Sustainable sourcing
of supply chains and pressure to lower production costs have negatively impacted environments and communities around the world, especially in developing nations where production of high demand goods is increasingly taking place. Since the 1990s, awareness of these negative impacts has grown, leading stakeholders to push companies to take responsibility and actively work to improve the sustainability of their supply chains. It has come to be understood that a company is only as sustainable as the start of its supply chain, bringing about the need for sustainable sourcing. Sustainable sourcing refers to the inclusion of social, environmental, and economic criteria in the sourcing process.
Background
Sustainable sourcing finds its roots in the concept of Corporate Social Responsibility, which gained popularity in the United States in the 1970s and internationally in the 1990s. CSR has evolved over time from a philanthropy-based strategy for responding to consumer concerns, to a decision-making process that takes into consideration the various facets of a company's impacts. CSR came to include environmental responsibility in the 1990s with the introduction of John Elkington's "Triple Bottom Line", which highlighted the responsibility businesses have to the environment, in addition to their economic and social responsibilities. Since the introduction of the triple bottom line, sustainability has become an important topic for most organizations.In the past, companies were often able to separate themselves from unsustainable and unethical practices within their supply chains, as long as their internal practices were considered to be sustainable. Supply chain scandals such as child labor in Nike factories in the 1990s, use of toxic lead paint in Mattel toys in the early 2000s, and more recently the collapse of a factory linked to Primark in Bangladesh, however, have worked to increase awareness of unsustainable supply chain behaviors. Pressure from stakeholders forced companies to begin taking responsibility for improving sustainability beyond the organizational level. As companies became responsible for the sustainability of their partners in the supply chain, in addition to that of their immediate organization, it came to be understood that a company is only as sustainable as its suppliers.
Defining sustainable sourcing
Sustainable sourcing can be defined as obtaining the materials, products, and services an organization needs from its suppliers in a manner that is socially and environmentally responsible, while still being economically sound.Environmentally responsible
Supply chain activities mainly impact the environment in two ways: natural resource depletion and/or production of harmful pollutants. These impacts have further implications for the natural world, leading to biodiversity loss, habitat destruction, soil degradation, and disruption of natural cycles. To mitigate these impacts and meet the 'environmentally responsible' component of sustainable sourcing, a company may take steps such as requiring suppliers to use certain materials, and evaluating various environmental metrics when selecting suppliers.Socially responsible
Supply chains activities also have a social dimension. Companies often fall short in ensuring fair treatment and safe working conditions for workers, especially in developing countries where a large portion of production happens. Furthermore, previously mentioned environmental impacts also have health and wellbeing implications for communities. To mitigate these impacts and meet the 'socially responsible' component of sustainable sourcing, a company may take steps such as mandating labor standards among suppliers, and evaluating multiple social metrics when selecting suppliers.Economically sound
In traditional sourcing practices, the focus is put on getting the best quality product possible at the most reasonable price, with little consideration given to the impacts of producing such a product. Sustainable sourcing requires companies meet high environmental and social standards while continuing to provide good economic value at a competitive cost.Ensuring sustainability
Sustainable sourcing is a growing trend within many industries, as is the utilization of sustainability standards and certifications to promote and measure the progress of sustainable practices.Voluntary Sustainability Standards (VSS)
Regulation of global business practices has seen a significant shift from governmental to private, as companies are increasingly held accountable by consumers and society as a whole. Numerous sustainability standards have been developed since the 1970s, and new standards continuously appear.Voluntary Sustainability Standards, set at the local, national or international level by organizations from the public and private sectors, are voluntary commitments made by companies to promote sustainability along the entire value chain, and have evolved as part of this regulatory shift. Voluntary Sustainability Standards are defined by the United Nations Forum on Sustainability Standards as:
"Requirements that producers, traders, manufacturers, retailers or service providers may be asked to meet, relating to a wide range of sustainability metrics, including respect for basic human rights, worker health and safety, the environmental impacts of production, community relations, land use planning and others."Voluntary Sustainability Standards can differ in many ways including actors/stakeholders involved, regulatory mechanisms, strategies, content, and scope. The following are the main types of VSS:
Voluntary government-led certification
Numerous governments utilize or are beginning to utilize Voluntary Sustainability Standards to promote green growth. In developing nations, the use of VSS by governments has the potential to increase market access for exported goods and services. In developed nations, the use of VSS by governments can be helpful in managing and reducing the environmental and social costs often associated with imported goods. The use of VSS by governments can also act as a stepping stone where implementation of mandatory certification proves difficult.An example of a voluntary government-led certification is the United States' USDA Organic label. This scheme provides both social and environmental benefits. Farmers who choose to certify see higher profits, as consumers are willing to pay a premium of about 30% for organic foods, and the environment benefits from reduced pollution and increased biodiversity associated with organic farming practices.
NGO certification
NGOs played a significant role in the initial development of sustainability standards in the 1970s and 1980s, and continue to act as a driving force for sustainability in various industries. NGOs are responsible for a number of the most well-known certification and labeling schemes including FairTrade, Rainforest Alliance, UTZ Certified, and the Organic- /Bio- Standard.The FairTrade label was created in the late 1980s by a Dutch development agency in collaboration with Mexican farmers. FairTrade finds its origins in the fair trade social movement which began in the late 1950s and aims to promote community development in disadvantaged parts of the world. The objective of the FairTrade label is to empower small producers and improve their ability to trade within the global market, primarily through a minimum price that must be paid to producers. The minimum price is set by FairTrade International depending on local economic conditions and is meant to cover both the cost of sustainable production and a decent living quality.
A variety of products are covered by FairTrade standards. The following products are listed on FairTrade International's : bananas, cocoa, coffee, flowers, sugar, tea, cotton, fruit/juices, herbs/spices, honey, nuts/oils, quinoa, rice, vegetables, wine, gold, sports balls, textiles, carbon, and composites.
As of 2019, there are over 1,800 FairTrade producer organizations.
The Rainforest Alliance was created in the late 1980s from a social movement dedicated to preserving rainforests and their biodiversity. Its certification scheme is meant to ensure that farms of all sizes in the tropics meet social and environmental conditions, as set out by the Network for Sustainable Agriculture, in order to prevent further destruction of tropical rainforests, while improving the lives of farmers. A main component of the certification scheme is the required production of a detailed plan for the development of a sustainable farm management system that will allow for conservation goals to be met. In 2020, the Rainforest Alliance redesigned its certification program making a number of significant changes such as shifting away from the one-size-fits-all model and pass/fail system it had previously used when evaluating producers.
The Rainforest Alliance certifies a number of agricultural and forest products, which it divides into the following six categories on its : Flowers and Plants, Food and Beverages, Health and Beauty, Home and Kitchen, Printing Services, and Sporting Goods.
As of 2019, over 2 million farmers have been certified by the Rainforest Alliance, and over 5,000 companies work with the Rainforest Alliance to source certified ingredients.
UTZ Certified was created in 1997 by a Dutch company, Ahold Coffee Company, with the aim of creating an open and transparent marketplace for socially and environmentally responsible agricultural products. UTZ Certified has implemented two main tools, the UTZ Code of Conduct which emphasizes environmental practices that promote biodiversity, conservation, etc., and the UTZ Traceability System which makes certified products traceable from producer to consumer. UTZ Certified became a part of the Rainforest Alliance in 2018.
The Organic- or Bio-Standard was developed in the 1970s, based on the International Federation of Organic Agriculture Movements' Basic Standards. The IFOAM Basic Standards provide a framework or minimum requirements made up primarily of environmental criteria along with a few social and economic criteria, that can be used by private certification organizations or governments to develop their own standards.