State of Sustainability Report: Regional Sourcing Edition

Regional sourcing, or purchasing materials that are produced close to where they will be used, limits the environmental impact of transporting raw materials. Implementing regional sourcing can slash a business’ carbon emissions and create a greener supply chain. 

Regional sourcing is one of the more common sustainable practices in the industry, with 68% of respondents currently practising it. Another 21% want to introduce regional sourcing. Only 11% have no plans to start the practice, a lower figure than for any other sustainability area measured in this report. 

Regional sourcing is much more common in the Americas, with almost 80% of respondents there reporting that their companies already practise it, compared to just over 60% of those in EMEA. 

Though nearly 23% of respondents in EMEA want to begin regional sourcing, over 15% of respondents there report no intention to add such sourcing. In contrast, only 3% of respondents in the Americas say they have no intentions to begin regional sourcing. 

There is also significant variance within each region, as a closer look at some country-specific data reveals. 

For example, in Europe, German respondents report regional sourcing at a much lower rate than French, Spanish and Italian respondents. In the Americas, 19% of respondents in the United States said they had no intentions of beginning regional sourcing, while all Brazilian and Mexican respondents reported either sourcing regionally already or wanting to begin.  

Unsurprisingly, regional sourcing is most frequently practised in order to ensure a secure supply of materials. Nearly 40% of respondents who source regionally call supply security their chief driver in this area, with smaller segments citing quality (19%), cost (12%), competitive advantage (12%), and sustainability (13%). Regulations, while a pertinent factor in some of the other sustainability areas, were negligible in regards to regional sourcing. 

“In industrial sectors, many sectors rely on ‘just-in-time’ deliveries,” says Jonathan Escondo, Industrial Solutions Business Development Manager, IMCD U.S.. “Sourcing materials regionally can limit the risk of supply chain delays that could result in manufacturing delays or even plant shutdowns that can cost companies millions.”

Two-thirds of respondents who are not yet sourcing regionally have found that issues with material availability stand in their way. Nearly a third call budget a limiting factor, and 11% are blocked by standing contracts with more distant suppliers. (Respondents could choose multiple barriers.) 

Of course, manufacturers are limited by the resources that exist locally; some areas simply cannot produce all necessary raw materials. Ideally, businesses will seek to source what they can regionally, even if some materials must be brought from further afield. 

Occasionally, regional sourcing may be at odds with other sustainability priorities. Some companies may have to choose between buying raw materials locally and buying renewables or biodegradables, for example. However, as the industry as a whole moves toward more sustainable practices, it may become more possible to find materials that work toward multiple sustainability goals. 

For companies that practise regional sourcing in EMEA, supply security is a significant driver of the practice, and slightly more so than in the Americas (41% compared to 34%). 

Variation existed within each region as well. German respondents were about twice as likely to name supply security as the top driver as those in France, Italy and Spain. In the Americas, more than half of respondents in the US named supply security the top driver, compared to 33% in Brazil and 21% in Mexico.  

Unlike respondents from the Americas, EMEA practitioners were many times more likely to call sustainability a driver of regional sourcing (21% compared to 3%). In the Americas, competitive advantage and cost are much more likely to drive regional sourcing decisions, though no respondent from the US called competitive advantage their primary driver. 

Quality considerations drive 22% of regional sourcing decisions in the Americas, and a slightly smaller proportion (17%) in EMEA. However, Italians were particularly likely to call quality considerations the primary driver of regional sourcing (42%). 

Material availability, a significant barrier to regional sourcing worldwide, is particularly acute in EMEA. When asked to select all factors preventing their adoption of regional sourcing, 74% of EMEA respondents included this issue, compared to just 50% of respondents in the Americas. 

Although a less common challenge than availability, budget constraints, standing contracts, and lack of leadership buy-in are all more significant barriers in the Americas than EMEA.  

Organisations with more than 1,000 employees were the most likely to already source regionally (71%), but smaller businesses were not far behind. 

While supply security was the top driver of regional sourcing for companies of all sizes, it was more likely to be a key factor for larger businesses. Forty-five percent of respondents from companies with over 1,000 employees called supply security their top driver, as did 43% of respondents from companies with 100 to 1,000 employees. In contrast, only 34% of those at companies with under 100 employees felt the same way. 

Respondents from these smaller companies were more likely to cite quality and competitive advantage as their primary drivers than those at larger organisations.  

The material technologies sector reported the lowest rate of regional sourcing (59%). This is likely due to significant cost barriers: many raw materials for this industry remain much cheaper to buy and ship globally than to procure within Europe and the Americas. 

Environmental technologies reported the highest regional sourcing, with nearly two-thirds of respondents purchasing materials within their own region. 

All sectors except processing technologies called supply security their primary driver for regional sourcing, whereas cost and sustainability were both larger forces for regional sourcing in the processing technology industry. 

According to survey respondents, regional sourcing will make the least impact of any of the eight sustainable priorities over the next few years. Although the chemical industry will always rely on the globalisation of the supply chain in some capacity, regional sourcing can and does significantly lessen supply chain emissions, and should not be discounted as a critical part of building a more sustainable chemicals industry. 

While regional sourcing is quite common, less than 30% of the respondents consider themselves experts in this area. It may not be the flashiest or most innovative sustainable category, but with ongoing growth and increased education, it can continue to add progress toward overall sustainability goals.