Sustainable Supply Chains - From Niche to Norm: Is India ready?
Authored by: Nikita Seth with inputs from Diksha Pandey and Neha Simlai
Edited by: Kausumi Saha
In the wake of the global pandemic, markets all over the world are looking to make their supply chains stable, sustainable, and locally stronger. Companies are now, more than ever, focused on adopting sustainable business practices. Even as their focus remains on ensuring that production processes and service delivery remain economically viable, environmental and social concerns are no longer seen as secondary priorities. Moreover, the practice of sustainability has been recognised as a focal point, not only as a characteristic of the end product, but at the level of the entire process of value creation. The aim, therefore, is to integrate environmentally viable practices into the complete supply chain life cycle, from the stage of design and development, to raw material procurement, manufacturing, packaging, transportation, warehousing, distribution, consumption, return, and disposal .
Traceability, or the ability to track the creation of a product from design to dissemination, remains key to ensuring a transparent and truly sustainable supply chain. Traditionally, supply chains have remained largely untraceable, with no way to verify the history and location of origin of raw materials and end products. In recent years, however, blockchain technology, clearer chains of custody and increasing transparency in backward supply chain management has allowed for determining the footprint of products. It has also aided in detection of unethical labour practices and fraudulent claims related to quality and safety. To this end, Environmental, Social and Governance (ESG) reporting has significantly improved, leading to better managed supply chains, improved stakeholder relations and enhanced brand value. Advanced markets such as the EU are driving the demand for sustainably sourced products, which implies that the end products on a retail shelf are made from traceable raw materials, are packaged and transported responsibly, and finally are safely disposable and/or recyclable. Slowly, but surely, sustainable sourcing, production, processing and manufacturing is becoming a critical lever for improved and continued market access. Companies are now expanding their sustainability programs beyond manufacturing, by setting targets similar to their own commitments for their suppliers. Similarly, nongovernmental organisations and institutions like IDH-The Sustainable Trade Initiative, Vasudha Foundation, and TERI, among others, are supporting this change through research, advocacy and training.
However, businesses continue to face challenges to ensure that their suppliers meet the same environmental and social standards that the company has set for itself. For instance, a recent study by the Harvard Business Review among the suppliers of four multinational corporations in four different industries and countries, showed that most suppliers were violating the standards expected and advertised by the MNCs . In such a scenario, a model based on enforcement, compliance and monitoring can often fall short while attempting to create better supplier relations. Here, building trust with downstream partners and working towards collaborative goals is the only way to ensure that the benefits of sustainable practices permeate throughout the supply chain.
For many products in the market, even though the primary market infrastructure remains domestic, the supply chains extend globally, adding to the complexity of its management. Global agri-food chains are one such example. Management of food supply chains for both fresh and perishable food products is different from industrial supply chains; because of the former’s unique properties of perishability, strict regulations regarding safety, consumers’ high variation of tastes and processes, and operational restrictions in storage, processing, and distribution . In such a case, introducing sustainability practices in production, distribution and consumption faces similarly unique challenges, in integrating the sustainable development agenda into farming and processing practices while also meeting food safety and quality standards.
In India, renewed interest in organic farming in recent years is because of three key reasons: excessive use of chemical fertilizers causing a reduction in agricultural yield, decreased soil fertility, and environmental concerns.  Despite this, farmers in India face several hurdles in the path to take up organic farming. The process requires heavy expenses and a complicated certification mechanism, and lacks incentives and subsidies. Moreover, small and marginal farmers who attempt to practise organic agriculture have a hard time convincing the buyer why they deserve to be paid a higher price for their produce . In semi-arid areas across the country, with minimal irrigation facilities, organic farming becomes the key to conserving water as well as the health of the soil. There is also a potential for organic farmers to earn almost double the price they might be paid for inorganic vegetables. Yet, an overly complex as well as expensive certifying process means that small farmers (owning up to five acres of farmland) cannot afford to get their organic agri-practices verified by a certifying agency. The consequence of these problems hinders the ability of the country to meet its organic farming potential, with only 0.3% of its total agricultural land currently being organically farmed .
It is in this context that the Participatory Guarantee System (PGS), a self-certification system, attains a crucial role to play. Under this system, farmer groups themselves inspect the land and practices of members, aided by facilitation councils and non-governmental organisations . This method of certification was officially recognised by the Ministry of Commerce in 2015 and by the Food Safety and Standards Authority of India (FSSAI) in 2017. However, as of now, even big retail brands such as Foodhall and Nature’s Basket, concentrated mostly in tier-1 cities, do not sell PGS certified products. As a result, consumers lack the trust and confidence needed to choose a PGS product over a product with a government-endorsed certification, such as the India Organic logo.
In this scenario, it is not unreasonable to expect from companies that sell branded organic products to pay for the certification process on behalf of the farmers they source from. At the same time, it is important to be cautious of multiple certification systems being valid in the market. A differentiated responsibility falls upon urban, empowered consumers and civil society organisations to demand responsibly produced and sourced commodities, with the role of the government focused on easing the trade of sustainable products. Networks like Vandana Shiva’s Navdanya, AOFG India, and OFAI are a few that are uniting organic farmers into coalitions, but there is still a long way to go before organic farming really breaks ground in India.
Extensive industry-specific research is also needed to determine the extent of market pull, i.e. the number of conscious consumers who would be willing to purchase products at a higher cost if produced sustainably. It is indispensable to understand what drives a subdued preference for green products - it can be a result of poor quality when compared to “brown” products, distrust in corporations resulting in buyers being skeptical about the sustainability claims, or lack of accessibility as sustainable products still have a long way to go before they appear on shelves of local stores and small business outlets.
Nonetheless, businesses can do a lot more; beyond developing and managing closed loop supply chains, they need to generate greater green products awareness in a bid to influence the buying practices of consumers. Enough evidence exists to support the fact that businesses have ample to gain from reinventing their products to be more sustainable as well as introducing new products altogether. Some such business decisions that are seeing their market share grow rapidly include a shift from palm oil to more sustainable rice bran oil by food manufacturers, launching fully organic collections by clothing manufacturers and a host of energy efficient services by smart home technology providers. The scope to make sustainable changes is evidently endless, and with millions of people isolating worldwide and taking this time to re-think their consumption patterns, it is time for businesses to step up and prepare to cater to a changing world.
Nikita Seth is a graduate in Sociology from Hindu College and has been running a sustainable and slow fashion label called Manjha since 2016. She has a special interest in sustainable supply chains globally and in India, particularly in unorganised sectors like textiles and handicrafts, and works closely with artisans and craft clusters.