It's no longer a novelty for businesses to create corporate social responsibility programs or alter their operations to reduce their carbon footprints. A commitment to sustainability and other environmentally conscious values are essential to developing consumer trust in today's economy, whether you're a young startup or established Fortune 500 corporation.
Retailers and consumer packaged goods companies have devoted significantly more attention over the past few years to developing their sustainability efforts, mainly in response to customers’ evolving expectations. Today, customers are concerned not only with where the products they buy originate or how they’re made, but also the packaging they come in.
Major brands are taking note of this shift. A recent PepsiCo study found that 40 percent of consumers think edible packaging should become an option to help protect the environment, and many would pay more for beverages that have truly sustainable packaging. In April, Apple (in partnership with The Conservation Fund) purchased 36,000 acres of U.S. forestland to preserve and source sustainably harvested fibers from for its product packaging.
As is the case with most sustainability initiatives, the pursuit of green packaging is an ongoing journey. Unlike more traditional efforts, however, sourcing sustainable packaging materials requires more strategic supplier collaboration and management.
How to manage the supplier relationship for sustainable sourcing
Unless a company has the budget or brand status to rival Apple’s, it has to depend on third party vendors to source sustainable packaging materials. Many brands often have to look outside of their existing supplier base to find partners willing to co-develop new, green materials, or those that specialize in green innovation.
Sustainable packaging, however, is still a relatively new space dominated by a small group of firms (which is shrinking due to M&A activity.) In this realm, businesses can’t expect to walk away from Supplier A and find a sustainable replacement in the next week or two.
Compared to sourcing other commodities, there are a number of nuances when sourcing niche materials. Here’s a look at how businesses can navigate the intricate landscape of sustainable packaging at all stages of the RFQ process:
- Preparing the RFQ: The creation of typical sourcing events is isolated to in-house teams, with procurement managers working with other department leads to create the RFQ. When sourcing sustainable materials, it’s important to loop packaging suppliers and manufacturing plant representatives into the conversation as well. In this three-way conversation, suppliers can speak to what a specific packaging material consists of and how it’s designed; manufacturers then share their perspective on how the material is used during the production process, and how consumers will dispose of it later. Given how specialized the sustainable material market is businesses need this transparent communication and visibility into the end to end supply chain process in order to prepare accurate RFQs.
- Running the RFQ: Once the RFQ is created, businesses need to conduct (or gather) thorough, quantitative research to vet suppliers and prove that their sourcing materials are more sustainable than those currently in use. A full product lifecycle analysis can take years, so procurement teams instead have to rely on secondary research compiled by the suppliers, their competitors or other industry partners. Case studies, documented trials and published data measuring the environmental impact of a specific packaging material can shed critical light on a supplier’s expertise and track record.
- Quantifying the impact: Once a company settles on a packaging supplier, it’s imperative to start tracking the impact of the relationship. Again, most teams don’t have the time or resources to perform a comprehensive lifecycle analysis, so vendors need to be “graded” against a separate set of sustainability metrics. In many cases, procurement leaders can use the pre-analysis information generated during the RFQ process as a basis for reporting and forecasting.
Businesses should measure changes in the amount of raw materials they’re using and the greenhouse gases they’re emitting: have those numbers dropped since switching to a more sustainable product? Start noting any efficiencies the company has gained since implementing the new material (e.g., does it take less time to assemble packaging on the production floor? Has manufacturing or warehouse productivity increased?) Another aspect to scorecard is what happens when consumers dispose of the packaging: is it recyclable or compostable, or does it still wind up in a landfill? Quantifying these results makes it easier to grade suppliers, and identify internal processes that can be improved.
Sustainable packaging is a young, evolving field. What customers prefer today can easily change tomorrow, and suppliers continue to innovate to meet emerging demand.
For retailers and CPG businesses committed to sourcing green materials, their work is never truly done; continuous collaboration within and outside of their organizations is critical to following through and making a greener impact.
About The Author
Claire Cunningham helps companies align their procurement strategies with sound application solutions as part of her role as a solution consultant at spend management solutions provider Ivalua, Inc. From leading numerous procurement software initiatives for packaging giant Pactiv to working with a variety of procurement systems on the strategic sourcing team at the University of Chicago Medical Center, Claire has a strong understanding of software capabilities and implementation pitfalls. At Ivalua, she leads large scale projects in government, financial services and foodservice sectors. Claire is an honors graduate from Michigan State University with a B.S. in Packaging.