The debate on global versus local sourcing always creates food for thought. One problem to start with is trying to determine what is ‘local’. The definition – and whether local sourcing is better than global sourcing – will depend on which stakeholder is answering the question.

Producers strive for global marketing so they can reach out to more customers. At the same time, producers may want to protect their local markets to avoid having to compete against low-price imported products. Market protection agreements at the World Trade Organization tend to favor developed economies and always generate controversy. But is local sourcing always a good idea?

Drawing the lines

To start with, where do we draw the lines when calling something ‘local’? Are we considering the distance from supplier to consumer, or country borders? Let’s suppose the former, and we limit the distance to 500 km. That would mean a product produced in the Netherlands is local not only on the Dutch market but also in parts of several other European countries. However, a different product, produced on the West coast of the United States, would not be local for a consumer on the East coast…

Carbon miles

Carbon miles is a term often used to remind us about the distance the product travels from producer to consumer, for example from farm to plate.

Local sourcing can be beneficial to the environment, as it uses less transportation and consequently causes less carbon emission. Total carbon emission, however, depends not just on how far, but also on how a product was transported. For example, trains may be more efficient at moving freight than trucks.  It depends on a couple of factors, such as the type of fuel.

Carbon miles is a good measure of how much the product has traveled, but it does not account for the total environmental impact of a product. The environmental impact also depends on how the product was produced. Research has shown that it is better, from a greenhouse-gas perspective, for Sweden to buy Spanish tomatoes than locally-grown Swedish tomatoes: the Spanish tomatoes were grown in open fields, while the local ones were grown in greenhouses heated with fossil fuels. In addition, different agricultural methods use different inputs, including pesticides and fertilizers. Fertilizers, especially, result in emissions of nitrous oxide, a greenhouse gas 298 times stronger than CO₂.

Social-economic impacts: the elephant in the room

Local sourcing is good for local suppliers. That is particularly important in developing countries, where smaller producers might not be able to compete with low-cost import products. If purchasing managers in countries like Vietnam, India or Brazil decide to purchase from local suppliers instead of importing products, that doesn’t seem like such a bad idea. However, a local sourcing policy applied in a developed country will also be good for local producers, while putting jobs in Vietnam, India or Brazil at risk. From this point of view, local sourcing does not necessarily contribute to global income distribution.

In addition, working conditions are often missed in this debate. It makes sense to choose a local supplier if he treats his employees well. At the same time, this choice may contribute to a factory in another country closing, and jobs being lost.

Finally, local supplies can be fairly expensive. During the last decades, we have seen large companies moving purchase orders from one low-cost country to the next one, whenever that would increase their margins or ensure the continuity of their businesses.  This trend contradicts the idea of purchasing a product that is locally produced but costs more. Going for the product that is best for a sustainable global economy would require changing the purchasing policy and mindset at many companies.

Sourcing locally is better: myth or not?

Status: half-mythical.

Favoring local sourcing can be a great way to drive positive change – depending on the context, what is considered and who we look at. It is tempting to just look at the aspects of sustainability that local sourcing does benefit: efficiently reducing the carbon miles from transport and optimally using local information to choose between suppliers.

My advice, however, would be to assess the entire life cycle of the product and different aspects of sustainability, including environmental, social, and economic.

Only then is possible to analyze the two alternatives – local or global sourcing – to see the trade-offs and to make informed decisions. In addition, regardless of which alternative you choose, I would suggest that companies initiate a continuous solidarity sourcing program, as L’Oréal did. Such a program dedicates part of purchases to suppliers in less privileged conditions, including marginalized rural communities.

Uncover more sustainability myths

This is the seventh part of our ‘Sustainability Mythbusters’ series. See other episodes:

• Sustainability Mythbusters I: Packaging
• Sustainability Mythbusters II: Recycling
• Sustainability Mythbusters III: Bio-based vs. fuel-based
• Sustainability Mythbusters IV: Transportation
• Sustainability Mythbusters V: Product energy use reduction
• Sustainability Mythbusters VI: Manufacturing products with zero emissions
• Sustainability Mythbusters VII: Local sourcing vs global sourcing
• Sustainability Mythbusters VIII: Zero waste
• Sustainability Mythbusters IX: Organic food vs conventional food
• Sustainability Mythbusters X:  Plant-based diet
• Sustainability Mythbusters XI: Biofuels and food shortages
• Sustainability Mythbusters XII: Electric cars and green mobility
• Sustainability Mythbusters XIII: 3D printing

It’s easy to use common sense and make assumptions in sustainability, but does that get you the results you want? If you want to learn how you can use sustainability metrics to uncover more myths for your company, contact us.