Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Sustainable Sourcing — The Ultimate Guide for 2024

Key takeaways

  • Sustainable sourcing refers to the process of choosing sustainable sources of supplies.
  • By implementing sustainable sourcing, companies can understand how to reduce negative impacts while tapping into significant opportunities.
  • Sustainability assessment, sustainable goals and criteria are requirements for establishing sustainable sourcing.

In this day and age, sustainable sourcing is a must. We must all do our share in protecting our Earth’s natural resources.

As such, companies are now shifting towards sustainable sourcing. For this article, we are going to study what sustainable sourcing is and what this means for industries all over the world.

Once you’re done reading this article, you should have an idea of how to apply sustainable sourcing for your company or department.

I have created a free-to-download editable Sustainable Procurement Strategy templateIt’s a PowerPoint file that can help you with your sustainable sourcing processes. I even created a video where I’ll explain how you can use this template.

What is Sustainable Sourcing?

The world is pretty much still recovering from a global pandemic that might be slowing down at the moment but could be still far from over, as most health experts believe. Despite the economic crunch though, sourcing and procurement still function on normal levels. It’s all because the modern technologies of today allow companies to incorporate sustainable sourcing.

What does sustainable sourcing mean though? According to procurement experts, sustainable sourcing is the process of selecting sources of supplies that is not detrimental to the environment. It is also the process of sourcing supplies that are sustainable at the core; it means it doesn’t hurt the environment and that it can be renewed through natural means.

Sustainable sourcing is also defined as the obtaining of materials, products, or services from suppliers in a manner that is socially and environmentally responsible.

Why Does it Matter? 

Sustainable sole sourcing matters as it is now critical across all industries. As supply chains continue to expand, they expose many companies to various threats such as supply chain disruptions

Additionally, many countries are mandating many businesses to comply with local laws and regulations to take responsibility for any negative impacts their operations might have on the environment and society. 

Therefore, many companies are incorporating sustainable sourcing within the procurement process to better understand how they can reduce their negative impacts and manage their risks while tapping into significant opportunities. 

Embracing Sustainable Sourcing

Embracing sustainable sourcing requires you to have a great commitment to incorporating ESG goals in your procurement process. 

For you to do this, you must conduct a sustainability assessment for you to know the areas where your business can improve its operation to reduce your negative impact on the environment. 

You also need to set sustainable goals for you to determine and measure sustainability in your business. Thus, you need to recognize and partner with suppliers who have the same goals as you to achieve sustainability. 

Additionally, you must establish sustainable criteria that suppliers must meet in order for you to select them as your partner. Once you are done finding the right supplier to achieve sustainability, it is time for you to monitor the sustainability performance of the procurement process. 

By following these, your business can embrace sustainable sourcing more easily and make a positive impact on the environment and society, while achieving your business goals. 

The Three Factors of Sustainable Sourcing

The procurement process must have the following three factors for the process to be considered sustainable:

1. Socially Responsible

Supply chain activities should always have a social dimension. This means treating the workers equally. The workers must have social security and benefits that will ensure that they are cared for by the company employing them.

Examples of this are companies that are very particular with their employee’s salaries and benefits, as well as ethical issues that may affect a company’s moral stand with the rest of the world. Nike’s involvement in child labor in its factories in the 1990s is one such example.

2. Environmentally Responsible

A huge chunk of sustainable sourcing always has something to do with the environment. This means that any supply chain activities that will naturally deplete a source of the supply or may cause pollution to the environment are discouraged and discontinued. Sustainable sourcing is one of the means to push suppliers for alternate sources of supplies needed.

One famous example is fashion giant Dolce & Gabbana’s decision to stop using fur in its materials for its products. The fashion brand is the latest among many fashion brands to promise the general public to find sustainable means to replace animal fur.

3. Economically Sound

While trying to save the environment and trying to be ethically right are some of the best practices for sustainable sourcing, it also needs to be economically sound. It means that the practice is not as wasteful when it comes to a company’s natural resources. 

The Difference Between Sustainable Sourcing and Ethical Sourcing

There is currently a great deal of confusion regarding the terms ethical sourcing and sustainable sourcing. From the way you look at the words, they do look and feel the same. But just like most words, the difference can be seen in their actual meaning. 

While ethical sourcing is choosing your suppliers based on how ethical and responsible they’ve produced or come up with their supplies and services, sustainable sourcing is the process of looking for a sustainable solution to keep up with the demand for a certain product.

One perfect example of sustainable sourcing is the development of synthetic ivory. Companies that wish to avoid getting implicated by the ivory trade ban are buying and using synthetic ivory to dissuade poachers and hunters from hunting elephants, seals, and walruses in the wild for their ivory tusks.

What joins sustainable sourcing and ethical sourcing together though is that both are needed due to supply chains are still going to expand globally into developing countries and are always on the lookout for lower prices. Companies must meet the expectations of its stakeholders to take responsibility for their supplier’s ethical and social practices.

The Benefits of Sustainable Sourcing

There are several benefits that a company can expect to receive should they start lean inventory towards sustainable sourcing for their procurement processes:

1. Environmental Benefits

Sustainable product sourcing helps reduce the environmental impact of how a company produces its product and operates its activities by promoting the use of renewable resourcing, reducing waste, and lowering carbon emissions.

2. Complying with national and international laws, securing the “license to operate”. 

Operating responsibly helps a company to meet or exceed the requirements set by laws. Failure to comply with these laws can result in sanctions being imposed on a company, heavy fines, or even imprisonment for company officials.  

3. Protecting business reputation and being an attractive investment prospect. 

Business practices that exploit people or the environment are a huge reputational risk. Poor practices and mistreatment of workers can turn into international scandals, generating significant negative press coverage and deterring both consumers and investors. Operating responsibly protects companies against these risks. 

4. Better business performance with reduced operational costs.

Protecting workers and providing safe working conditions reduce injury rates, absenteeism rates, employee turnover rates, and worker error rates, all of which cost a company.

Conclusion

Sustainable sourcing is crucial in today’s world to protect our environment and meet legal requirements. Companies are shifting towards sustainable practices, focusing on socially responsible, environmentally friendly, and economically sound approaches. Embracing sustainable sourcing involves commitment, assessment, goal-setting, and collaboration with like-minded suppliers.

By incorporating the three factors of sustainability – social responsibility, environmental responsibility, and economic soundness – businesses can make a positive impact on the environment, comply with laws, enhance their reputation, and improve overall performance.

The distinction between sustainable and ethical sourcing lies in finding sustainable solutions to meet product demand while ensuring ethical and responsible supplier practices.

The benefits of sustainable sourcing include environmental conservation, legal compliance, reputation protection, and improved business performance with reduced operational costs. It’s time for businesses to prioritize sustainable sourcing for a better future.

Frequentlyasked questions

What is sustainable sourcing?

Sustainable sourcing is the process of getting suppliers who follow ethical and sustainable ways of getting supplies.

Is sustainable procurement better than regular procurement?

Sustainable procurement is better for companies who are very particular with their reputation and with the quality of the supplies.

Who is in charge of sustainable sourcing?

The sourcing manager is often the person in charge of sustainable sourcing.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics