:
Globalisation has brought with it many advantages: its increased competitiveness in the business sector, lowered the price of goods, created innovation and technological advancement. However, it’s also got its drawbacks. Most notably the effect on the environment via expansive supply chains.
Liberalisation of trade through the reduction of restrictions, tariffs and other barriers may result in the expansion of a country’s industrial or manufacturing industry, which in turn means that energy intensive practices are also increased. This means more pollution, more carbon emissions and the depletion of natural resources.
Not only this, but with increasingly expansive supply chains, the transportation of goods has also increased. How often do you notice that the product you’re buying in the supermarket was grown or produced in another country half way across the world? Unfortunately the further the product has travelled the more transportation that’s involved, which also means the bigger the carbon footprint.
As more and more companies focus on reducing their carbon emissions, one aspect of their business operation that’s often overlooked is the supply chain. It’s much easier, and perhaps more obvious, for companies to focus on their direct emissions that result from their day to day operations - for example the greenhouse gases that are released from their manufacturing plant, or the electricity consumed by their office building. This is known as scope 1 and 2 carbon emissions (direct and purchased emissions). They’re often the easiest to obtain data on, as well as the easiest to calculate.
What’s trickier however, and often overlooks is scope 3 emissions which encompasses the emissions associated with all the goods and services that a company buys - ie. the company's supply chain. What some might be surprised to learn is that emissions from a company’s supply chain often outweigh the emissions that it directly produces. This is why sustainable sourcing is so important when it comes to addressing a company's carbon footprint.
Savvy businesses realise that governments, investors, stakeholders, and clients increasingly expect them to play their part when it comes to protecting our environment and society. This comes from increasing regulatory and legal requirements, as well as internal and external pressure from both shareholders, employees and customers alike. It’s increasingly apparent that if a business wants to survive then they’re going to have to adopt ESG principles into their operational practices. Sustainable sourcing is one way of doing this and has a surprising number of benefits:
Often companies have existing sustainability initiatives as part of their wider CSR strategy. Where this is the case, companies should review existing sourcing policies and determine if there are areas for improvement when it comes to sustainability. They should ask themselves what policies are missing when it comes to the processes and criteria used for supplier selection and management?
Where the company doesn’t have any CSR strategy at all, company leadership should first look to develop a wider ESG strategy. Then, once a framework is in place for this, specific policies regarding procurement practices can be put in place that align with the business’ central ESG strategy.
No matter what position a company is starting from when it comes to sustainable sourcing, the best way to achieve their goals is to set clear targets and to measure progress against these. Data should be collected and analysed to better evaluate the effectiveness of policies and the impact they are having.
It’s entirely possible that a company has already built up strong and long-lasting relationships with existing suppliers and therefore doesn’t want to jump ship, or at least not straight away. If this is the case companies need to be looking to engage with their existing suppliers and leveraging their relationship to encourage sustainability.
A good way to initiate the conversation is to send existing suppliers a sustainability questionnaire which will help a company to evaluate the sustainability practices of their supplier. Where the results fall short of the mark, a company can then look to discuss incremental changes that can be put in place to improve sustainability.
Alongside reviewing and engaging existing suppliers, it’s also important that a company updates its procurement process so that it reflects its sustainable sourcing goals. This can include a sustainability questionnaire that is sent out to potential suppliers and the adoption of sustainability criteria with regards to the supplier evaluation and procurement scoring.
It’s not enough to simply ask these questions at the start, companies need to commit to ongoing assessments and audits of their suppliers environmental and social performance to ensure that they're doing the work to implement their own sustainability practices.
It’s often a good idea for a company to share their procurement policy both internally and externally. This can benefit the company as it shows potential investors and customers that it is committed to implementing sustainability practices, which will improve brand reputation and maybe even attract new business. It also encourages the company to stick to its word. Sharing practices on sustainable sourcing in a public forum means that a company is more likely to enforce the policy, because if it doesn’t it risks considerable damage to its brand reputation.
Sustainable sourcing is something that should be on the agenda of businesses across the board. It’s an essential part of corporate social responsibility and will both protect and create value for an organisation, while also helping it to reach its ESG targets.
Not only this, sustainable sourcing is also essential if we’re to meet global climate change targets. There’s no denying that industry has had a negative impact on the environment (and sometimes society) over the years, and has greatly contributed to global warming and environmental depletion. Sustainable sourcing is crucial if we are to change this and to attempt to reverse the effects of some of this harm.
At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. Why not request a free demo with one of our experts - no obligation or commitment required.
If reading this article has inspired you to consider your company’s own carbon footprint, Greenly can help. Learn more about Greenly’s carbon management platform here.
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