Why firms should embrace local supplies for sustainable growth

Naivas supermarket

Shoppers buying foodstuffs at Naivas supermarket in Nairobi on December 31, 2019.

Photo credit: File | Nation Media GRoup

Though it may be challenging for companies to source all their goods and services entirely locally, the shift can unlock long-term growth.

Conflicts such as the Russia and Ukraine war have triggered supply chain shortages and persistent inflation, meaning companies now have to restructure their business operations, including increasing local sourcing and bringing production closer home to achieve sustainable growth.

A shift to local sourcing helps reduce logistics costs, lower costs of raw materials, reduce currency risk, ensure consistency in supply and quality controls, hence supporting business continuity.

It is for this reason that localisation remains a top sustainability strategy for consumer goods companies to help increase incomes across the supply chain, and make businesses thrive, therefore making a wider economic contribution.

Essentially, localisation is 100 percent sustainable sourcing of raw, packaging materials and services in the long run.

This in turn translates to increased investment in skill development for consistent supply, quality, and compliance specifications, building capacity and capabilities among underrepresented suppliers such as women and differently-abled persons as well as green sourcing of packaging materials.

For instance, in line with its sustainability agenda, Unilever Kenya targets to source 70 percent of raw materials locally by 2025; with a spend of close to Sh7 billion.

Local sourcing in Kenya transitioned from 26 percent in 2021 with a spend of about Sh3 billion.

Unfortunately, manufacturing companies are still reeling from geopolitical turbulence occasioned by war instability, which reversed a temporary decline in shipping prices after a sharp rise in 2020.

Concerns are also growing that the latest war in the Middle East could exacerbate challenges in supply chains and add to inflation through lower regional trade, tighter financial conditions, higher energy prices, and lower consumer confidence.

According to the Manufacturing Priority Agenda 2023 by the Kenya Association of Manufacturers, there is an appreciation that the global inflation problem including the US is not a monetary phenomenon but is primarily being driven by supply-side disruptions due to pandemic-related supply shocks and shifts in the pattern of demand.

Partnerships with local sustainable sources would create a positive impact on the local communities through job creation and empowering the local economy.

The continuous monitoring of suppliers will also ensure alignment with the values and best practices of sustainable companies to promote a renewable, sustainable supply chain for most of the company’s raw materials.

Sunday is director of corporate affairs, communications and sustainable business, at Unilever East Africa

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.