How Can Responsible Sourcing Save Money?

Local businesses consider that the increasing awareness of the sustainable sourcing trend will raise the costs for raw materials. They want to join the sustainability movement, both because their green-minded customers demand it and because they believe in improving the impact on workers’ conditions and the environment – but they’re scared of the expenses. And who can blame them? Potentially revamping your entire supply chain to be able to source wares in a sustainable manner sounds like a costly endeavour.

The truth is that costs will be higher. However, in the long run, switching to responsible procurement won’t just encourage more customers to show up at your business’s door – it will also reduce your overall costs. Know this.

How Do We Source Responsibly?

Responsible sourcing teaches businesses to procure their products and services for their activities in a sustainable, ethical, and socially conscious way. That means our business practices should be sustained (if possible) in a way that doesn’t hurt the environment and people.

Businesses source services and products – both those that they sell and those that they use – from all over the world. They have a responsibility to understand the impact their operations can have and reduce the negative impact. This idea has stemmed from growing pressure from customers, investors, and regulators for companies to accept responsibility across all their activities, not just internally.

Sustainable sourcing means choosing services and goods that have at least the minimum negative impact (best case not at all) impact on our cultural, economic, and social aspects. Within hospitality, for example, this means buying table products like table wares and delivery containers from sustainable suppliers and investing in balers specifically for cardboard recycling to show that you don’t only tend your business well but also the world.

Overall, this sustainable practice can help you reduce costs and improve value for money. Here’s how:

Reduced supply chain costs

If you’re hanging to your budget, you should consider limiting your supply chain. The amount of money businesses spend on logistics is mounting, with some companies shelling out more than 1$ billion every year.

A number of businesses send and receive products and parts all over the world and the expenses can add up as quickly as the miles. Then these pieces need to be stored in depots until they are shipped again to other suppliers or customers.

These costs, however, can be drastically reduced by sourcing from your local supply chains. The benefit? Less money going into logistics will weigh less on your bottom line.

Reduced running costs

Adhering to sustainable practices whenever possible will actually help reduce operating expenses such as energy, rent and maintenance. For example, energy-efficient resources can significantly lower costs of sourcing and manufacturing, like vehicles, lighting, IT equipment, and buildings. General expenses for running a building can add up to 85% of total lifecycle costs.

And while you’re tempted to say that energy-efficient buildings are more expensive to build, the resulting diminished running costs will generate a higher and faster ROI.

Competitive advantage through value creation

Modern consumers will spend more on sustainable and socially responsible brands and businesses. They’re already seeking out products from companies embracing ethical, sustainable, and transparent practices across their supply chains.

This gives businesses a great opportunity to engage consumers in the act of doing good. It’s no surprise those looking for responsible products are often willing to pay more for them.

Attention to our social, environmental, and financial norms through responsible sourcing and procurement can therefore provide a marketing advantage due to customers’ sensitivity to socially conscientious supply chains certifications.

As a business owner who sources responsibly, you have a competitive advantage over your competitors who aren’t using sustainable supply chains. You may also generate additional revenue through:

  • product innovation
  • rewards from recycling/closed-loop programs, and
  • ratings and ethical funds through brand differentiation

Working at a desk with a calculator and pair of glasses

Reduced Regulatory Risks

Collaborating with international vendors and manufacturers with different compliance standards always carries some risk. Partnering with suppliers who engage in bad social and environmental practices can have a negative impact on your bottom line and brand image.

Sourcing locally or sourcing from suppliers who are doing their best in terms of corporate social responsibility also keeps your business compliant with environmental and socio-economic regulations.

Does responsible sourcing pay?

Recent findings hint that a 1$ investment generated $28 in return over 20 years – for businesses that focus on sustainable practices. What’s more, a report from McKinsey named “cost reductions” as one of the main values of ESG, explaining that sourcing responsibly can help combat mounting operating expenses,” affecting running costs by as much as 60%.

Responsible sourcing – Always good for the community

It makes sense that if sourcing from local suppliers can benefit your bottom line, it would do the same for other businesses in your area, which can be a great advantage to people who live there and your local community.

Well-paid and satisfied workers are more likely to purchase from local businesses. What’s more, respected and well-off companies are more likely to contribute to communities through volunteering, fundraising, benefits, and sponsored activities.

Always good for the environment

Lastly, when you reduce storage and shipping, you also reduce energy usage and CO2 emissions. Responsible sourcing encourages green manufacturing and ultimately helps you build customer confidence. When people buy with confidence, the business benefits greatly from improved brand awareness and customer loyalty.

It’s widely known that modern consumers, especially millennials, have been driving the food and beverage industry by purchasing goods and services that explain the origin of their products.

It’s important that companies that are creating products more sustainably are marketing their efforts to save our social, environmental, and financial health.

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