Why Unlocking Sustainable Sourcing is Key for the FMCG Industry
Article
Research shows that the consumer mindset toward sustainability has shifted, with 52% of consumers checking product packaging to ensure that a sustainable impact is being made by the brands they are buying from.
However, it isn’t plain sailing for businesses that are on the path to sustainable sourcing and there are several organizational and operational challenges to overcome.
Why is sustainable sourcing key for FMCG?
Sustainable sourcing means selecting suppliers that operate in an ethical, economical and environmentally conscious way. When you break down each of these factors, there is a whole range of things to consider and many complexities to figure out, such as how to best source materials, attract talent and respond to new consumer purchasing habits. Ultimately, FMCG brands are looking to purchase from the most sustainable supplier companies, businesses that avoid contributing to deforestation, exploitation of natural resources, damage to the environment or violations of human rights.
As value chains grow to increase their production capacity, they tend to expand into territories that have lower operational costs and less regulation. While the immediate costs will decrease, the risk level and need to report on their suppliers’ operational practices rises. ESG reporting is a particular challenge for brands, because they are required to achieve transparency across all of their operations based on accurate data. Maersk stated that only 53% of consumer product companies have significant or complete visibility into their own processes and only about 21% have visibility into their supplier processes, posing a significant risk for FMCG companies.
Sustainable sourcing strategies
Strategies will vary depending on the products and sustainability goals for each FMCG company. But first we suggest evaluating your supply chain and engaging with your current suppliers to address the biggest environmental and social impacts associated with their operations and products. Then you can tailor your sustainable sourcing strategies to make the largest difference and gain the biggest results. Technology solutions like Cleanchain can also play a key role in identifying, tracking and reporting on this information to gain up-to-date visibility across the entire supply chain.
Once you have implemented your new sustainable sourcing strategies, your business will benefit from the following:
- Risk Mitigation: Reduce business risks associated with environmental and social issues by identifying potential risks in the supply chain and addressing them immediately.
- Cost Savings: By optimizing resource use, reducing waste and improving efficiency, companies can achieve cost reductions in areas such as energy consumption, raw material usage and waste management.
- Environmental Conservation: Sustainable sourcing aims to minimize the negative environmental impacts associated with production processes, protecting ecosystems, reducing pollution, supporting local communities and conserving natural resources.
- Social Responsibility: Improve the social and ethical aspects of production by promoting fair trade, safe working conditions and the protection of human rights across global supply chains.
- Innovation: Sustainable sourcing encourages the development of new processes, technologies and products that are more resource-efficient and environmentally friendly.
- Competitive Advantage: Differentiate yourself in the market, attracting environmentally conscious consumers and easily adapting to evolving regulations and consumer preferences. Sustainable sourcing practices can also enhance brand reputation and customer loyalty, leading to increased sales and market share.
The total impact that sustainable sourcing can have on businesses, society and the environment is incredibly powerful, as it enables companies to align their operations with sustainable development goals, reduce their ecological footprint and contribute to a more equal and sustainable world.
Take a look at some more FMCG sustainability trends here
