Sustainable sourcing has become a critical aspect of any modern supply chain management. It's getting even more attention across different industries, especially with new legislation such as the EU's Corporate Sustainability Due Diligence Directive (CSDDD) coming into play.
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Published: February 2024
Sustainable sourcing is the process where companies ensure that products and services on each tier of their supply chain are obtained in a responsible way. Regardless of industry, your supply chain is what brings you the goods you to sell.
And the thing is, sustainable sourcing isn’t just about being ethical; it’s smart business. In an era where customers and investors focus on sustainability, and regulations such as the EU's CSDDD are being introduced, it's simply impossible to overlook the origins of your products.
It's about keeping risks low and making sure your business stays on the right side of the future.
In this blog, we’ll cover what sustainable sourcing is, why it matters, and how companies can get started.
What is sustainable sourcing?
Sustainable sourcing enables companies to get better insights into their sourcing and supply chains while considering the impacts those products have on the planet and people.
In other words, sustainable sourcing is the process of ensuring that products – or the material a company uses – are obtained in an environmentally conscious, socially responsible, and economically viable manner. It involves choosing suppliers who meet certain sustainability criteria, such as reducing environmental impact, providing fair labor practices, and supporting local communities.
The primary focus of sustainable sourcing is on the sustainability risks and opportunities of your supply chain. It's about making procurement decisions that minimize your company's negative impact on the environment and society and, by that, make your business more resilient.
Why your business should care about sustainable sourcing
Sustainable sourcing is increasingly important for several key reasons, each of which reflects broader shifts in the global business, environmental, and social landscapes:
Stay on the right side of the law
All around the world, governments and international bodies (such as the EU, the UK, Germany, and France) are implementing stricter regulations on the environmental and social aspects of your business. Sustainable sourcing helps companies comply with regulatory compliance to avoid legal risks and potential fines.
Mitigate risks and supply chain disruptions
Environmental and social disruption can really impact your supply chain’s stability. The past few years, marked by the pandemic and social unrest, are clear evidence of how vulnerable global supply chains can be! By working proactively and choosing to source things sustainably, you’re better prepared for these problems and keep your business running smoothly.
Reduce environmental and social impact and practice more ethical
Consumers and stakeholders are increasingly aware of and concerned about where and how products are made. Sustainable sourcing addresses issues your stakeholders care about, such as workers' rights, pollution, and deforestation.
Build trust among stakeholders and attract top talent
Companies that engage in sustainable sourcing demonstrate a genuine commitment to ethical practices, which positively influence their brand reputation and customer loyalty.
So, ultimately, sustainable sourcing is not just an ethical choice but a strategic business decision. It helps companies manage their risks, comply with regulations, and meet consumer and investor expectations while contributing to a more sustainable, equitable world at the same time.
The greater the insights, the bigger the impact
The harsh reality is that a staggering number of people, estimated at 16 million, are trapped in forced labor within the supply chain of international companies. On top of that, companies’ supply chains often account for over 90% of their emissions.
It’s clear that for a company that wants to act sustainably, it needs to manage its supply chain, not just its direct operations. This is why there's a global shift of introducing tougher laws, making sure companies are responsible for every step that leads to their final product.
Sustainable sourcing legislations
Countries like the UK, France, Norway, and Germany are just a few of the countries that have already implemented or are in the process of adopting national sustainable sourcing laws. These laws mandate companies to take responsibility for the impact of their supply chain.
In 2023, the EU adopted a much-await major directive, the Corporate Sustainability Due Diligence Directive. With this directive in place, all large companies operating or selling within the EU will have to carry out due diligence in their own activities and their suppliers.
5 steps to implement a sustainable sourcing strategy
1. Develop a responsible sourcing policy
Create a responsible sourcing policy that defines what sustainable sourcing means for your company while establishing clear guidelines and standards that suppliers and employees need to live up to. Use widely recognized third-party sustainability standards and certifications, such as ISO 20400:2017 or others relevant to your business, to ensure that your suppliers meet environmental and social sustainability requirements.
2. Understand your current supply chain
Map out your existing supply chain to identify your suppliers and the origin of your materials and services.
3. Engage your suppliers
Work closely with your suppliers to encourage them to adopt sustainable practices. Create a streamlined process that not only allows you to gather essential data for smart decisions but also supports your suppliers in their sustainability efforts.
Remember, reporting simplicity for your suppliers is crucial; otherwise, you risk not getting the information you need.
4. Conduct due diligence
Implement a process to systematically assess potential social, environmental, and ethical risks and opportunities associated with current and prospective suppliers.
5. Monitor, audit, and reportContinuously monitor suppliers’ sustainability performance and conduct regular audits, either internally or through third parties, to ensure compliance with your policy.
Make sure to be transparent with your stakeholders and report on your sustainable sourcing practices and progress. It’s through your reporting you can demonstrate your progress and build trust.
Sustainable sourcing in Worldfavor
Use Worldfavor’s Sustainable Sourcing Solution to track your supply chain's ESG performance and access real-time data straight from your suppliers. Gain insight, take action, and drive sustainable change. All in one intuitive tool.
Why Worldfavor?
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Gather scope 3 data from your suppliers, discover your climate impact, and set a reduction plan.
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Enable suppliers to assess and share their emissions with our free CO2 calculator.
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Track and align with CSDDD, CSRD, and other legal frameworks.
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Suppliers use Worldfavor for free for sharing data, calculating emissions, and getting guidance on ESG topics.
Want to know more? Book a free demo today!
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