🌱 What Do You Need to Green Our Supply Chains? More Plastic 🏆 or Money 💸? 🌱
🌱 At a recent sustainability event, I was pleasantly surprised to hear a speaker explain how their company engaged with suppliers to boost ESG (Environmental, Social, and Governance) performance. They even offered an annual supplier award 🏅 to celebrate these efforts.
The intention was good, but I couldn’t help wondering: Is a plastic award really enough motivation for suppliers to invest in sustainable changes?
At Koaloo.Fi, we don’t think so. Instead, we prefer giving financial support 💰—so suppliers can invest in sustainable practices, innovate, reduce production costs, and pass those savings and environmental benefits down the supply chain to end consumers like you and me.
♻️ The Paradox of Sustainable 🌍 and Affordable 💵 Products
Consumers today demand products that are both sustainable 🌱 and affordable 🛒. But this creates a paradox for companies: How can they provide products that meet sustainability goals, win customers, and still turn a profit?
On the one hand, more than 60% of consumers say they’re willing to pay more for sustainable products according to a 2023 McKinsey survey. On the other hand, the costs of raw materials, stricter environmental regulations, and investing in greener technologies are squeezing companies' margins. This is where the solution lies: value sharing and lowering the cost of production.
Pushing suppliers to produce more sustainably 🌿 while constantly demanding lower costs creates a vicious cycle. Many suppliers are already under financial strain, and expecting them to make the transition to sustainability on their own will only weaken the entire supply chain. Instead, companies should work collaboratively with suppliers, sharing the value created through sustainability to help build a more resilient, efficient system.
🌍 Why Scope 3 Emissions Matter
An urgent area of focus for greening the supply chain is reducing Scope 3 emissions—those indirect emissions that come from all the activities involved in sourcing, producing, and delivering goods. For most companies, Scope 3 emissions make up a whopping 70-90% of their total carbon footprint 🏭.
According to CDP, Scope 3 emissions are, on average, 26 times higher than a company's direct operational emissions. Failing to address these emissions not only risks falling short of sustainability targets but could also lead to shortages of raw materials, higher operational costs, and damaged reputations. The environmental costs of not acting could hit an eye-watering $1.26 trillion over the next five years.
📊 The 3 Pillars of Supplier Sustainability Engagement According to Quantis
If companies want to effectively decarbonize their supply chains, they need to focus on three key pillars, as outlined by Quantis:
1. Quantify: Start by measuring the impact at the supplier level using standardized tools like GHG emissions calculators and aligning with global standards like the GHG Protocol and SBTi 📊. This step helps companies and suppliers track emissions and set realistic reduction targets.
2. Track: Once the impact is measured, it's essential to follow the progress along the entire supply chain. Chain of custody systems (whether segregated or mass balance) ensure that sustainability attributes travel with the product at each step 🔗, providing transparency from supplier to customer.
3. Trade: Suppliers need the right incentives to adopt sustainable practices. Companies should provide financial compensation 💵 and reward suppliers based on performance outcomes, not just promises. Transitioning from practice-based incentives (doing the right thing) to outcome-based incentives (delivering measurable results) helps drive long-term decarbonization.
🤝 Creating a Win-Win Model for Suppliers and Buyers 💡
There’s a real opportunity for suppliers and buyers to benefit from working together on shared sustainability goals. Suppliers can reduce costs by becoming more efficient, while buyers can meet growing consumer demand for eco-friendly products 🌍. Plus, companies with strong ESG strategies are 2.5 times more likely to outperform their competitors in the long term 🚀.
Transparency, trust, and communication are essential. This means maintaining open dialogue, performing third-party audits, and ensuring that both parties are aligned in their sustainability goals 📞📝. At Koaloo.Fi, we create the conditions for these win-win partnerships by helping suppliers reduce their costs while allowing buyers to improve profitability.
🏦 The Path Forward: Money Over Plastic 💸
Plastic trophies and symbolic gestures are no longer enough. To truly green our supply chains, we need to empower suppliers financially so they can make real, lasting changes to their operations. Financial incentives enable suppliers to innovate, become more efficient, and lower their production costs, which benefits the entire value chain.
Consumers want sustainable products 🌍 at prices they can afford 💵. The way to deliver that is by enabling suppliers to make the sustainability transition, share the value created, and pass on the benefits throughout the supply chain.
At Koaloo.Fi, we’re committed to helping companies and suppliers achieve this goal. Let’s collaborate and build a greener, more resilient future—together 🌳🤝.
Comments