Businesses around the globe are practically falling over themselves in an effort to position their brand as “sustainable”. Increasingly stringent regulations and changing consumer attitudes mean that companies from all industries have signed up for recycling schemes and are purchasing carbon offsets en masse.
However, a recent report from McKinsey shows that up to two-thirds of businesses' emissions occur upstream and are attributable to suppliers. This means that the environmental and social responsibility of any given business extends far beyond its own walls.
Minimizing upstream emissions can be tricky. Long-term contracts and delicate supply chains may limit businesses’ ability to pivot towards more eco-friendly suppliers. However, businesses that authentically care about their environmental, social, and governance (ESG) responsibilities need to embark on green procurement to encourage more sustainable practices across the supply chain.
Setting Sustainable Standards
Businesses that fail to follow up calls for greater sustainability with new standards are probably greenwashing. Setting new ESG standards keeps businesses accountable and helps them set goals that meaningfully improve their sustainability.
Businesses that want to encourage greater sustainability across the supply chain can join the Ethical Trade Initiative (ETI) to build their network. The ETI’s central purpose is to protect the rights of workers around the globe. However, the ETI also hosts sustainable procurement training initiatives that minimize upstream emissions. The ETI also holds members accountable, meaning businesses are forced to follow through on their commitments to ESG standards.
Companies that authentically care about sustainability can pursue ISO 14001 certification, too. ISO 14001 is the gold standard for international environmental management systems and gives companies a framework to audit their current operations, identify failings, and complete life-cycle analyses.
Working with Existing Suppliers
Adhering to sustainability standards can be tough. Many companies are surprised to learn about the operations of their suppliers and may not be aware of the carbon emissions that they inherit from their supply chain. Businesses that don’t want to “fire” their current suppliers should aim to work with them to reduce their carbon emissions and improve their adherence to ESG standards.
Adhering to stringent ESG standards can be challenging for suppliers. Many suppliers work to a tight profit margin and may see calls for greater sustainability as a threat to their profitability. Downstream businesses must work collaboratively with their supplier to develop joint sustainability standards together.
Sustainable goods are invariably more expensive but need not break the bank entirely. While drawing up joint sustainability standards, companies should actively suggest methods to control costs and avoid rising prices. For example, businesses can improve sustainability by streamlining operational efficiencies, buying in bulk and leasing used carbon-neutral equipment to their suppliers at a reduced cost.
Working collaboratively and embracing creativity can help businesses have the best of both worlds. Eco-friendly businesses can even tap into government-sponsored green funding initiatives to alleviate financial pressures while undertaking green procurement. However, sustainability isn’t a static goal and companies need to undertake regular life-cycle assessments to encourage environmental responsibility across their supply chain.
A life-cycle assessment is an audit of everything that goes into delivering a product or service. A complete life-cycle assessment will consider the following:
- The raw materials used in the production process;
- The energy needed to create, package, and ship the product;
- Release of waste during production;
- Transport and disposal of the product at the end of its useful life.
A thorough life-cycle assessment helps businesses assess their suppliers and identify areas for improvement. A life-cycle assessment can help companies rethink their supply chain and pivot towards new suppliers, too.
Businesses that conduct life-cycle assessments must treat the findings seriously. For example, if a business finds that they are working with unethical distributors that dump waste material and use excessive carbon, they should switch to eco-friendly fulfilment centres instead. Eco-friendly fulfilment centres mitigate waste and carbon use by automating essential processes and maximizing their use of alternative energy sources during transport and delivery.
Pivoting towards more sustainable suppliers and distributors can be frustrating. However, taking the step towards greater sustainability will improve industry-wide standards and create new opportunities for small, local suppliers.
Local Supply Chains
Most modern businesses rely on global supply chains to fulfil their needs. However, local supply chains are inherently more sustainable. Procuring local suppliers reduces transport-related carbon emissions produced and can bolster the strength of the local economy.
Local suppliers and distributors are familiar with nationwide sustainability standards, too. As such, suppliers, producers, and distributors are working to the same laws and are held accountable by the same governing bodies.
The UK government supports businesses that want to invest in local supply chains, too. Grants are available for local supply chain projects and the clean energy budget can help businesses procure suppliers who source their energy sustainably.
Green procurement is one of the best ways for businesses to reduce their carbon footprint and improve their ESG standards. Companies can work with existing suppliers to meet sustainability standards outlined by ISO 14001. Businesses that want to transition away from unethical suppliers should look locally and may find financial support in the form of grants and government funding designed to reduce emissions and support ecological protection initiatives.
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