If you think sustainable sourcing doesn’t matter, think again.

Sustainable sourcing is a practice that many businesses have adopted over the past decade, primarily due to the increasing concerns over the stability of our environment.

The food industry alone is one of the most significant contributors to single-use plastic pollution worldwide. The annual production and use of plastics has increased 200-fold since the 1950s, and the global production of plastics reached 368 million metric tons in 2019. Furthermore, 91% of the plastic we produce isn’t recycled, piling up in landfills and polluting our oceans.

Plastics aren’t the only materials that should be sourced more carefully, too. Coffee capsules, wet wipes, disposable chopsticks, and even cosmetics with microbeads are harming our future as humans and businesses.

Fortunately, there are a lot of sustainable alternatives on the market today, and switching to them can help your company stay ahead of changing environmental laws while improving public perception of your brand. 

But sustainable sourcing is about more than just using eco-friendly materials. It also means sourcing products from companies with sustainable business practices, like giving back to the communities in which they operate by educating employees and their families.

In this article, we’ll talk about what sustainable sourcing means and how it can be beneficial for your business. The goal of sustainable sourcing is to minimise negative impacts on the environment and create positive results for future generations and businesses. 

What is sustainable sourcing?

Sustainable sourcing is the procurement of materials and suppliers with social, ethical, and environmental performance factors in mind. This practice includes purchasing products and services made from recycled or remanufactured materials, abiding by “green purchasing” guidelines.

According to the “Sustainability as a Business Strategy” learning module from SIG University, sustainable sourcing has several dimensions: 

  • Environmental Concerns: This includes global warming, biological perseverance, pollution regulations, energy conservation, carbon and water footprint reduction, and the overall ecological effects that supplies and services have over the whole lifecycle of their manufacturing, use and disposal.
  • Social Concerns: Social concerns related to sourcing include protecting local communities, ensuring proper labour conditions or fair trade standards are observed, contributing to poverty eradication, and preventing human rights violations. 

Consumers are more aware and conscious than ever before of how brands source their materials and how they work to treat society and the environment. 

A survey by Accenture across 11 countries showed that 83% of 6,000 consumers believe that it’s essential for companies to have reusable or recyclable products. SIG University also mentioned noticeable shifts in consumer mindsets in their report, which found that 67% of people prefer to work for socially responsible companies, and 52% of consumers check the packaging for sustainability.

  • Economic Concerns: This includes the financial stability and energy consumption (demand and reduction) that businesses use in the sourcing process. There are also value-for-money considerations which impact any sourcing decision, such as price, quality, functionality, availability, and the overall life cycle of their products.

Why should businesses care about sourcing sustainably?

As supply chains expand into developing countries, the need to source products at lower cost and with larger production capacity is making sustainability even more important. 

Companies are increasingly expected to source responsibly—and they’re being closely monitored by the government, their customers, shareholders, employees, labour unions, and other stakeholders to see how they measure up to this expectation.

But there are also other critical business concerns that factor into the decision to source products more sustainably:

  • Managing business risks, such as brand reputation, supply chain disruptions (especially from unforeseen or extended circumstances, like the coronavirus pandemic), legal fines, and litigation with local communities.
  • Increasing baseline revenue and business capabilities with progressive innovation, vendor rationalisation, and reduced administration.
  • Expanding their competitive advantage over similar manufacturers by accessing and developing new markets, continuously attracting new customers in the fact-paced modern business landscape.

Companies increasingly see sustainable sourcing as essential in their procurement and supply chain processes, keeping their broader strategic context in mind when they make purchasing decisions.

Ultimately, sustainable sourcing enables businesses to build solid and long-term relationships with reliable suppliers—especially in the food, packaging and clothing industries, where production is largely outsourced to other countries.

Source: “Value of Sustainable Procurement Practices,” EcoVadis

Our team at Good for Life has developed a questionnaire and matrix to score suppliers based on the areas that contribute most to sustainable sourcing. A systematic supplier selection process like this helps companies prioritise the suppliers that will lead them to sustainable sourcing—the ultimate goal of many procurement teams. 

What are the benefits of sustainable sourcing?

Now that you know what sustainable sourcing is, let’s get into the details of how a business can benefit from shifting procurement processes towards sustainable suppliers.

Prevention of Harmful Environmental Impacts

Sustainable sourcing provides a firm foundation for industrial development to be truly sustainable for decades to come. 

This growing attention to the prevention of harmful materials entering our environment is a result of global consumer preferences shifting towards cleaner production and eco-efficient industrial systems. Running an eco-friendly business will preserve natural resources and ultimately reduce your reliance on non-sustainable materials (which may be subject to price fluctuations in the future), but it also builds brand trust amongst consumers.

