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Sustainable sourcing

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Globalization 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.[1] 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.[2] 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.[3] Sustainable sourcing refers to the inclusion of social, environmental, and economic criteria in the sourcing process.[4]

Background

Sustainable sourcing finds its roots in the concept of Corporate Social Responsibility (CSR), 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.[5] 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.[6] 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.[7] Pressure from stakeholders forced companies to begin taking responsibility for improving sustainability beyond the organizational level.[8] As companies became responsible for the sustainability of their partners in the supply chain, in addition to that of their immediate organization,[7] it came to be understood that a company is only as sustainable as its suppliers.[3]

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.[2]

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.[9] 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.[2]

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.[9] 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,[10] and evaluating multiple social metrics when selecting suppliers.[2]

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.[9] Sustainable sourcing requires companies meet high environmental and social standards while continuing to provide good economic value at a competitive cost.[3]

Sustainable sourcing in practice

Sustainable sourcing is a growing trend within many industries, as is the utilization of sustainability standards and certifications.[11]

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.[11] 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,[12] and have evolved as part of this regulatory shift.[11]

Numerous sustainability standards have been developed since the 1970s, and new standards continuously appear. Many sustainability standards were originally developed within the agricultural sector and have since been adopted by other sectors as well.[11] Sustainability standards that address all three aspects of sustainability (environmental, social, economic) tend to focus on the whole production process rather than evaluating the final product, in order to cover the entire value chain.[13]

FairTrade

The FairTrade label was created in the late 1980s by a Dutch development agency in collaboration with Mexican farmers.[11] 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.[14] 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.[11] 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.[14]

A variety of products are covered by FairTrade standards. The following products are listed on FairTrade International’s website: 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.[15]

As of 2019, there are over 1,800 FairTrade producer organizations.[15]

Rainforest Alliance

The Rainforest Alliance was created in the late 1980s from a social movement dedicated to preserving rainforests and their biodiversity.[11] 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,[16] 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.[11] 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.[17]

The Rainforest Alliance certifies a number of agricultural and forest products, which it divides into the following six categories on its website: Flowers and Plants, Food and Beverages, Health and Beauty, Home and Kitchen, Printing Services, and Sporting Goods.[18]

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.[19]

UTZ Certified

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.[11]

UTZ Certified became a part of the Rainforest Alliance in 2018.[20]

Organic- / Bio- Standard

The Organic- or Bio-Standard was developed in the 1970s, based on the International Federation of Organic Agriculture Movements' (IFOAM) 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.[11]

Other

There are many other Voluntary Sustainability Standards that have been developed over the past few decades. Literature on the topic suggests that growing numbers of sustainability standards has led to increased cost and administrative responsibility for producers, as well as confusion over the meaning and legitimacy of the various standards.[11][21]

Various organizations are working to promote the global adoption of common metrics for measuring sustainability.

