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Sustainable Sourcing for Companies

By 
Keslio Team
6
 minute read  
|  
March 19, 2024
A conveyer belt full of boxes. Surrounding it are plants and renewable energy.

Products and resources are spread across a business’s value and supply chain. The goods and materials a business acquires leave an impact on the business itself, its environment, and on society. With the rise of sustainable practices, every detail across a company’s operations and functions are taken into account. The ethical sourcing of certain raw materials can affect business practices, brand reputation, and a company’s sustainability performance. Sustainable sourcing– the integration of environmental, social, and governance factors in business decisions on the procurement of resources and the selection of suppliers, can change the way a business operates by steering them towards a more sustainable value chain.

Through sustainable sourcing, businesses extend their decision-making processes by going beyond traditional factors such as price and quality and considering suppliers that can provide both financial and nonfinancial benefits on the business, the environment, and society.

Benefits

Sustainable sourcing brings benefits to a business and its supply chain. Choosing the right suppliers cultivates a culture of sustainability within the company. Sustainable sourcing may reduce a company’s emissions and waste. Sourcing raw materials from suppliers with sustainability and ethical certifications ensures a commitment to social responsibility and environmental preservation. This minimizes the risk of contributing to environmental and social issues. Sustainable sourcing can also assure companies remain compliant to government ESG policies and regulations.

From an economic standpoint, sustainable sourcing can also mean investing in materials or resources that lead to long-term savings. Local sourcing can reduce transportation costs. Additionally, technology or machinery sourced from suppliers with commitments to sustainability can have improved efficiency, longer use, and reduced waste.

Benefits also extend to external stakeholders. When businesses choose to work with suppliers with strong initiatives towards sustainability and ESG, these can impact the suppliers they work with and the communities involved. Sourcing locally boosts local economies and businesses. Communities who benefit from suppliers may gain stable sources of livelihood.

By sourcing sustainably, a business can not only improve their operations, but also their brand reputation towards consumers and investors as the business continues to commit to and strengthen their practices in ESG. The practice and impact of sustainable sourcing encompasses the entire value chain.

Practicing Sustainable Sourcing

How does one apply sustainable sourcing practices to a business? Before a business can make the change towards sustainable sources, it is important to first assess current practices and suppliers and see which areas can be improved on. This can be simplified by first breaking down suppliers and determining which have high significance and impact to the business. After reviewing, businesses can then opt to seek for new suppliers that have previous history on sustainable practices. By evaluating and screening suppliers while considering traditional factors such as cost-effectiveness and quality, and ESG factors such as waste reduction, environmental efficiency, emissions, and biodiversity preservation, businesses can build new practices anchored towards their sustainability commitments.

Yet, sustainable sourcing doesn’t just mean replacing current suppliers with new and more sustainable suppliers. A company can continue working with current suppliers but also engage with them with new goals and expectations in mind. A business can work with their suppliers and encourage them to switch to practices that have improved environmental and social impacts. Creating and sharing policies on sustainable sourcing can increase urgency for change and transform supplier practices. Collaborating with existing suppliers can be value-adding to both parties, as it retains that established relationship and steers both company and supplier towards sustainable development.

Sourcing locally is another way to be sustainable. Local sourcing is the procurement of materials or goods manufactured in the area or country where the business operates or where their plants are located. Through this, businesses are able to support local businesses and help environmental initiatives. This would also reduce transportation costs and gain better control of their supply chain by having goods delivered faster and building strong relationships with these suppliers due to proximity.

Sustainable sourcing can also venture into circularity and end-of-lifecycle activities such as waste management and recycling. By sourcing from suppliers who process waste and bring them back to production systems or establishing their own circularity initiatives by partnering with local communities, companies can reduce the need for virgin raw materials and also their contributions to waste that ends up mismanaged or in landfills.

Once a business has sustainable suppliers, there needs to be assurance that these practices continue to remain sustainable towards the environment and society. Companies can also aim for third-party certification and use these for branding and marketing strategies to show that their products make use of sustainably sourced materials. Practicing sustainable sourcing stretches from one end to another, starting with working with suppliers to communicating and reporting one’s sustainability performance.

Challenges and Opportunities

The shift towards sustainable sourcing can pose significant challenges and also bring in new opportunities. Embracing sustainability can be a costly commitment amidst its long-term savings and benefits. To transition to new suppliers would require changes in stakeholder management plans. Suppliers may also be resistant to changing their current business practices. In addition, with sustainable sourcing still emerging as suppliers too may also be on the transition towards a more sustainable business model, the lack of assurance or certifications poses a challenge when screening suppliers.

Sustainable sourcing still presents positive change and opportunities to reduce the impact of these risks. By sourcing sustainably, a new market that values their environmental and social impact emerges. Remaining engaged with suppliers and supporting them in their sustainability endeavors also can strengthen relationships and push for improvements within their respective industries. As more people embrace sustainable practices and make sustainable choices, growth and impact towards society and the environment progresses.

The practice of making sustainable sourcing decisions is also a balancing act that blends business goals with sustainable development. A company’s choices on sustainable sources can affect their product, reputation, and their finances. Finding the right supplier that matches the needs of the company financially, socially, and environmentally can make a great difference in their success and performance. By awakening businesses in new sustainable practices and instilling conscious decisions, sustainable sourcing eventually becomes a necessary practice integrated into businesses.

At Keslio, we are deeply passionate about sustainability, equipping us with the expertise and extensive network needed to guide clients through their sustainability journey effectively and efficiently. Our expertise is particularly valuable for companies looking to embed sustainability practices into their businesses and investors looking to integrate ESG and impact into investment portfolios. To learn more about how Keslio can assist your organization on its sustainability journey, please don't hesitate to get in touch with us.

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