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Ethical supply chains

Highlights
Growth through sustainability
  • Creating a sustainable supply chains give brands access to a fast-growing and under-serviced market
  • Once established, sustainable supply chains are less risky and more stable than supply chains where the brand is detached from producers
  • They often require more work in the initial phase prior to a brand’s launch
  • Sustainable supply chains are more profitable in the long term and inspire deeper consumer loyalty.

Australian importer Amazonia has discovered how to give consumers ethical products, protect the environment and make a profit.

In just under six years, a curiously named company called Amazonia has grown from a single market stall to a multi-million dollar enterprise.

The Australian health food business imports açai berries from the Amazon for local customers, all of whom are hungry for more than just tasty fruit. In addition to the berries, they’re buying coffee from Papua New Guinea and baobab fruit from Africa, yet the appeal is not simply access to food from exotic locations.

Ethical supply chains

Consumers increasingly seek products from companies with a passion for social and environmental responsibility – and they’re prepared to change consumption habits to feed that passion. In May this year consumer research commissioned by Fairtrade Australia found eight in 10 shoppers would be more likely to purchase a product which supported people in need, so long as it was a similar price and quality to what they were already consuming.

It’s a trend which represents an exciting growth opportunity for brands, like Amazonia, that can effectively establish ethical supply chains.

Dwayne Martens, Amazonia’s chief executive, says cultivating a sustainable supply chain begins with getting to know your suppliers. He describes it as a long-term commitment which starts with due diligence on potential suppliers and includes working with communities to avoid harmful farming practices.

Amazonia imports three tonnes of açai berries each month, sourced from 4,000 families located across 4,000 acres in the Amazon. “So for them there is a financial incentive to work with us to ensure harvesting is sustainable,” Martens says.

People want to know they’re consuming something that’s good for them and the environment, but they also want to pay a reasonable price.

While the foundational work required to create sustainable supply chains is more comprehensive, the result is access to a fast growing consumer segment, and a more stable supply chain.

In the case of Amazonia, Martens needed to help to educate farmers on how to produce the açai berry while maintaining the biodiversity that already exists in the Amazon rainforest. Martens works with his suppliers to show them how to plant the açai within forests, in stark contrast to cattle and soybean farming which requires rainforest to be flattened and replaced with monocultures.

The supply chain is more sustainable because the integration of the açai berry into existing ecosystems does not degrade the soil, which is what happens when the rainforests are removed.

In a similar project Martens spent four years in Thailand working with his coconut pulp suppliers to help them change to farming practices which replace banned pesticides and herbicides.

“Now, the coconut husks are ground to make fertiliser for the trees, which grow in estuaries. The fish and insects have started coming back, yields from the trees are higher and suppliers are getting paid more, so it’s a win/win situation,” he says.

Sustainable growth at the big end of town

Much larger companies are also recognising the benefits of a sustainable supply chain.

Ten years ago Westpac started actively managing its ethical, sustainability and governance (ESG) risks.

Head of Sustainability and Community Siobhan Toohill says sustainability is a proxy for quality, a powerful driver in business.

“If you let your suppliers know you value sustainability, they will strengthen their systems. It’s in their best interest to be sustainable because we’re more likely to procure their products and services if they are,” she says.

Today Westpac actively looks for opportunities to work with businesses with the same commitment to ethically sourced products. It identifies and partners with businesses that empower women, plus social and indigenous enterprises.

For instance, Westpac’s Sydney caterer, the Compass Group, spearheaded the Warrigal program to help indigenous people develop hospitality and catering skills. Toohill says the approach has demonstrable commercial benefits. “It’s about reducing risks and developing stronger, longer partnerships.”

These partnerships matter over the long term, agrees Martens. “It’s a great marketing story and from a personal perspective, I’m proud to have created change. Staff also hear our story and say, ‘this is a company I want to work for’.”

Sustainable supply chains also let him charge a premium for his products, within reason. “We have to be careful not to price ourselves out of the market. So it’s a balance. People want to know they’re consuming something that’s good for them and the environment, but they also want to pay a reasonable price,” he says.

More information

Telstra has remained a signatory to the United Nations Global Compact since 2011 and contributed $217 million to social and community initiatives in 2014. Sign up for our monthly newsletter, Sustainability Matters.

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