The Benefits of Local Sourcing: Mitigating Externalities (5/5)

In this week’s blog post, we explore some of the externalities that occur when a company only sources and manufactures products globally. We will continue to reference and tie in our concept of circularity in our examination of some of these externalities. While it is true that globally sourcing raw materials and manufacturing can sometimes lead to cheaper production costs, there are some cost-saving advantages associated with regional sourcing. This is in addition to the many advantages that won’t ever show up on a business’ balance sheet but are more even important when examining the long-term impact our businesses can have on the environment and our local communities. When businesses attempt to save money in the short-term, we often forget about the long-term costs to society overall. Many of the externalities that we have observed with global supply chains directly impact our local communities and the environment in a negative way that often creates significantly higher costs down the road.

Sana Packaging’s supply chains are an example of how a small business can achieve real cost-savings by utilizing a predominantly regional supply chains as we strive towards a circular economy. By structuring our supply chains with a focus on sustainability and regional sourcing whenever possible, we have been able to cut out some major expenses. Because most of our raw materials are sourced regionally and all our products are manufactured regionally and shipped directly to customers, we have largely eliminated the need to pay for expensive warehousing.

Beyond traditional cost savings, we believe that global supply chains create a lot of negative externalities in the environment and local communities. When companies focus on attempting to mitigate the negative externalities associated with their supply chains, the cost-benefit occurs far beyond their bottom line. It appears that in a rush to participate in the global economy and the perceived advantages that come with it, many business owners have missed a crucial point: what is the actual impact these decisions have environmentally and within local communities? Is it worth saving money on raw materials if it means putting a local operator out of business? Is it worth saving money in the short-term if it requires exponentially higher costs to try to reduce the damage caused by increased greenhouse gas emissions in the long-term? These are the kinds of questions that we are not only asking ourselves every day but hoping to inspire other businesses to begin to ask themselves as we look to build a better future.

The rise in awareness around sustainability has created a category of consumers who want to associate themselves with environmentally friendly businesses that are actively working to support their local communities. We also believe that regional supply chains can have the same impact on business relationships as well. We have seen how utilizing regional sources whenever possible, in addition to regional manufacturing, can lead to new partnerships and create new business opportunities in addition to helping create a powerful brand image within our local communities. Establishing local supply chains gives a business the ability to give back to the same community within which the business itself is thriving, which can have a positive impact far beyond the bottom line. We believe it is so important to build positive relationships with other businesses within the local community that the benefits far outweigh any potential higher costs of production per unit. This is how we can eventually transition from the traditional economic model to a circular one and help create the kind of lasting change that is necessary to create a truly sustainable economic model.

We believe a regional model is the best way to mitigate the negative externalities that may save a business money in the short-term but create many additional long-term “costs” socially, environmentally, and within local communities. By utilizing local sources and regional manufacturing as much as possible, we are not just attempting to save money. As a company, we are doing our best to keep resources circulating locally to help build up our communities, all while doing the best we can to limit our impact on the environment. That is also why we have chosen to manufacture our products out of 100% plant-based hemp plastic, 100% reclaimed ocean plastic, and other sustainable materials. These are not perfect solutions by any means, but there will always be limitations to any solution to a complex and multi-faceted issue. We also know that while we have made progress in striving towards circularity, we can do even better. In attempting to be industry leaders in the movement towards circularity, we will continue to push ourselves as a company and ask ourselves the same difficult questions we encourage other businesses to ask themselves.

Written by: Galen Kuney, Sana Packaging Intern