Difficulties Determining the Validity of Supplier and Eco-Label Claims

A growing focus on sustainability plays a significant role in extending the definition of procurement and supply chain practices. This unstoppable change led companies to design their procurement policies by integrating environmental and social issues. Undoubtedly, creating a green supply chain will benefit everyone in the long run. However, as it is well known and experienced by many procurement and supply chain professionals, the complexity of the procurement processes makes implementing sustainable policies challenging. On the other hand, greenwashing is one of the most significant concerns for the companies in case of ill execution of the policies or false eco-label claims. So, how can you avoid possible risks and overcome the difficulties of determining sustainable suppliers? 

The best way to learn how to navigate your way towards a greener supply chain is to know the obstacles you might face along the way. This knowledge will be your first step in developing strategies for finding the best eco suppliers. 

This article lays out common challenges professionals encounter while searching for sustainable suppliers and critical points of finding the best eco suppliers for your company. 

Challenges in finding sustainable suppliers 

Whatever your business, the specialized materials your company needs for production rely on multi-tiered suppliers. Working with a multi-tiered structure comes together with the struggle of control and influence you can have, especially over the low-tier suppliers. Many multinational companies (MNCs) rely on creating a cascade effect starting from their first-tier suppliers to tackle this issue.  

However, the research run by Harvard Business Review investigated the cascade of sustainable practices between MNCs, their first-tier and lower-tier suppliers, showed that the cascade effect is not applicable in real-world situations.  

Pointing out what is not working might seem a bit negative. However, knowing the reasons behind it will only result in either finding solutions to make existing systems work better or coming up with even better solutions to solve the initial struggle. Here are the three main reasons behind the weakened influence level and leading violation of standards in multi-tiered supply chain systems. 

• Not having enough information about the suppliers or the varying regulations in different geographies 

• Suppliers' lack of knowledge of sustainable and environmental issues 

• Setting unreasonable deadlines or placing unrealistic orders compared to the suppliers' capacity 

How to find eco suppliers? 

Most straightforwardly, addressing the three reasons above while designing your procurement strategy would help you find the most suitable eco suppliers for your company. However, the main question is how to overcome these reasons and leave them out of the equation.  

Define what sustainability means for your company

Even if it seems like integrating sustainability into procurement processes is the supply chain associates' responsibility, it requires a total collaboration of different teams. Think about it this way; sustainability is a comprehensive concept. 

It is not only about the environment but also the social and ethical effects that your company has. So, to come up with sustainability targets, procurement associates should work together with legal, risk and compliance, human resources, and sustainability teams. This process would also help you find the right questions to judge your supplier's sustainability efforts. 

Set inclusive and long-term sustainability goals 

It is necessary to include your lower-tier suppliers in your overall sustainability strategy to have a measurable impact. Yes, it is easier said than done; however, you don't have to do everything for your suppliers, but you need to lead them!  

The key here is sharing the responsibility and putting the required control mechanisms in place. Requiring the first-tier suppliers to set their own long-term sustainability goals would be a great way to lead your first-tier suppliers to increase their sustainability knowledge and perspective toward a greener future. Also, pointing a target person to expand your sustainable supply chain efforts towards lower tier suppliers will give you a better chance to check each tier's practices closely.  

On the other hand, depending on the size of its supply chain organization, it is not always possible to work closely with all tiers or even remotely observe them. If this is the case for your company, it is best to use the "intensive care" approach and prioritize your suppliers, considering their sustainability risks. 

Know your suppliers  

Put your sustainability knowledge and company's sustainability aim into use to question suppliers' practices. Checking suppliers' facilities and observing sustainability practices is always a great way to discover.  

However, knowing your suppliers is not only about their sustainability practices. To cover all aspects of sustainability, you need to go beyond. Make sure that you also know their production capacity, working conditions, and the number of employees. This will help you avoid making procurement decisions that cause your suppliers' to violate social and ethical aspects of sustainability standards. 

Track eco-label claims of your suppliers 

Eco-labels are crucial to understanding the environmental effect of a specific product and supplier. What's more critical than the labels themselves is their validity. Since eco-labels are the quickest and easiest way to identify environmentally friendly products for procurement associates and consumers alike, not paying enough attention to them might end up making your company a victim of greenwashing.  

It is excellent if your supplier is transparent about the eco-labels and shares sustainability-based certifications and documentation with you. However, this is often not the case. It is the procurement professionals' responsibility to check if the certifications meet specified standards, are audited independently, and reviewed frequently.  

There are various types of eco-labels in many sectors. They can be owned by government agencies, non-governmental organizations, or the private sector. Eco-labels can also be focused on an industry, a single production stage of a product, or a single environmental issue. Instead, you can find cross-industry certifications, such as LEED certifications, the Green Business Bureau, and standards such as ISO 37101 and ISO 26000. Cross-industry certificates are known for having high accountability for sustainability efforts; however, it is always best to check the sector and country-specific eco-labels and certifications that fit your sustainability goals

Tags: eco label claims, procurement, supply chain, sustainable supplier, eco supplier, eco label