In an era where sustainability and cost-effectiveness must coexist, procurement leaders are rethinking supply chain strategies to balance environmental responsibility with economic performance.
Ashish Dhongde, a seasoned procurement expert, Senior IEEE member, Associate Editor at SAARC, works in the Foods and Personal care product procurement industry with close to two decades of experience in South Asia, Middle East and North America. He offers key insights into how sustainable procurement practices in the Fast-Moving Consumer Goods (FMCG) industry can enhance efficiency and reduce costs.
The Sustainability Imperative in FMCG Procurement
The FMCG industry, known for its high production volumes and rapid turnover, is pressured to adopt sustainable practices. Regulatory frameworks, consumer demand for eco-friendly products, and corporate social responsibility commitments drive companies to reevaluate their procurement strategies.
However, businesses often struggle to find the right balance between sustainability goals and cost efficiency.
In his publication on SAARC, Sustainable Procurement Strategies in FMCG: Impact on Supply Chain Efficiency and Cost Reduction, Ashish highlights how integrating sustainability into procurement decisions can lead to cost savings through waste reduction, supplier optimization, and long-term resilience.
Key Strategies for building supply chains of sustainable products
1. Strategic Supplier Partnerships
Fostering long-term partnerships with suppliers committed to ethical sourcing and environmentally friendly practices is one of the most effective ways to enhance sustainability while maintaining cost efficiency. He recently presented at the SCOPE fall 2024 summit in Chicago on use of sustainable feedstock in packaging.
By working with vendors who align with their sustainability goals, companies can negotiate better pricing, ensure supply chain stability, and improve product quality.
2. Risk Mitigation and Resilience
Disruptions in the FMCG supply chain can have significant financial and operational repercussions. Dhongde’s expertise, as demonstrated in the book he authored A Procurement Professional’s Guide to Risk Events and Mitigation Strategies, underscores the importance of proactive risk management.
By integrating risk assessment frameworks, businesses can anticipate potential disruptions and develop contingency plans that minimize environmental impact while safeguarding costs.
3. Technology-Driven Assurance
Digital transformation is revolutionizing FMCG’s traceability processes. Geospatial mapping, blockchain and electronic documentation enable companies to track sustainability compliance across the value chain.
Smart procurement tools may help businesses analyze lifecycle costs, making it easier to invest in sustainable materials without exceeding budget constraints.
4. Regulatory Compliance and Ethical Sourcing
Government regulations and consumer expectations require FMCG companies to adhere to environmental standards and ethical sourcing practices. Brand sponsored initiatives allow procurement to put in place frameworks to ensure compliance with these regulations while promoting corporate transparency.
The Financial Benefits and Costs of Sustainably sourced products
Many companies assume that sustainability initiatives come at a significant premium, but this need not be the case.
- Brand Value and Market Differentiation: Companies with strong sustainability credentials may attract environmentally conscious consumers and investors.
- Large corporates by virtue of their size may have the ability to create demand for sustainable products that in turn reduces the cost of sourcing
- Having goals on sustainability may lead to design of sustainable packaging or use of sustainable energy sources such as via use of recycled paper or plastic and renewable sources of power
As Ashish emphasizes, “Procurement of sustainable products is often a requirement of brands. Businesses that integrate consistent sustainable practices into their supply chains may reduce costs and drive long-term value to the consumer
The FMCG sector is transforming, and procurement strategies must align with sustainability goals and financial performance. Organizations can achieve a competitive edge in today’s dynamic marketplace by leveraging technology, risk mitigation strategies, and supplier partnerships.
Industry leaders like Ashish, continue to develop innovations that balance ecological responsibility with needs of businesses.