Responding to resource scarcity: Supply chain perspectives

Using renewable resources such as paper from responsibly managed forests and bioplastics have clear environmental benefits - so why aren't more businesses using them? World Resources Institute's JP Leous explores.

Using renewable resources instead of their conventional counterparts creates clear environmental benefits. For example, using paper from responsibly managed forests helps promote healthy ecosystems, while plant-based bioplastics minimize the need to dangerously extract more finite resources like petroleum and precious metals.

So why aren’t more businesses using these materials in their supply chains?

WRI’s Corporate Consultative Group recently facilitated an industry discussion among representatives of a variety of global brands to explore this question and what it will take to mainstream the use of materials that can be regrown or refurbished naturally over time. It became clear that the adoption of renewable materials across industry sectors requires greater knowledge and appreciation of their economic return, as well their environmental benefits.

3 Issues to consider for mainstreaming renewable materials

The discussion centered on three necessary areas of focus if businesses are to better recognize the benefits of using renewable resources in their supply chains:

1) Identify barriers and opportunities

In some cases, moving from conventional inputs like fossil fuels and scarce minerals to renewable stocks requires a transformation of infrastructure and complex supply chain systems. For example, paper companies who want to responsibly source renewable wood fibers may require third-party assurances if the wood they source comes from trees that are not from lands the company maintains. Building and navigating these types of new systems can be challenging for both suppliers and customers. Additionally, from our discussion, we know that definitions around renewable resources must be standardized and “best practices” must be agreed to for industry to collectively move forward.

Innovative thinking and new technologies can play a role in overcoming these barriers. This means adopting a mindset of long-term value creation over short-term market demands. Evaluating and acting on new R&D options is also key to bringing new technologies online that can optimize efficiencies, reduce costs, and present even more renewable material alternatives. Suppliers acknowledge this and indicate an interest in emerging technologies and optimizing processes.

Investments will also be required. This includes capital investments as well as investments in education around the value of pursuing a long-term growth strategy through use of renewable resources, and its benefits for brand differentiation and risk avoidance.

2) Recognize that the market is the main driver

While perspectives may differ, our discussion uncovered one universal conclusion: When it comes to scaling use of renewable materials, there is collective agreement that businesses need new knowledge.

Not surprisingly, buyers’ interests are what really generate demand for renewable materials. Sectors that are seeing this and responding to it would do well to better communicate their success to industry peers. Leaders’ actions usually prompt copy-cat, competitive behaviors. In the early 90s, for example, setting corporate climate goals was almost exclusively the purview of a handful of companies from a few sectors. Within a decade, companies in nearly every industry followed suit, recognizing the economic and environmental gains from activities like energy efficiency or recycling water, not to mention increased brand preference from consumers growing savvier about global warming. Plus, the supply and demand equation dictates that the more companies use renewable materials, the lower the costs will be to businesses. This will in turn stimulate scalability across multiple sectors.

Richer and more frequent storytelling also reinforces consumer demand. For renewable resources to become as mainstream as recycling, consumers need to understand in a very personal way how a particular product or resource impacts the world. Companies need to explain, for example, a shift in packaging material as a long-term investment in the planet in the face of constrained natural resources. Consumers will then increasingly seek to protect the planet through the choices they make in supermarket aisles.

3) Mainstream the idea of natural capital

Renewable materials and resources are still ill-defined terms for both businesses and consumers. This lack of clarity contributes to a lack of consensus on the way forward. Discussants agreed that more education around what many call “natural capital” can help build value for scarce resources and change views as to how businesses can benefit from better management of natural inputs.

Exploring the role that government and other third parties can play in mainstreaming this concept deserves further discussion. For example, will policies or regulations jump-start increased use of renewable materials? Should large retailers or influential certification schemes create criteria to measure the use of renewable resources in products and packaging, and rank companies accordingly?

Scaling up renewable resources in supply chains

While perspectives may differ, our discussion uncovered one universal conclusion: When it comes to scaling use of renewable materials, there is collective agreement that businesses need new knowledge. Overcoming the barriers to renewable resource adoption will ultimately require that businesses take small steps over time, while setting their eyes squarely on long-term gains.

JP Leous is senior manager, corporate relations at the World Resources Institute. This post was originally published on WRI’s Insights blog.

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