Sustainable Sourcing 101

An image of a sustainable forest with the sun coming through the trees.

The concept of sustainable sourcing, also known as  green purchasing or  social sourcing, is nothing new.  Sustainable sourcing is impacting nearly every area of corporate business and the consumer ‘s mindset. Everything from sourcing materials, talent attraction and consumer purchasing habits is changing because of sustainable sourcing growth.  However, the term gets thrown around in the procurement industry quite often and is often misunderstood or misused. So,  here ‘s a guide  with  all the basics you need to know about sustainable sourcing.    

WHAT IS SUSTAINABLE SOURCING

First and foremost, we have to define the term.  Sustainable sourcing  is the integration of social, ethical and environmental performance factors into the process of selecting suppliers.  It includes  purchasing sustainably preferable products and services (products made from recycled or remanufactured materials),  as well as  green purchasing guidelines that might pertain to certain products or commodities.    

Sustainable sourcing is needed because supply chains continue to expand globally into developing countries for lower costs and  larger  production capacity. This expansion  exposes  companies to  increased risks and heightens the expectations of their stakeholders. Company  stakeholders (including customers, shareholders, employees, NGOs, trade associations, labor unions, government observers, etc.)  expect corporations to  take responsibility for their supplier ‘s environmental,  social and ethical practices. Now  companies are increasingly making  sustainable  sourcing an  essential  part of their procurement and supply chain management processes.  

WHAT IS NOT SUSTAINABLE SOURCING

Sustainable sourcing often gets confused with other industry terms. The most common is  ethical sourcing, which is defined as  the process of ensuring the products being sourced are obtained responsibly and sustainably. It is a component of sustainable sourcing but not the same thing.    

Additionally, sustainable sourcing is not  supplier diversity   – providing economic opportunities to diverse supplier enterprises like  minority-owned or veteran-owned businesses.  It is  also  not  sustainable cost savings,  which  is  the concept of recurring savings  (you saved 10% last year, and you want to save at least 10% this year, too).  

DIMENSIONS OF SUSTAINABILITY

The €œSustainability in the Supply Chain € learning  module  from SIG University teaches that there  are several dimensions of sustainable sourcing:    

  • Environmental:  Biological perseverance, energy conservation, pollution regulations, carbon/water footprint reduction  and global warming  
  • Social:  Diversity, local communities  and  decent working conditions  
  • Economic:  Financial stability, energy demands and reduction  

SUSTAINABLE SOURCING BENEFITS

The three primary benefits of sustainable sourcing practices are to manage risks, reduce costs and increase revenue.  Each driver has different elements to it that motivate the business:  

  • Manage Risks:  Brand protection, supply chain disruptions, fines and  litigations  

  • Reduce Costs:  Vendor rationalization, reduced administration, the total cost of ownership  

  • Increase Revenue:  Service differentiation, access to new markets, competitive advantage    

One  company  that stands out to me as  using sustainable sourcing  for  a competitive advantage is Toms. You may be familiar with  Tom ‘s  One for One ®  campaign,  which provides a new pair of shoes to a child in need for every pair that is purchased. They utilize the social dimension of sustainable sourcing to promote this charitable cause  that supports local communities  and makes their brand stand out from the competition.  

Sustainable sourcing also provides the following opportunities to businesses:  

  • Mitigate risks  

  • Increase competitiveness  

  • Attract new consumers  

  • Develop new markets  

  • Speed up innovation  

  • Predict future earnings  

THE SHIFTING MINDSET ON SUSTAINABILITY

According to research in  “Sustainability as a Business Strategy”  from  the  SIG University learning  module, the mindset of consumers is drastically changing when it comes to sustainability.  Consumers are now more aware and conscious of the brands they  purchase  from and the companies they work for, and they desire to make decisions that support sustainable enterprises.    

  • 67%  of consumers  prefer to work for socially responsible companies  

  • 66%  of consumers  will pay extra for products and services from socially responsible companies  

  • 52%  of consumers  made at least one purchase in the past six months from socially responsible companies  

  • 52%  of consumers  check product packaging to ensure sustainable impact  

  • 49%  of consumers prefer to  volunteer/donate to organizations engaged in social and environmental programs  

For additional resources on sustainable sourcing, visit the  SIG Resource Center  to find a variety of content on the subject. I ‘d also recommend reading this  whitepaper from  EcoVadis  on €œThe 5 Pillars  Of  Sustainable Procurement Value Creation. €    


Heather Schleicher

Heather Schleicher

Chief Marketing Officer

Heather Schleicher,Chief Marketing Officer at Sourcing Industry Group (SIG), has more than 15 years of experience in business and marketing with organizations ranging from independently owned franchises and small businesses to $12B international enterprises. Prior to joining SIG's leadership team, Heather served as Senior Marketing Manager where she was responsible for creating, executing, and supporting SIG's marketing strategies across all regions and lines of business. Before joining SIG, Heather led digital marketing initiatives for outsourcing, recruiting and workforce management provider Allegis Global Solutions. Previously, Heather managed the marketing department at a contracting consultancy in Washington, D.C.