How Sustainable Sourcing Can Reduce Cost

June 24, 2020 Nancy Carroll

Photo by Daria Shevtsova from Pexels

“My costs will skyrocket if I invest in sustainable sourcing.”

Many companies believe that the expected exponential growth of the trend of sustainable sourcing will raise the costs of raw materials. They want to hop on the sustainability bandwagon, both because their customers demand it and because they themselves believe in improving the impact on the environment and working conditions - but they’re scared of the expenses. Potentially overhauling their entire supply chain to be able to procure wares in a sustainable manner sounds like a costly business.

And in the short term, yes, costs will be higher. But in the long run, switching to sustainable procurement won’t just entice more customers to their door - it will also reduce their overall costs. In fact, the World Economic Forum shows that sustainable sourcing practices in supply chains can reduce costs by up to 16%.

Here are the three ways in which sustainable procurement reduces cost and improves value-for-money.

1. Reducing Overhead Costs

Focusing on sustainability wherever possible will actually help reduce overhead costs, for example, energy. Energy-efficient resources can lower the costs of sourcing and manufacturing, like vehicles, IT equipment, lighting, and buildings. Running costs for buildings can account for up to 85% of total lifecycle costs. This means that, while an energy-efficient building is more expensive to build, the resulting lower operating costs will generate a faster and higher ROI.

Then there’s the waste factor. By

ensuring that products are produced and shipped correctly,
reducing the number of sample runs and in-production waste,
reducing air shipping by placing purchase orders in time for ocean shipping,
consolidating shipping to make use of Full Container Loads (FCL) instead of Less Than Container Loads (LCL),

a consumer company is ultimately reducing waste and thereby saving costs - at often substantial levels.

2. Competitive Advantage through Value Creation

Because more and more customers are looking for sustainability in their wares, integrating sustainability in supply chains and sourcing can mean not just a decrease in cost, but an increase to the bottom line. People looking for sustainable products are often willing to pay more for them. Attention to sustainable sourcing and procurement can therefore also provide a marketing advantage, due to consumers’ sensitivity to socially responsible supply chain credentials. This means companies have a competitive advantage over their competitors who aren’t using sustainable supply chain management.

That competitive advantage can be amplified by using Bomler’s QR code feature, which allows consumers to view the product’s entire supply chain map by scanning the QR code on their phones. Check out the video of how it works and understand how it will give your own company a competitive edge here.

Implementing sustainable sourcing practices generates additional revenue through

premium brand differentiation,
income from recycling/closed-loop programs, and
product innovation.

Increasingly, sustainable procurement is also one of the factors taken into account by corporate social responsibility rating agencies and ethical funds. A positive evaluation facilitates access to capital and potentially increases company valuation.

3. Reducing Risk

Partnering with manufacturers and vendors, especially from foreign countries with different regulations and compliance standards, always carries some risk. Relationships with suppliers who engage in bad practices, like child labour or non-compliance with industry environmental regulations, can have a severe negative financial impact on brand value.

Investing in sustainable sourcing safeguards that a company works only with suppliers who are also doing their part in terms of corporate social responsibility, thereby keeping the entire organization compliant with environmental and socio-economic regulations.

But how do you know or ensure that your suppliers are sticking to their compliance regulations when you can’t be on-site in person all the time? Especially in these times of lockdowns all over the world, when no travel is possible and remote work is the new order of the day.

That’s where Bomler’s nSITE and Compliance Portal are a huge help as you work remotely from your home office - which, incidentally, will reduce your costs even further! Bomler offers a compliance portal on a consolidated platform, connecting suppliers to brands with ethical sustainability.