Which comes first, the chicken or the egg? Ethical and sustainable raw material supply or ethical and sustainable raw material purchasing?
This is the latest question on how businesses can achieve their ESG (environmental, social, and governance) standards. Who is most responsible for creating a sustainable economy that complies with ethical standards, those who supply or those who buy?
There is a trend to blame big business and industry chiefs for not doing enough to protect the environment or lower carbon emissions. However, as consumers (buyers) we are all responsible.
By the same logic, purchasing departments and procurement officers have a significant impact on the ESG performance of their supply chain. Sometimes, some buyers probably don't consider enough how their own actions throughout the sourcing process affect the supply chain, as well as how they may actively improve the sustainability of the supply chain.
“Buyers tend to quickly blame suppliers for not being compliant, doing things behind their backs, and so on, but sometimes it’s important to look inwardly and consider how our actions affect suppliers and can cause some negative outcomes as a knock-on effect,” explains Andrew Leighton, a marketing specialist with experience in the Chinese manufacturing sector. “Adopting ‘Responsible Purchasing Practices’ is about making buying decisions that will support your supplier to behave in compliance with your requirements and the law, to treat staff well, not to outsource production to some unknown factory due to being under pressure, etc.”
With regards to sustainability, the chemical industry is at the heart of ethical purchasing, as it provides so much of the raw materials that make up scope 3 emissions. Unlike scope 1 emissions (created by a business in its retail outlets, offices etc.) and unlike scope 2 emissions (created by logistics), scope 3 emissions are made in the supply chain and manufacturing processes. These typically account for a massive 90% of a business's total emissions responsibility.
“Plagued by high-profile incidents, the chemicals industry has long been under the fiercest scrutiny for its high exposure to environmental risks,” explain the business consultants at Daato. “With ambitions like zero-pollution and a toxic-free environment part of the European Green Deal, transitioning to sustainable chemicals is more urgent than ever.”
But while ethical sourcing of raw materials by suppliers is key, the buyer also has a role to play.
For example, how many buyers consider it ‘normal’ to ask a supplier to make changes to an order but still assume delivery in the same time frame? This decision will have an environmental cost, as delivery must be speeded up, but may also have an ethical cost in forcing overtime from workers that may breach labour laws.
Buyers should also be aware that their products are the starting place for ethical and sustainable production.
Textile manufacturers, for example, may insist on the darkest black dyes without considering the additional chemicals and processes (and their environmental impact) required to achieve this. In the same way, a buyer choosing aluminium rather than steel should be aware that aluminium production creates six times more carbon emissions than steel.
ESG targets can only be achieved through consideration and work at the earliest stages. If manufacturers follow ecodesign principles, then suppliers have a better chance of delivering sustainable and ethically sourced raw materials.