Environmental Impacts from Material Sourcing

Sarah Simon

19 min Read Time | November 14th 2022

Key Takeaways

1

This topic focuses on the environmental impacts of a company’s material sourcing, which frequently takes a toll on the environment, either by changes in land use, extraction of natural resources, or deforestation.

2

Identify the materials the company depends on the most for its production and provide context about how this sourcing affects the environment. Include data that shows how severely the environment is concerned.

3

Although material sourcing can lead to impacts like water pollution and depletion, GHG emissions, and air pollution, these should not be included only if this leads to double-counting.

What is it?

Land use for agricultural purposes has been shown to displace ecosystems, ultimately leading to biodiversity loss, and ecosystem service degradation while also contributing to land use change. Please make sure to estimate the land used by the company related to its procurement of agricultural products and the impacts land use has on the environment.

Industries rely on sourcing unprocessed materials like wood, fibers, minerals, metals, and others to manufacture the final products. Sourcing these materials can result in adverse environmental impacts, including deforestation, biodiversity loss, resource scarcity, soil degradation, landscape alteration, and pollution, among others.

Industries with the highest impact on this topic include:

  • Consumer Goods (apparel, accessories & footwear, building products & furnishings, household & personal products)
  • Technology & Communications (semiconductors, hardware)
  • Transportation (auto parts)
  • Food and Beverage (restaurants, meat, poultry & dairy, alcoholic beverages, non-alcoholic beverages, processed foods, tobacco)
  • Renewable Resources & Alternative Energy (biofuels, pulp & paper products)
  • Resource Transformation (containers & packaging)

These industries are highly dependent on raw materials as critical inputs for their finished products, including biological raw materials (e.g., cotton, leather, rubber) and non-renewable materials (e.g., precious metals and other minerals).

Companies must strive to promote sustainable material sourcing of their products, either if they are sourcing these materials directly or indirectly through their supply chains. A company’s environmental impacts from material sourcing can vary significantly depending on the technologies and techniques implemented in materials production and the countries from which it sources. Thus, including precise information about the company’s material sourcing supply chain or activities is paramount.


Please note:

It is important to consider commodity-driven deforestation. Some companies 'only' deforest and do not use other ecosystems to source materials. This is of materiality for alcoholic and non-alcoholic beverage industries, tobacco, and others.

Remember that using a certain amount of hectares of land does not automatically mean that the company is deforesting. This can be from different land uses, conversions, etc.

Treating water pollution and consumption is of materiality for the apparel, accessories & footwear, and restaurant industries.

For instance, one of the most significant impacts of textile sourcing is water use in cotton and water pollution for leather. At the same time, eutrophying emissions from the restaurant industry are also significant.

If the company does not include water consumption or pollution related to its material sourcing (upstream - supply chain), meaning that it is not captured on the platform, then it can and should be treated here.

Often, companies will not include all the resource consumption in their supply chain in company reports. For instance, they would disclose water withdrawal and use during its operations, but not the water used to source the materials/ingredients.

E SDG PRINT 15

SDG choice and Impact Category

SDG

15 “Life on land” is the most common choice for this topic to “ensure the conservation, restoration and sustainable use of terrestrial and inland freshwater ecosystems and their services, in particular forests, wetlands, mountains, and drylands, in line with obligations under international agreements

Impact Category

Processes: environmental impacts of material sourcing are related to how the company operates and runs its business; i.e., the impact described is related to the company's operations.

Impact assessment

General guidelines

In your analysis, you should examine the company's impact on sourcing raw materials. If the company sources multiple materials and, thus, has multiple impacts, you must try to be as comprehensive as possible. Prioritise the materials that are related to the most serious environmental impacts and on which the company is mostly dependent.

For your analysis to be published, make sure to provide context data on the environmental impact of sourcing the pertinent materials in the introduction. Be specific by mentioning the particular materials a company uses, where it is sourcing them from and any particular initiatives they have implemented to address their impact from material sourcing.

In the development, provide an estimate of the volume of materials the company sources and estimate the related environmental impact. Go beyond a general estimation of the company’s material sourcing and its estimated impacts and be as specific as possible about the environmental impacts the company is responsible for. Information regarding the places from where the company sources its materials, as well as the names and impacts of its suppliers, can be crucial to achieve this specificity.

In your conclusion, clearly convey to the reader the value and scale of the company’s impact.

⚠️ Caution!

