Sustainable Sourcing When Manufacturing in China

Several world leaders may be in denial about climate change (and there are some who aren’t such as Tuilaepa Sailele of Samoa), but a growing number of  businesses across the world are embracing sustainability in an attempt to reduce the impact of their business activities on the environment. 

In this blog, we will focus on the sourcing industry and how as a business that sources from low-cost regions such as China, you can also take several steps towards sustainable sourcing across all stages of sourcing including manufacturing and shipping.

But first: What exactly is sustainable sourcing?

Sustainable sourcing is the process of taking environmental and social costs and ethical factors into consideration along with traditional parameters like financial factors while procuring assets, supplies or services for your business needs. The objective is to reduce the negative impact of sourcing on the environment and society.

Sustainable sourcing is also referred to as sustainable procurement. It forms part of the UN’s sustainable development goals that several countries are moving towards.

The United Nations explains sustainable procurement thus:

“Traditional procurement has focused upon value for money considerations. The aim and challenge of sustainable procurement is to integrate environmental and social considerations into the procurement process, with the goal of reducing adverse impacts upon health, social conditions and the environment, thereby saving valuable costs for public sector organizations and the community at large.”

Sustainable procurement is virtually impossible without supply chain sustainability.

“Between 40% and 60% of a company’s carbon footprint resides upstream in its supply chain – from raw materials, transport, and packaging to the energy consumed in manufacturing processes. For retailers, the figure can be 80 percent,” said a McKinsey study.

Why should my business choose sustainable sourcing?

Businesses opt for sustainable sourcing for different reasons. Some are self-motivated because they are concerned about the environmental and social impact of their business activities, others go down that road because their customers want them to do so (market demand), while others go green because they believe it helps them cut costs and become more competitive (economic factors).

Caring for the environment is indeed good for business. Research has shown it can help businesses attract consumers worldwide – particularly millennials – who are increasingly becoming aware of their impact on the environment and society and are consciously choosing brands and companies that embrace sustainability.

Seventy-three percent of Millennials are willing to pay more for sustainable goods, said a 2015 study by Nielsen. The study of 30,000 consumers in 60 countries found that consumer goods brands with a demonstrated commitment to sustainability grew more than those without.

Another study by Accenture Strategy in 2018 had similar findings. Consumers overall are increasingly choosing brands that are environmentally conscious, said this online survey of nearly 30,000 people.

These are the other findings of that study:

• 66% of customers say they are attracted to buy from companies that are transparent about where they source their materials and whether they treat employees fairly.
• 62% said they are attracted to companies that take a stand on current and broadly relevant issues like sustainability, transparency or fair employment practices.
• 52% said they would choose companies that genuinely stand up for societal and cultural issues and related causes.
  

How can I source sustainably?

Given the fact that a chunk of a company’s carbon footprint resides upstream in its supply chain, it’s no surprise then that an increasing number of companies worldwide are collecting environmental data from their suppliers in an attempt to determine how to reduce their own carbon footprint.

According to a study, the companies interact with their suppliers at different levels – basic, transactional and collaborative. They use the data to:

1. Measure the greenhouse gas emissions of their suppliers (basic).
2. Calculate the carbon footprint of their suppliers as well as identify opportunities for improvements, providing their supply chain with targets and incentives and even warnings of non-compliance with pre-agreed goals (transactional).
3. Work with suppliers to develop shared goals and values around sustainability (collaborative).

A report on the study says:

“Measuring emissions across the whole value chain can be incredibly complex for a company like Walmart with its thousands of suppliers around the world. The amount of data involved is probably why we see tech companies leading the way in reducing their carbon footprint. Their data analytics skills mean it is natural for them to collate data and put it to good use and work up and down the supply chain.”

As a business that sources from China, you can start sourcing sustainably by paying attention to the environmental and social impact of sourcing that we detail below. It helps that China has been looking at ways to develop green supply chains for the past few years. It seems to have been motivated to go in this direction on its own as well as because of prodding by western companies who manufacture in China and are keen on improving the environmental performance of their supply chains.  

ENVIRONMENTAL IMPACT

Environmental impact covers several aspects such as manufacturing, shipping and even product life. 