References

  1. ^ Osland, Joyce S. (2016-07-22). "Broadening the Debate: The Pros and Cons of Globalization". Journal of Management Inquiry. doi:10.1177/1056492603012002005.
  2. ^ a b c d Lambrechts, Wim (2020), Leal Filho, Walter; Azul, Anabela Marisa; Brandli, Luciana; Özuyar, Pinar Gökcin (eds.), "Ethical and Sustainable Sourcing: Towards Strategic and Holistic Sustainable Supply Chain Management", Decent Work and Economic Growth, Cham: Springer International Publishing, pp. 1–13, doi:10.1007/978-3-319-71058-7_11-1, ISBN 978-3-319-71058-7, retrieved 2021-03-03
  3. ^ a b c Schneider, Lena; Wallenburg, Carl Marcus (2012-12-01). "Implementing sustainable sourcing—Does purchasing need to change?". Journal of Purchasing and Supply Management. Sustainable Procurement. 18 (4): 243–257. doi:10.1016/j.pursup.2012.03.002. ISSN 1478-4092.
  4. ^ Pagell, Mark; Wu, Zhaohui; Wasserman, Michael E. (2010). "Thinking Differently About Purchasing Portfolios: An Assessment of Sustainable Sourcing". Journal of Supply Chain Management. 46 (1): 57–73. doi:10.1111/j.1745-493X.2009.03186.x. ISSN 1745-493X.
  5. ^ Latapí Agudelo, Mauricio Andrés; Jóhannsdóttir, Lára; Davídsdóttir, Brynhildur (2019-01-22). "A literature review of the history and evolution of corporate social responsibility". International Journal of Corporate Social Responsibility. 4 (1): 1. doi:10.1186/s40991-018-0039-y. ISSN 2366-0074.
  6. ^ Kim, Seongtae; Colicchia, Claudia; Menachof, David (2018-11-01). "Ethical Sourcing: An Analysis of the Literature and Implications for Future Research". Journal of Business Ethics. 152 (4): 1033–1052. doi:10.1007/s10551-016-3266-8. ISSN 1573-0697.
  7. ^ a b Veit, Claire; Lambrechts, Wim; Quintens, Lieven; Semeijn, Janjaap (2018). "The Impact of Sustainable Sourcing on Customer Perceptions: Association by Guilt from Scandals in Local vs. Offshore Sourcing Countries". Sustainability. 10 (7): 2519. doi:10.3390/su10072519.
  8. ^ Goebel, Philipp; Reuter, Carsten; Pibernik, Richard; Sichtmann, Christina (2012). "The influence of ethical culture on supplier selection in the context of sustainable sourcing". International Journal of Production Economics. 140 (1): 7–17. doi:10.1016/j.ijpe.2012.02.020.
  9. ^ a b c Agrawal, Vishal V.; Lee, Deishin (2016), "Responsible Sourcing", Environmentally Responsible Supply Chains, Cham: Springer International Publishing, pp. 71–86, ISBN 978-3-319-30092-4, retrieved 2021-03-03
  10. ^ Wright, Chris F. (2016-08-01). "Leveraging Reputational Risk: Sustainable Sourcing Campaigns for Improving Labour Standards in Production Networks". Journal of Business Ethics. 137 (1): 195–210. doi:10.1007/s10551-015-2552-1. ISSN 1573-0697.
  11. ^ a b c d e f g h i j k von Hagen, Oliver; Manning, Stephan; Reinecke, Juliane (2010-09-17). "Sustainable Sourcing in the Food Industry: Global Challenges and Practices". Rochester, NY. {{cite journal}}: Cite journal requires |journal= (help)
  12. ^ "Voluntary sustainability standards in the banana industry. World Banana Forum. Food and Agriculture Organization of the United Nations". www.fao.org. Retrieved 2021-04-01.{{cite web}}: CS1 maint: url-status (link)
  13. ^ Giovannucci, Daniele; Ponte, Stefano (2005). "Standards as a new form of social contract? Sustainability initiatives in the coffee industry". Food Policy. 30 (3): 284–301. doi:10.1016/j.foodpol.2005.05.007. ISSN 0306-9192.
  14. ^ a b Doherty, Bob; Davies, Iain A.; Tranchell, Sophi (2013). "Where now for fair trade?". Business History. 55 (2): 161–189. doi:10.1080/00076791.2012.692083. ISSN 0007-6791.
  15. ^ a b "Fairtrade Products". Fairtrade International. Retrieved 2021-04-01.
  16. ^ "What is in a label? Rainforest-Alliance certified banana production versus non-certified conventional banana production". Global Ecology and Conservation. 7: 39–48. 2016-07-01. doi:10.1016/j.gecco.2016.05.002. ISSN 2351-9894.
  17. ^ "Our Approach". Rainforest Alliance. Retrieved 2021-04-01.
  18. ^ "Certified Products". Rainforest Alliance. Retrieved 2021-04-01.
  19. ^ "Impact Dashboard". Rainforest Alliance. Retrieved 2021-04-01.
  20. ^ "About us". UTZ. Retrieved 2021-04-01.
  21. ^ Giovannucci, Daniele (2008-10-01). "How New Agrifood Standards are Affecting Trade". Rochester, NY. {{cite journal}}: Cite journal requires |journal= (help)
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