As sustainable sourcing becomes more popular, it also becomes more cost-efficient. Your business can now achieve cleaner production processes, design eco-friendly products, and build efficient product systems (such as logistics, end-of-life collection, and material recycling), for pretty much the same cost as sourcing non-sustainable products.

It’s a win-win solution for business and for the environment.

Procurement plays an integral role in promoting sustainable production. Procurement leaders can influence and encourage corporations to choose suppliers that use resources efficiently, are careful in managing chemicals, minimise pollution and risk to human workers, and help protect the future of our environment.

Development of the Economy and Community

Sustainable sourcing can be a catalyst to further the economic, social, and environmental development of a society as a whole. By working only with sustainable suppliers, your business can show its support for:

  • Human and Labor Rights: Inextricably linked to corporate risk and reputation, human rights is a looming issue for companies sourcing from developing countries that tend to have repressive governments, ethically questionable labour laws, and poor working conditions. Focusing on sustainable sourcing includes procurement teams identifying suppliers that uphold universal human rights, protecting your company’s image and business methods.
  • Gender Equality and Female Empowerment: The Millenium Development Goals (MDGs) has set a goal to eliminate gender disparity in all levels of education by 2015, and one indirect effect of this is that procurement teams are now being called upon to award more contracts to minority-owned suppliers—especially those owned by women. Sustainable sourcing includes the development of supply chains that respect and support nondiscrimination against minority groups of all genders, being fair to all individuals.
  • Poverty Eradication: Closely related to labour rights, the MDGs have also called for the eradication of extreme poverty. Sustainable sourcing helps achieve this by ensuring that the suppliers are from countries with responsible economies—those that support job creation, salary increases, and contribute towards social development.

Supporting local communities in these ways isn’t just a corporate social responsibility initiative. These benefits also help your business achieve good governance by strategically increasing the efficiency and accountability of all your supply chain stakeholders. This also reduces the potential for corruption and discriminatory practices.

Long-Term Business Benefits

Sustainable sourcing is more than being good to the community and the environment—it’s also financially beneficial to companies. Introducing sustainability efforts yields positive ROI through cost savings, and these savings increase the more the company spends. 

For example, if a company chooses a supplier in a closer location, this can reduce shipping and transportation costs, lowering your products’ carbon footprint and saving you money that can be reinvested in other parts of your business.

Here are some more business benefits of sustainable sourcing:

  • Companies can improve their reputation with customers and their respective industries, gaining a competitive advantage over other brands.
  • Companies can reduce their overall costs by using recyclable materials for products and services. Revenue is also increased with innovation, vendor rationalisation, and reduced administration.
  • Companies can effectively manage risks to brand reputation and potential supply chain disruptions with enhanced sustainability standards.
  • Companies can enjoy increased profits from consumers willing to pay higher prices for sustainable products, where the Business of Sustainability Index study of GreenPrint shows that 78% of Americans are more likely to purchase a product that’s labelled eco-friendly, and 64% are willing to pay higher prices for them. 

Statistics from Accenture also show that 72% of their respondents buy more eco-friendly products than they were five years ago, and 81% will continue to buy more in the years to come.

  • Companies can receive financial incentives and subsidies from the US government. This includes tax credits and grants of 10-30% for using alternative energy properties, tax credits for vehicles that meet fuel-efficient standards, grants from the Environmental Protection Agency for environmentally responsible operations, and financing solutions from the Small Business Administration (SBA) for businesses that support green solutions.

On top of the immediate benefits, companies that incorporate sustainable sourcing into their procurement process can also attract more interest from like-minded investors—unlocking funding opportunities for future expansions.

Sustainable Sourcing: The Big Picture

Sustainable sourcing is the future—and procurement officers need to start preparing for it now. 

The first step is to cultivate strong, positive partnerships with the right suppliers. Build trust and close monitoring practices with them for more profitable relationships, trustworthy materials sources, and reduced costs for your business.

Good for Life is committed to developing a network of suppliers that’s good for you, good for the community, and overall, good for life. WIth Good for Life’s team of experts sourcing and managing vendor partnerships on your behalf, you’ll never have to worry about disrupted supply chains or regulatory issues again. 

We work with suppliers who produce eco-friendly products, like fully biodegradable alternatives to single-use plastics. Our suppliers also value their employees, offer training and promotions from within, and operate with women who are a part of the management structure. This isn’t just good optics, it’s good for business, too.

To get started on sustainable sourcing, get in touch with our team today!