Sustainable sourcing: how a green supply chain became the new corporate necessity

Sustainable sourcing: how a green supply chain became the new corporate necessity

The impetus to ‘go green’ has never been greater.

The sustainable fast-moving consumer goods market is forecast to be worth between $142.4 billion and $150.1 billion by 2021*. The green economy has overtaken the fossil fuel industry. And following the global reset triggered by Covid-19, many experts are heralding a ‘green recovery’ in its wake.

Agile, progressive enterprises are already well acquainted with the principles of sustainability, elements of which should permeate every aspect of today’s businesses. But procurement in particular warrants special attention due to the wide-ranging impacts the department’s decisions can create globally.

According to the CIPS (Chartered Institute of Procurement and Supply) sustainable procurement can be defined as: “A process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole-life basis in terms of generating benefits not only to the organisation, but also to society and the economy, whilst minimising damage to the environment”.

And to meet the goal of sustainable procurement, purchasing managers need to review a host of factors across their supply chains, from the use of renewable materials in any goods produced, to the production methods themselves, as well as packaging, transportation and more.

Today’s supply chains can harbour a shocking amount of environmental neglect, which vastly exceeds the social and environmental costs of your own operations: a 2016 report by McKinsey & Company found that the typical consumer company’s supply chain accounts for more than 80 per cent of its greenhouse-gas emissions and more than 90 per cent of its impact on air, land, water, biodiversity, and geological resources.

Fortune favours the sustainable

It’s been well documented that conscious consumerism is on the rise. A 2019 study by Accenture** found that nearly three-quarters (72 per cent) of respondents say they’re buying more environmentally friendly products than they were five years ago, and 81 per cent said they expect to buy more over the next five years.

And thanks to the digital revolution, today’s complex, multilayer supply chains have become increasingly transparent, making environmentally driven purchasing decisions even easier for the average consumer, while also rendering tokenistic efforts and ‘greenwashing’ futile.

But it’s not just consumers that are becoming more picky. B2B customers are also somewhat driven by ethics.

Research conducted by creative agency gyro shows that business purchasing decisions are being made in exactly the same way as consumer purchases: emotionally. The study revealed that 62 per cent of executives rely on intuition and gut instinct when buying.

So if the quality, price and repute of your company’s product or service hasn’t already tipped the scales in your favour during the tender process, a renewed or sustained focus on ESG issues might just give you the competitive edge.

In line with the change in popular sentiment among both B2C and B2B markets, statistics show that businesses which have instigated a more eco-friendly supply chain can reap financial rewards: the FTSE Russell found that over the last five years ‘green’ companies generated higher returns than the broader stock market.

And just in case you needed any more incentive to subscribe to an environmentally friendly procurement strategy beyond a moral obligation, legislation relating to the sustainability of supply chains is potentially coming to a court near you. The UK government, for example, is planning to introduce a new law aimed at clamping down on large corporations whose supply chains are linked to illegal deforestation offshore.

How technology make your supply chain more sustainable 

Many companies do not have a comprehensive understanding of the sustainability impacts of their supply chain. With popular misconception that reviewing every cog in your supply base must be prohibitively expensive, as well as time- and resource-heavy.

Although there is no quick and easy path to sustainability, the right supply transparency solution can help your business strive toward, and eventually achieve, a bottom line defined by not just profit but also by people and the planet.

At RobobAI, our ‘Know Your Supplier’ solution provides a complete 360-degree view across spend, compliance, risk and contract management. By connecting all four platforms your business can identify risk and compliance that meets legislative requirements critical to your brand and reputation, while uncovering how much of your spend has gone through internal accreditation, and make suggestions on how to redirect your spend to a sustainable supplier. This no longer needs to constitute a monstrous and costly challenge.

How well do you know your suppliers? To learn more about what constitutes an ethical supply chain, and how you can future-proof your business, read our white paper, here.

[FOOTNOTES]

*According to research by Nielsen, released in 2019.

** Accenture, released 2019