Manufacturing: You must consider the use of raw materials, where they have been sourced from, the use of resources such as water and energy during the manufacturing process, the amount of packaging, the extent of recycled material in manufacturing and packaging, the impact of disposal on the environment at the end of the product’s life. You can help your business become more sustainable by:

• Choosing suppliers who are genuinely invested in improving their carbon footprint and have set long-term goals to achieve this.
• Reduce the number of sample runs and waste during production.
• Choosing more environmentally friendly raw materials (such as recycled material) or manufacturing processes that may perhaps be more energy efficient than others such as those that use newer technologies. You could perhaps work with suppliers to reduce the use of energy where possible, setting time-bound goals for this.
• Ensuring suppliers reduce the use of hazardous materials and have a sustainable waste management plan in place so that they do not damage the environment they are located in.

Shipping: Sustainable shipping has been a buzzword for several years now. For this, you must consider things like the environmental cost of transporting your products such as the mode of shipping and perhaps even the distance from the factory and port. You could consider:

• Minimizing air freight: Air freight is proven to have a significantly larger carbon footprint than sea freight. By placing POs (purchase orders) well in advance so that you can catch ocean shipping, you can reduce your reliance on shipping via air and contribute to lowering emissions.
• Consolidating shipments: Planning your inventory in such a way that you take one big delivery (FCL shipping) instead of several small ones (LCL shipping) will also help your business become more sustainable. Besides being good for the environment, this is also great for your finances as consolidated shipments will cost less than sending several small shipments out over a period of time.
• Inland travel: It’s just not sea or air freight. Your products are usually ferried to and from ports in vehicles. Opting for bio fueled and electric vehicles for road freight or choosing rail freight whenever possible also can significantly lower your carbon footprint.
• Carbon neutral shipping: This approach acknowledges that shipping generates a significant amount of carbon no matter what mode of shipping you use, but helps you offset the damage to the environment by donating to, or investing in, initiatives that remove an equal amount of carbon from the atmosphere. There are several organisations that do this, but the best ones are likely to be certified by a third party and have a clearly defined carbon-offset program. But remember, before opting for any of this, you need to first calculate the extent of your emissions.

SOCIAL IMPACT

To source sustainably, you must consider the welfare of the workers who manufacture and transport your goods. Are they being paid a fair wage? Do they work a reasonable number of hours? Do they work in safe conditions?

Several companies have in the past faced major flak for neglecting the welfare of workers – one of them being Apple, whose Chinese manufacturer has most recently been accused of violating Chinese labour laws and subjecting workers to harsh working conditions. 

To source sustainably, you must ensure that:

• Factories pay their workers a fair living wage to produce your goods.
• The working hours are not exploitative.
• Work conditions meet health and safety standards.

How we can help

You can also ensure you source sustainably by working with a Sourcing Allies – reliable China sourcing agent with a team based on the ground – who can help you choose suppliers who are best kitted to fulfill your sustainable sourcing requirements.

There are government agencies and non-profits that also work with businesses to help them achieve their sustainability goals. The US EPA, UK’s DEFRA and non-profit organisations like the Ethical Trading Initiative are a few of them.

Several websites help small businesses calculate their carbon footprint so that they can use that information to offset not only their shipping emissions but also emissions of the entire business. These include Carbon Footprint, Carbon Fund, the Cool Climate Network among others. Go ahead and calculate yours.

Is sustainable sourcing cost-effective?

Finally, you may wonder if sustainable sourcing is cost effective. 

It is.

Sustainable sourcing is always cost-effective as it is largely about eliminating waste. When you ensure that products are produced and shipped correctly every single time, reduce the number of sample runs and in-production waste, reduce air shipping by placing POs (purchase orders) well in time for ocean shipping, consolidate shipping so FCL (Full Container Load) can be used instead of LCL (Less than Container Load), you don’t only save on costs that can help your business become more competitive, your business will be able to attract customers who are increasingly wanting to patronize companies that are environmentally responsible.

Sourcing Allies is a team of expert China sourcing agents that has helped western customers manufacture and source products from low-cost regions since 2006.

For more on China sourcing visit our website or write to us at info@sourcingallies.com.