Written by Anuj Kumar Rajput
In the past decade, sustainability has become a crucial part of businesses globally. We have been experiencing extreme temperatures and irregular seasons. These concerns require us to take a major change in the consumption pattern and supply chain as they contribute to 60% of the emissions during the life cycle of the product. A new paradigm is proposing a helping hand in these hard times i.e. Integrating local sourcing and global collaboration.
In 2020, CDP found that greenhouse gas emissions in a company's supply chain are 11 times higher than operating emissions and around 50% are due to reliance on the global partner for the supplies. The new paradigm is seeking a balance between local and global collaborations. This came down into existence when reporting of Scope 3 emissions was started in 2011 which helped to develop the frameworks to reduce the carbon footprints. Now let's understand how they can help to curb emissions in the supply chain.
Local Sourcing: The guiding pillar for sustainability
Firstly, we need to understand what local sourcing is. It refers to sourcing products or materials from the locals i.e., within your city or state, or country. During the covid 19, we realised how important is to have local suppliers. After it company started building the local supply chain. The chart below describes the emissions from 8 supply chains. This study by BCG showed that more than 70% of these emissions are due to the outsourcing of parts or materials from different countries.
Carbone4 & WBSCD (World Business Council For Sustainable Development) suggested that local sourcing can reduce these emissions by more than 60%. The other advantages which local sourcing encourages are:
· Regional development and employment opportunities thus enhancing the company's reputation and also promoting Sustainable economic growth· It allows easier sourcing of specialised products and greater control over the quality, development
· Shorter supply chains may help in greater predictability of the delivery time
Global Collaboration: Mastering the Experience & Technology
Global sourcing is defined as the practice of sourcing goods and services across the globe. It's never possible to have all the required resources locally so Global collaboration comes into the picture. It has many advantages of having global counterparts and some of them are listed below:
· Access to unique resources and expertise
· Implementing global standards for the sustainability
· Complementing local sourcing with international partner
Although the combination of Local sourcing and Global collaboration is of utmost importance but still its implementation has a few challenges. We are aware that certain materials are available locally only so in these cases companies can't go for local sourcing. For example, semiconductor industry is only limited to particular locations in Taiwan and Japan. Another major thing that comes is the economy, so it's possible that material may come at a higher price compared to global options that impact the TBL (Triple Bottom Line). Ensuring transparency and traceability in the global supply chain is a complex process.
In China, a recent study used a conceptual framework for integration. This framework is comprised of antecedents, five global sourcing practices experts, and three sub-dimensions of TBL performances, which reveal various linkages between global sourcing practices and sustainable performance on each dimension of the triple bottom line.
With the introduction of Scope 4 emissions companies want to gain a competitive advantage by showing them in their CDP (climate disclosure project). The major reduction in emissions that the company can do under scope 4 is from its supply chain and for that, a better integration between global and local sourcing is a must. Thus accessing local sourcing is a need of 2023 unless we won't be able to meet the Paris Agreement which is curbing the temperature rise to 2°C by the end of this century and their aims of being carbon neutral by 2070 in India.
References
https://ghgprotocol.org/corporate-value-chain-scope-3-standard