3.1 Prioritising Raw Materials and Sustainability Issues

Typically, companies make decisions about the scope of their sustainable sourcing programme in three different ways: heuristically, by systematically mapping their supply chains and by using generic sustainability frameworks. Most companies will use a combination of these approaches, or move from one to another, e.g. start in a heuristic fashion and later expand to a more systematic approach.

  1. Heuristic approach to identifying priorities: Companies start with raw materials or issues that are ‘obvious starting points’. They know which raw materials are important to them; or that there are particular issues around certain materials.

These may be external pressures, e.g. the need to move towards sustainable palm oil in response to growing public concern and NGO pressure on unsustainable palm oil; or internal drivers like the need to develop a new source for sugar because domestic supply cannot keep up with the company’s growing demand.

Many companies prioritise raw materials that:

  • Are important to their business in quantitative terms, e.g. cocoa for Mars, black tea for Unilever; or in qualitative terms, e.g. vanilla in vanilla ice cream;
  • Are difficult to replace;
  • They have a significant influence on in the market, e.g. Nestlé in coffee, Mondelēz in cocoa, Unilever in palm oil or Coca Cola in sugar; or
  • Are commonly associated with significant issues or risks (actual or alleged), such as palm oil and deforestation, dairy and greenhouse gas emissions or cocoa and child labour.

Some companies focus on issues that are ‘close to their heart’ or are connected to the nature of their business. E.g. many beverage companies focus on water-related issues. For dairy companies greenhouse gas (GHG) emissions may be an obvious choice. Others choose to emphasize particular themes that resonate particularly with consumers, such as the Walkers Crisps case below (Example 4), where PepsiCo connected to the high awareness of climate change in UK consumers.

Example 4. "50 in 5" - Reducing GHG and Water footprint to produce potatoes for Walkers Crisps in the UK

PepsiCo is a good example of a company that has set strategic reduction goals as a point of departure for sustainable sourcing. In its project “50 in 5”, the firm aims at reducing the GHG (CO2) emissions and water footprint of potato production for Walkers crisps by 50% in 5 years, starting in 2010. This is part of a wider project focussing on key crops sourced from the UK: potatoes, oats and apples which make Walkers Crisps, Quaker Oats and Copella Apple Juice. This ambitious goal will be achieved through a combination of approaches: partnerships, investment and technology, including:

- Applying new technologies, such as the i-crop™ and Cool Farm tools to better measure water impacts and carbon emissions and to help farmers manage their use of water, fertiliser and other raw materials more effectively.

- Investing in research to optimise energy efficient storage practices and to identify the most environmentally sensitive ways to grow and irrigate crops. This includes using wind turbines, anaerobic digesters and solar panels to create on-site renewable energy on the company’s farms, trialling new low carbon fertilisers and capturing rainwater to be re-used for irrigation.

- Replacing 75% of the firm’s current potato stock (the Saturna, Hermes and Lady Rosetta strains) with better quality varieties, aiming to improve yield and decrease waste. Pepsico has invested millions in research over 20 years to find out which varieties of potato provide the best quality and are most sustainable – those requiring the least amount of irrigation, and that are highly resistant to diseases, easily stored over longer periods, and requiring less inputs to produce the same crop yields. Combined, this will mean a high quality potato requiring less water to grow and emitting less carbon whilst doing so.

Source: SAI Platform Project

A heuristic approach is not necessarily random. Interviewing stakeholders can be a powerful way of reliably identifying the relevant raw materials and issues. You can include internal stakeholders, such as colleagues from product development, procurement, manufacturing, brand marketing, legal etc.; and external stakeholders like suppliers, customers, NGOs, consumer groups etc.

  1. Systematic supply chain mapping: Companies systematically map their supply chains to investigate which raw materials they rely on, in what quantities and where they come from. It is particularly useful for companies that buy many processed ingredients. E.g. modified starches or many plant oil derivatives can be from a number of crops and it is often not immediately visible to the buyer which one was used, let alone where it was produced and how.

The UK Food and Drink Federation developed a sustainable sourcing guide that provides useful prompts for a supply chain mapping exercise (http://www.fdf.org.uk/sustainable-sourcing.aspx), see below. However for a full supply chain mapping exercise you will most likely need to rely on a combination of in-house knowledge, suppliers’ knowledge and external expertise.

Questions to consider

  • What is required to produce the product, e.g. raw ingredients, water, energy, packaging, transport, etc?
  • Who are your immediate suppliers?
  • Who supplies them? Think about suppliers all the way back to source
  • From which countries are key resources sourced and what do you know about them? e.g. are there any geopolitical issues?
  • What amounts are being sourced?
  • What are the largest resources in terms of expenditure and/or volume?

Getting Started

  • Use expertise from both within your business and outside, such as your trade association to help gather the relevant information
  • Start by mapping major product categories e.g. those that are most critical and/ or account for the largest expenditure
  • Gather information from suppliers to identify those who are of most strategic importance e.g. via questionnaire
  • Create a visual and statistical map of your product supply chain

Source: FDF Sustainable Sourcing – Five Steps towards Managing Supply Chain Risk. 30 Nov 2012 

While supply chain mapping gives you an insight into the primary agricultural raw materials and their origins it does not inform you of issues that may be connected to these raw materials or origins. You will need to identify these separately. However, knowing your supply raw material base will make identifying issues much easier than without that knowledge. Commonly, companies identify issues through a combination of

  • Stakeholder interviews
  • Internet and literature research
  • Consulting firms specialising in sustainable agriculture.

Systematic mapping may, finally, help companies discover ‘hidden’ issues or opportunities. E.g. most chocolate contains cocoa butter replacers (CBRs). CBRs can be made from a number of non-lauric vegetable fats, however, often they are made from shea butter. Collecting shea nuts is an important livelihood strategy for women in the Sahel, and often the only source of cash income during the ‘hunger season’. 90% of the world’s exported shea nuts are used in the chocolate industry. A company that buys, say, chocolate coating may not have been aware of this and only through mapping its supply chain discover it connection to thousands of women in the Sahel, and he risks and opportunities associated with it.

  1. There are a number of generic sustainability frameworks which can be as good basis for identifying issues. One example are the ‘Principles and Practices’ (P&Ps) provided by SAI Platform (go to each of the Working Groups links to see specific P&Ps). Within that organisation, food and drink companies jointly develop P&Ps for the sustainable production of several crops on a pre-competitive basis. To date, P&Ps have been developed for arable and vegetable crops; beef; coffee; dairy and fruit. Other sets of generic sustainability frameworks are listed in the following table.

 

Next Previous