  • Although material sourcing can be responsible for the significant production of GHG emissions, please leave these out of your analysis. This impact is comprehensible and quantified in a company's Scope 3 emissions accounting.
    Please flag the topic if a company mainly sources polymers and polymer-derived materials, as the impacts from this sourcing are already quantified in the company's emission disclosure.

  • Make sure to go beyond a general estimation of the company’s impact from material sourcing and include specific information about the company’s suppliers or sourcing activities. Information about the company’s suppliers or the places from where it sources its raw materials can be critical here.

Your analysis can treat commodity-driven deforestation and landscape alterations as well. Please note that land use does not imply deforestation. Deforestation involves the conversion of forest land to other uses, including farming or urban space development. While a company’s material sourcing might depend on vast land areas, this land-use per se does not imply deforestation.


Introduction

The introduction should describe the broader issue at hand and set the stage for the reader. It should provide enough context information about the environmental impacts associated with the extraction or production of raw materials, focusing on the type of raw material in question.

Some key points to include in your introduction are:

  • How is this type of extraction/production harmful to the environment?

  • What is the global/industry scale of the problem being described?

  • What is the context of the place where the sourcing is taking place?

Read more on how to build a strong introduction in this article.


Core Analysis

In the body of the analysis, you should address:

  • How does the company benefit from the raw materials sourced? What are they used for?

  • What are the environmental impacts of sourcing these materials?

  • How many tonnes of raw materials does the company source? By how much is the environment impacted by these types of sourcing?

    • Here you need to include quantitative data. You can use proxies for this*.

  • If data allows, where is the company sourcing most of its raw materials? What are the environmental peculiarities of these areas? How has sourcing this material degraded the environment?

  • Which are the company’s suppliers? Have they been directly linked to concrete environmental impacts from their sourcing? How reliant is the company on these suppliers? How strong is the business relationship between the company and its suppliers?

  • For how long are the impacts going to persist? Are they long-lasting?

  • How has the environment changed due to this sourcing?

  • How much of this change can be attributed to the company?

  • Is the company implementing initiatives to care for its environmental impacts from material sourcing? This can be included as a secondary point to your analysis. When doing so, please make sure to be nuanced and critical by including the caveats of these programs.

* Proxies - What to do if there is a lack of transparency on materials sources:

If the company has not been transparent about the absolute amount of materials it sources, it is also useful to show the readers how much the company’s portfolio relies on certain raw materials for its products.

  • Consider showing the percentage of revenue the company derives from these raw material-reliant products, and
  • Include information about how critical the raw materials are for the industry would help show how essential the materials are for the company.

How do you quantify the impact?

After providing context on the issues of sourcing the relevant materials at hand, you will need to provide an estimate of the weight (tonnes) of material the company uses. If the company is not providing direct data about this, you will need to provide an estimate. To do so, consider their most sold products and their composition, weight, and price. With the company’s total sales, estimate the number of materials the company sourced. This can be done for several materials at the same time.

Companies might disclose their list of suppliers and the countries they are operating in. This information might be disclosed in the company’s reports or on their supplier list (which you can search on your browser by inserting the name of the company followed by “tier supplier list”). Focus on the suppliers and places that have been related to significant environmental impacts from material sourcing.


How much of the impact can be attributed to the company?

Depending on the available data, quantify the concrete environmental impact related to the company’s material sourcing.

Remember that quantifying the raw materials the company sources is the first step to estimating the environmental impacts of the company’s sourcing. The absolute amount of material sourced would then have to be measured against data on the specific negative impacts of material sourcing.

  1. In the best-case scenario, sources are clear about the exact impacts related to the company’s material sourcing. If the company is using suppliers, remember to include information about how close the company’s business ties are with the said supplier.

  2. If there is enough information, you can accurately estimate the number of materials a company sources from a given country. Use this information to compare it to the total sourced material from the country in question.

SOURCE: The Data website of The Food and Agriculture Organization of the United Nations provides useful information about agriculture and land use. This source might be useful for raw agricultural materials.

  1. Using studies and proxies, you can estimate the exact environmental impacts per tonne associated with the specific material the company is sourcing. While using this approach, please make sure to go beyond the estimation and include specific data about the company’s sourcing. The note can include information on places where the company sources from, specific suppliers, and the traceability of the company’s suppliers.



Assessing the scale of the impact:

To describe the scale of the impact, take into account:

1/ The breadth of the impact

  • Is the impact local, national, or global?

  • How many people are concerned? Thousands? Millions? Billions?

