Environmental Impacts from Material Sourcing

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.

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.

It is also important to estimate how much land the company used to source its raw materials. If the company is reliant on crops that contribute to desertification or are overly reliant on water, please make sure to include an estimation of how much water the company consumed for its products. Estimating the company's eutrophying emissions would also help the reader understand the scale the company's raw materials had on polluting the environment.

The Impaakt Team has developed three calculators that estimate land use, water use and eutrophying emissions for the most common raw materials. To estimate total land use/water use/emissions, you will only have to input the amount of materials sourced and the formulas will instantly calculate the required metrics.

Each of the sources used for the calculation is pasted in a comment in every cell, so you’ll only have to copy it and cite it in the analysis. Please note that estimating water use or eutrophying emissions for all types of raw materials is not always necessary as not all crops are water intensive or contribute significantly to eutrophication. For this reason, you will find more raw materials in the land calculator than in the water or eutrophying emissions one.

You can access and use the calculator here.

Tip:

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.

If the company you are covering publishes sufficient information to assess the impact of its sourcing by using a local study, please prioritize local information as it is likely to be more accurate than the global studies used in the calculator.

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.

ThaiBeverage requires over 220k ha & 314Mn m3 of water amid biodiversity loss & water scarcity

Michelin sourced ≈ 3.2Mn t of raw materials, using over 400k ha of land amid deforestation concerns

Xiaomi procured precious metals to produce 146 Mn phones affecting the environment

Aramark’s 441t of cattle products release around 78.5t of eutrophying emissions, creating dead zones