Many manufacturers today are aiming to become more sustainable. As climate issues become increasingly prominent and more consumers favor eco-friendly businesses, ESG policies have come under the spotlight.
Becoming more environmentally friendly as a company involves many changes. One of the most important of these is sustainable material sourcing.
Why Is Sustainable Sourcing Important?
Sustainability is good for business as well as the environment. Consumers today prefer eco-friendly brands, with 66% willing to pay more for products from responsible companies. While ensuring internal processes meet a higher standard is important, being truly sustainable also means addressing material sources.
Companies’ value chains often represent their largest impact on the environment. Third parties and supply chain partners account for 80 to 90% of overall end product emissions. If a business claims to be sustainable but only addresses its internal operations, it may come across as misleading, driving customers away.
If companies want to become fully sustainable, they must source from sustainable partners. Here are seven ways you can ensure you’re doing that.
1. Look for Environmental Standards
Several standards and certifications help companies demonstrate their sustainability to partners, customers and investors. Manufacturers can look for these qualifications when selecting material providers to find verifiably green sources.
Look for certifications like the Global Recycled Standard (GRS), Rainforest Alliance membership, ISO 14001 and Global Reporting Initiative (GRI) standards. Suppliers will almost certainly display these standards on their website if they meet them, and manufacturers can inquire about them if they don’t.
Manufacturers can also turn to the standards boards themselves to find qualifying suppliers. Looking at lists like the Dow Jones Sustainability Index (DJSI) and case studies from groups like the Global Sourcing Council can reveal who leads the industry in sustainability. These records are also helpful for finding companies that claim to be sustainable but aren’t in reality.
2. Require Data
Manufacturers should also take a more active role in monitoring sources’ sustainability. Ask your suppliers to share information like emissions, land use, sustainability projects and workforce data. These reports will help ensure that supply chain partners meet the company’s unique sustainability standards.
The easiest way to collect and share this data is through technology. Internet of things (IoT) sensors can gather the information that businesses can then use cloud computing platforms to access. Using these technologies provides hard facts to hold all parties accountable and makes it easier to access them.
Remember that trust is a two-way street. If manufacturers ask for this insight, they should also share the same data from their own processes.
3. Help Suppliers Go Green
While going green has long-term economic benefits, it carries high upfront costs. These expenses are the No. 1 barrier to sustainability among small and medium businesses, so manufacturers should help address them. Approaching environmental projects as a team effort will help offset costs so suppliers can go green faster.
Manufacturers could help suppliers pay for renewable energy installations or new, more energy-efficient technologies. While this does mean manufacturers will have to spend more, it helps them make their sourcing sustainable faster, leading to quicker ROIs. This collaboration will also help strengthen supplier relationships, promoting transparency and future cooperation.
4. Consider All Parts of the Supply Chain
Supply chains are complex, so it’s easy to overlook some factors that hinder sources’ sustainability. However, if manufacturers want to be truly green, they need to find and address these areas. Consequently, it’s important to review all the parts of the supply chain, not just large sources and production facilities, to look for ways to improve.
Transportation, for example, accounts for 29% of greenhouse gas emissions in the U.S. If a manufacturer sources from a carbon-neutral supplier but transports goods with inefficient fossil-fuel vehicles, they may still have a considerable carbon footprint. While the logistics phase between parties is easier to overlook, it still has a large environmental impact, so it deserves attention.
5. Use Technology to Your Advantage
Understanding these factors and holding everyone to a higher standard can be challenging, but technology makes it easier. Blockchain platforms, for example, provide an easily accessible but unchangeable digital record. As a result, they’re ideal for sharing sustainability data to fight fraud and improve accountability.
Artificial intelligence (AI) is another promising technology for sustainable sourcing, as it can analyze multiple data points faster and more accurately than humans. Some companies use it to detect changes in land use, helping understand their sources’ ecological impact. AI could also review supply chain partners and processes to highlight areas to improve.
Technologies like AI, blockchain and the IoT all improve visibility. That’s an indispensable resource for companies trying to understand complex things like sustainability.
6. Redesign Products
Part of ensuring sustainable sourcing is paving the way to use sustainable sources in the first place. Manufacturers can do that by redesigning products to make it easier to integrate sustainable materials. Low-carbon materials may have different properties or cost considerations, but redesigns can help account for these differences.
One of the easiest and most widely applicable ways to do this is to redesign products to use less material. Green steel may cost roughly 25% more than conventional metals, but if manufacturers don’t need as much, that premium isn’t as impactful. Sourcing sustainable materials then becomes more economically viable.
7. Review Sources and Practices Regularly
It’s important to realize that just because a supplier was sustainable one year doesn’t mean they’ll always be. As standards evolve and companies expand, businesses’ sustainability practices can falter. Look no further than Nestle and Humana falling from the DJSI for evidence of how companies’ sustainability stance can shift.
In light of this dynamic nature, manufacturers should regularly review their sources and their own environmental practices. Audit supply chain partners at least annually, review quarterly sustainability data and check indexes often. Ideally, things will only improve year after year, but these reviews can help adjust as necessary to stay green if they don’t.
Sustainable Sourcing Is Increasingly Important
Sustainability as a whole is becoming more important to customers and businesses alike. As a result, manufacturers can’t afford to overlook sustainable sourcing. If a company’s supply chain isn’t also green, it can’t truly call itself sustainable, and consumers and potential business partners will notice.
These seven steps can help manufacturers ensure their material sourcing is sustainable. They can then protect the environment and appeal to a more eco-conscious market.