2/ The depth of the impact

  • Is the life of people concerned deeply affected, or does the issue just marginally impact them?

  • Are the changes brought by the issue profoundly changing society or the planet?

3/ The persistence of the impact

  • How long would the impact described last for? Months? Years? Decades?

  • How reversible is the impact described in the impact analysis? Can it be easily stopped/extended?


In your analysis, make sure you add value to your readers and go beyond the company’s CSR report by not merely reporting data from the company’s report but going the extra mile of providing additional metrics, studies, and sources to make your analysis robust and the impact value and scale are clear.

Industry-Specific Information

Apparel, Accessories & Footwear

The apparel, accessories & footwear industry relies on raw materials as critical inputs for their finished products, including cotton, leather, wool, rubber, and other precious minerals and metals.

The main environmental impacts related to this industry’s sourcing are water depletion and pollution or deforestation, depending on the specific materials the company is using.

Harvesting cotton, for instance, requires large amounts of water, land, and pesticides. It can also degrade soil and affect biodiversity if grown in monocultures. China and India are the two largest producers of cotton in the world. In China, for instance, desertification has been accelerated by harvesting crops.

Viscose or rayon, also known as cellulose, is highly dependent on wood pulp. Forestry products are themselves responsible for 26% of global deforestation. Deforestation, in turn, contributes to biodiversity loss and the extinction of species. You can also find the water footprint of polyester and viscose fibers.

On the other hand, leather can be linked to deforestation, water and land overuse, and water pollution during the tanning process. Natural and synthetic rubber have different environmental impacts on the environment. Natural rubber is linked to deforestation.

Auto Parts

The auto parts industry relies on raw materials as key inputs for their finished products, including steel, iron, aluminum, and plastics.

The main environmental impacts related to this industry’s sourcing are deforestation and landscape alteration, depending on the specific materials the company is using. Natural rubber is linked to deforestation, while sourcing iron ore for steel production disturbs land.

Semiconductors

The semiconductor industry relies on raw materials as key inputs for their finished products, including silicon, germanium, gallium arsenide, and metalloids. Many precious metals and other inputs have few or no available substitutes and are often sourced from deposits concentrated in few countries.

The main environmental impact related to this industry’s sourcing is landscape alteration during the mining of the metals. Specific environmental impacts might vary depending on the particular metal and the country from which it is sourced.

Containers & Packaging

The container & packaging industry relies on raw materials as key inputs for their finished products, including paper, steel, iron, aluminum, and plastics.

The main environmental impacts related to this industry’s sourcing are linked to deforestation and landscape alterations related to mining metals.

Restaurants

Restaurants source ingredients and products from a wide range of suppliers. Food production is responsible for a significant amount of natural resource extraction leading to environmental impacts. The global nature of the industry exacerbates this problem. Demand from food and beverage industries, including restaurants, drives and shapes agricultural production, indicating that actions by industry players have more significant impacts on society.

The main environmental impacts of this industry’s sourcing are deforestation, land degradation, eutrophication and water pollution, and other negative environmental impacts from monoculture farming.

Building Products & Furnishings

The building products & furnishings industry utilises large amounts of wood sourced from forests worldwide. Unsustainable production and harvesting of timber can result in adverse environmental impacts, including biodiversity loss. Companies may inadvertently source wood from areas susceptible to unsustainable forestry practices. Companies in this industry also source various materials, such as plastics, aluminum, steel, and many others, to make all sorts of building products (faucets, bathtubs, fitness systems, etc.).

The main environmental impacts related to this industry’s sourcing are linked to deforestation and land disturbances from metal mining.

Hardware

The hardware industry relies on raw materials as key inputs for their finished products, including rare earth minerals. The main environmental impacts related to the industry’s sourcing are related to landscape alterations from rare earth elements and tin, tantalum, tungsten, gold, and cobalt.

Meat, Poultry & Dairy

Companies in the meat, poultry & dairy industry rely on a variety of contract farmers and suppliers. Food production is responsible for a significant amount of natural resource extraction leading to environmental impacts. The global nature of the industry exacerbates this problem.

Environmental impacts within the industry’s supply chain include deforestation and land use. Ensure a quantitative measure of how the environment is impacted (land-use changes, forest and land conversion, intensification of agriculture), and assess their impact on the environment (i.e., deforestation from meat or palm oil, biodiversity loss).

Biofuels

Facilities may also generate wastewater containing salts, organic compounds, dissolved solids, phosphorus, and other substances, requiring wastewater treatment.

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