Sustainability and “Green Sourcing” – Can It Be Done Without Adding Cost and Complexity?
Sustainable procurement — or “green sourcing,” as it’s often called — has increasingly become a top priority for electronics manufacturers across the globe. The goal of green sourcing is to reduce the environmental impact of one’s supply chain by purchasing recycled materials, for example, or by working with suppliers who have implemented energy-saving production practices.
Despite being an important approach, green sourcing isn’t necessarily the easiest procurement strategy. How can companies achieve a more sustainable sourcing program without adding too much cost or complexity to their already expansive supply chains? Read on to learn Lytica’s tips.
Why is Sustainability Important in Procurement?
Pursuing greater supply chain sustainability is an important mission that serves not only your company, but also your community, the environment, and our planet as a whole. Forward-thinking manufacturers have their eye on the following green sourcing benefits when setting out to improve their procurement strategies:
- Preservation of raw materials and natural resources
- Lower manufacturing energy and water use
- Reduced transportation and carbon emissions
- Less ingredient waste and landfill use
- Lower pollution and environmental harm
- Advancement of recycling/upcycling technologies
- Boosted brand reputation
- Potential cost savings on certain materials/components
How to Improve Supply Chain Sustainability
There are dozens, or even hundreds, of tactics that electronics manufacturers use to create a more sustainable supply chain. But, when starting out on your sustainability journey, these tend to be the most common three:
Reduce Existing Waste
No supply chain is perfect, so it’s likely the case that waste exists in your supply chain as it stands today — which could be product waste from inaccurate demand predictions, and/or financial waste from overspending on components. The first step in your green sourcing journey should be to identify opportunities for greater efficiency and savings that lie in your existing processes. As the top tool for electronic component supply chain transparency, Lytica can help you do just that.
Re-Evaluate Material Requirements
Creative manufacturers are finding ways to redesign their products to use less material or packaging, reducing their spend while providing a more environmentally-conscious product offering to consumers. Alternatively, or additionally, they’re seeking out lower-emission source materials to use in their products, such as green steel, recycled aluminum, and recycled plastic. They’re also putting more thought into how the materials from their products can be more easily recovered and reused at the product’s end-of-life, such as via incentivized recycling programs.
Work with More Sustainable Suppliers
It may be the case that recycled versions of your required materials or components are not readily available. Nonetheless, it is still possible to pursue a more sustainable supply chain by forging relationships with component suppliers who are investing in environmentally-friendly production practices. Such measures could include the installation of solar panels, the use of energy-conserving machinery, proactive carbon footprint monitoring, and more.
How to Evaluate Supplier Sustainability
On the surface it’s not always easy to tell which suppliers value sustainability and which do not. While some well-executed online research can get you started, not all suppliers are as outwardly vocal about their sustainability efforts and performance (or lack thereof) as perhaps they should be.
Sometimes a supplier interview or questionnaire is needed in order to learn enough details to be able to compare suppliers and make an informed decision. Here are some questions that any sustainability-focused supplier should be happy to answer for you:
- Are you compliant with local environmental standards?
- Have you achieved any energy-related certifications or awards?
- What policies do you have in place to ensure environmental responsibility?
- What are your sustainability targets and how are you performing against them?
- How do you track your sustainability performance?
- What are your facility/infrastructure improvement plans for the next five years?
- How do you handle your waste to prevent environmental pollution?
Managing Sustainability Costs
It’s true to say that green sourcing can sometimes be a more expensive procurement strategy, due to the scarcity of recycled materials or potentially elevated component prices to help cover a supplier’s infrastructure investments. However, there are a few techniques that can help mitigate these green sourcing costs:
- Compare Supplier Prices: Once you’ve narrowed down your list of sustainable suppliers, use Lytica to compare component pricing and determine which supplier offers the best combination of sustainable manufacturing practices and component value.
- Be Flexible on Your Terms and Conditions: Suppliers commonly charge higher component prices for certain contract stipulations, such as longer payment terms and shipping requirements. Consider exploring whether certain adjustments to your terms and conditions could yield savings that help offset the increased prices of sustainable components.
- Work on One Category at a Time: Rather than trying to implement more sustainable sourcing across your entire portfolio from day one — and potentially incurring higher costs across the board — focus first on improving and optimizing your sourcing for one product category. Then, once that category is in a good place, repeat the process by evaluating your sustainable material and supplier options in another category.
By gradually implementing more sustainable supply chain practices — and leveraging the Lytica platform for real-time spend analysis along the way — electronics manufacturers can succeed in reducing their environmental footprint without adding significant cost and complexity to their procurement strategy.
