The reality of marginal suppliers

August 16, 2011 at 2:44 pm

Here’s another insight from the carbon footprint session at the recent AIFST (Australian Institute of Food Science and Technology) convention: Look at marginal suppliers when considering real world examples in LCA.

Marginal suppliers are those suppliers able to increase (or decrease) their supply when demand for their product or commodity increases (or decreases).

Most traditional LCAs model an average of all suppliers, or use the supplier geographically closest to the point of consumption. While this seems to make sense, in many cases it doesn’t reflect reality. One such instance came to mind at the AIFST convention.

Anthony Peyton from Greenchip Consulting presented the LCA undertaken for Aldi’s olive oil product. The olives used for oil production come from four countries: Tunisia, Spain, Italy and Turkey. Each country has a different profile for growing olives and different impacts from the harvest. From my memory, the Italian olive production and harvesting process results in the lowest impacts. Now, an obvious strategy for Aldi would be to source the olives for their carbon-certified product from the lowest impact region; that is, Italy. However, production in Italy is likely to be highly constrained by the availability of land, with little capacity to expand. It is possible for Aldi to buy up a greater percentage of Italian olives, depending on existing supply contracts. However, this would displace other buyers into alternative regions for their supply, probably Tunisia which has been expanding olive production over the last decade.

While this is interesting from a modelling point of view, what does it mean for decision-making and conceptualising green products? These are the really important questions.

Should we reward ‘good’ – that is, low-impact – producers, even if their production is so constrained that any financial or moral reward can’t actually lead them to increase production and thus replace ‘bad’ or high-impact producers?

Is a producer responsible enough if they do all they can to lower the impact of their own product, whatever effect this has on other producers’ supply? 

Certainly, competition for low-impact products that are constrained should encourage innovation to find new alternative low-impact supplies. On the other hand, false idols – ‘green’ products that don’t actually lead to lower environmental impacts – may out-compete alternative products that do genuinely reduce impacts. They may also stop consumers from realising that, for some products, there are no low-impact options – except to reduce purchase of the product in the first place.

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