Summary: Sustainable sourcing has become a consumer and investor expectation which impacts businesses not only morally and ethically, but alters customer loyalty, price point, risk level, and more. Because SMBs make up the vast majority of global businesses, the combined global impact of ethical choices can alter the course of history as long as businesses take steps toward responsible procurement environmentally, socially, and economically.
Sustainable sourcing is at the forefront of planning efforts for many businesses as climate change and consumer expectations offer a clearer and clearer call to action. As SAP Ariba Live and the coordinating Sustainability Summitfast approach, businesses of all sizes prepare to learn how to further augment and optimize their approach to sustainability in the supply chain.
There are benefits to businesses outside of morality and ethics as it pertains to responsible procurement and sustainable sourcing.
On the financial front, sustainable product sales have risen nearly 20% since 2014 and sustainable fast-moving consumer goods (FMCG) have a CAGR of 3.5%, almost four times that of conventional products. Another point for the bottom line—Millennials and Gen Z are more inclined to buy sustainable and ethical products devoid of harmful chemicals and which support social responsibility, with 73% and 72% respectively willing to pay additional costs for products that meet these requirements, according to Nielsen. Additional customer loyalty and increased prices can make a major difference to an SMB’s growth. And it’s not just consumers who expect transparency and sustainability—investors are increasingly on the lookout for responsible practices within the companies they choose to support.
Government initiatives are another reason to pursue sustainable sourcing, because many places around the globe offer incentives for responsible action. Similarly, avoidance of legal trouble and hefty fines is a byproduct of ethical decision-making in the procurement process. Because many unsavory practices hide in complex supply chains, opting for transparent sourcing platforms can help SMBs avoid unexpected compliance issues.
SAP Ariba, through their Procure With a Purpose campaign, supports the full list of UN Sustainable Development Goals (SDGs) which include basic rights and expectations such as access to clean water and food, elimination of poverty, gender equality, education, and responsible consumption and production. In order to achieve these goals and many others along similar lines, SAP Ariba focuses on three pillars of sustainability: social, economic, and environmental—all of which can guide the process for SMBs who seek to practice sustainable sourcing.
Social sustainability refers to human and workplace rights, while social ethicality often refers to supplier diversity and similar measures. According to the speaker at the 2019 Sustainability Summit, Givewith CEO Paul Polizzotto:
“Society is demanding businesses change the way they operate by acting more sustainably and with greater transparency – all while generating a positive impact on the world. There’s an incredible opportunity for procurement teams to amplify their organization’s impact, not only by prioritizing ethical suppliers butby sourcing from suppliers who add social impact sales incentives into these transactions to drive even greater change.”
- Transparency, not slavery
With more than 40 million slaves worldwide, it is important to expect transparency from all members of a supply chain, all the way to the original source. Transparency is the enemy of unsavory practices such as slave labor and is an important first step in any sustainable supply chain. SMBs can require risk assessments and reports on working conditions, even through trusted third parties, in order to reduce the chance that slave labor is part of any step in the creation of their products.
- Engage diversity
By working with historically underutilized businesses (HUBs) and minority-owned businesses, SMBs are able to opt for ethical business decisions that help the world economy as a whole.
Approximately 50% of the world’s population lives on less than $2 per day. By supporting sustainable practices in businesses who pay workers a living wage, SMBs can impact poverty worldwide.
- Support economic growth in underserved communities
By choosing procurement processes which support indigenous workers and other underserved communities, wealth is spread and business grows symbiotically in tandem with one another. Single origin products can help ensure fair exchange of funds for exports from indigenous regions, but this is only one method to engage this practice.
- Verify risk levels for fair labor practices
Because poverty is an issue that spans the globe, SMBs can use a risk management platform to help ensure they do not support forced labor or child labor and to verify that all workers receive a decent, sustainable, living wage for the time they put in—and that the hours expected of them are similarly sane. The Ariba Network and platforms built upon it such as the Premikati Marketplaceintegrate supplier risk management software to avoid pitfalls such as this.
We often hear of large enterprises which take on environmental issues. For example, L’Oreal and McDonalds have opted to nix deforestation from their commodity supply chains. Similarly, Danone—maker of Evian water—has been developing a new, more sustainable and recyclable makeup for plastic bottles to help eliminate the pollution crisis. However, SMBs can have a substantial impact on the environment by simply choosing to work only with sustainable suppliers.
- Cut out toxins
Choose suppliers who elect not to use toxic and ozone-depleting substances in order to reduce pollution as well as hazards to workers and even consumers. As demand wanes, suppliers will be forced to change their processes—and those who were ethical and responsible from the outset are rewarded.
- Say “no” to waste
In a world overrun by pollution on land and at sea, sustainability as it pertains to wasteis a must. Ways SMBs can apply this to their own sustainable procurement process include choosing suppliers who:
- Limit unnecessary packaging materials
- Create recyclable products
- Utilize recycled products in the creation of their own products
- Create reusable products
- Offer products which can be repaired rather than thrown away
- Use environmentally-friendly, renewable materials in production such as bamboo
Considering SMBs with less than 500 employees account for 99.7%of employers in the US, the power held by businesses of this size is formidable. By functioning in unison, SMBs have immense sway over the state of both business and the world we live in. It is through this majority power share that GPO platforms such as ourPremikati Marketplace—powered by SAP Ariba—offer a truly actionable opportunity for SMBs to engage sustainable sourcing practices and become stewards of our future, all the while saving time and money.