May 11, 2020
Stakeholder expectations have significantly increased in regards to sustainable sourcing. Transparency and traceability, especially beyond tier 1 suppliers, have become a major challenge. However, adaptions of industry standards and global frameworks, such as the UN Global Compact Ten Principles, are still the exceptions.
And here is one example why: Lower-tier suppliers are only very little equipped to handle sustainability requirements and lack both sustainability expertise as well as resources. They further not only lack environmental management systems but also the handling of social problems as well as hazardous labor conditions. This makes lower-tier suppliers the riskiest member in a supply network.
It would, nevertheless, not be fair to just blame the suppliers. Purchasing and procurement processes still mostly follow a shareholder approach driven by financial returns and hence have a short-term orientation. Contributing factors to the procurement successes often do not exceed delivery time, quality and cost targets. Even though sustainable sourcing and the impact on carbon emissions influence the buyer behavior, the perspective in procurement processes has not yet changed. Stakeholder concerns are usually much broader. A change towards a stakeholder perspective would entail a stronger focus on long-term goals such as reduced emissions along the supply chain.
Startups and smaller businesses often struggle to find sustainable-oriented suppliers who are willing to use new materials that were separately sourced.
Many manufacturers only cooperate with their current partners and suppliers. Finding an environmental-friendly supplier alone is immensely time consuming. It brings new obstacles and most likely additional costs when a business has even more requirements for a collaboration. This is especially challenging for startups and small businesses, who have limited resources.
Once a supplier who matches all production requirements is identified, on both a sustainability as well as a cost level, the packaging is often the next hurdle to take.
Environmental-friendly and plastic-free packaging is an immense competitive advantage, eventhough costs for customary packaging are still lower than for environmental-friendly packaging. It is very problematic that customers can unfortunately not identify genuine environmental-friendly packaging yet. There are several ways to tackle sustainable packaging: Packaging can be made recyclable or reusable. Paper or BPA can replace plastics. To reduce the use of plastic to a minimum or optimally removing it completely is the next step. Out-of-the-box ideas welcomed.
However, customary packaging still makes the majority and therefore its costs are low and the access is easiest.
There still is a lack of real commitment between consumer businesses and their supply network to make products and the whole supply chain sustainable. Instead, a lot of greenwashing is done to trick consumers into thinking they are actually purchasing sustainably sourced products.
Also, there is a lot of confusion around words used in sustainability campaigns, such as biodegradable, green, eco-friendly, and compostable.
And here is why: All materials, even plastics, are technically biodegradable. It just takes a long time and the impact on the environment is not considered. Green is only a very broad term without any specifications. Eco-friendly does not specify to what extend it benefits the environment. Businesses misuse the term compostable to make their products sound more sustainable as compostable-claimed products are often only compostable under specific conditions (e.g. in industrial composting installations with certain oxygen, temperature and pressure levels).
The perception of all these terms, however, is very positive and customers associate them with doing good for the environment. Educating the consumers accordingly and highlighting the tricks some businesses use to elevate their products is a major challenge.
From strategic sourcing processes to consumer knowledge gaps – the problems when sourcing sustainable go from cradle to grave. Each party needs to commit to their fair share.
Clearly, businesses need to change their strategic sourcing approach to not only contribute to comply with the UN’s Paris Agreement goals, but also to ensure supply chain visibility. Especially sustainability consulting is acceleratingly essential to keep up with this rapidly changing environment.
It positively influences the buyer behavior to make these changes traceable and transparent. This brings the competitive edge back to businesses that source sustainably.
Tell us about your problems when sourcing sustainably!
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