9 December 2021
Welcome to our brand-new series of articles where we explore how the strive towards sustainability is affecting business operations. In this series, we will predominantly centre our focus on the purchasing function and its ever-evolving role. In order to have a broad overview, we’ll investigate a wide variety of industries, ranging from soft-floor covers to food and the life-science industry.
In this, our very first instalment, we will be talking to Johan Van Hamme, Procurement Leader for the Balta Group, about their mission and the various obstacles they face in establishing a strong culture of sustainability.
The Mission to Go Green
“Our goals within Balta are big,” says Van Hamme.
Van Hamme is a leader in the European soft-floor covering market and regularly supplies prestigious institutions such as the White House, the presidential abode of the U.S. President.
“We want to have a fully green solution by the end of the year for every segment. We intend to do that in a number of ways. Firstly, we want to focus on making the base composition out of recyclable materials. Next, we want to take it a step further, and make our product out of a single material. That’s what we’re doing with our output. We’re also focusing on our internal processes. We’re a big consumer of polypropylene – that’s why we want to reuse it as best we can,” Van Hamme explains.
Moving into the eco-friendly segment does not come without its share of issues, though. It’s hard to gauge consumer reactions when prices rise. According to recent research, 62% of all consumers feel the additional costs for going green need to be covered by the manufacturer. The willingness to pay a higher price for environmentally friendly products was only 9%.
Within The Balta Group, it’s more or less the same. One can’t always charge the increased cost to the end-consumer. The price difference is significant. The premiums for eco-friendly products would practically double since the base materials are more expensive. It will remain a niche until customer mindsets change, or until the company’s downlines willingly accept the increased price.
Changing the production process requires investments. Even though increased demand should reduce prices, due to the nature of these investments, it will take several years to recoup the associated costs – especially in these times.
Currently, the Balta Group focuses on reducing water consumption and plastic pollution while opting for green energy when and wherever it’s economically viable. Although it’s a difficult balancing act between competitiveness and an eco-friendly approach, it never affected their position as a market leader in the EMEA region.
Another strong focus point is the car park – the first ID3s available on the Belgian market were reserved for the Balta Group.
Establishing a Code of Conduct
“We’re also having serious discussions with our suppliers. We’re working on a setup with an intensified focus on green solutions,” Van Hamme adds. The Balta Group has launched a Supplier Code of Conduct in January 2021, and they’re sticking to their guns. “We’re not that worried, though, as Asia has seen a major shift to recycled solutions. Where only 10% of produced materials consisted of recycled materials until two years ago, we’re now moving towards 20-30%, and sometimes even up to 40%. Numbers are increasing faster than anticipated”.
“The focus of the code of conduct is the aspect of sustainability, along with the typical stipulations regarding business ethics. We have dedicated a section of the code to social responsibility, and ask for compliance with environmental guidelines.” The relationship has shifted from a buyer-seller relationship to a collaboration, where more factors than price play into the equation. In this way, Balta’s suppliers are pushed to move to green alternatives whenever possible and economically feasible. These collaborations aren’t very formal for the time being, due to the additional complexity. While quality, competitiveness and agility are certainly factors to consider, Balta currently can’t follow up on the few suppliers that do raise questions, because of the health restrictions.
“We experience little issues with the big companies,” Van Hamme explains. “It’s the SMEs in off-shore locations that we need to audit, which has proven to be quite the challenge due to the pandemic. Once regulations and restrictions ease up a bit, we can start conducting those necessary audits.”
About the Author:
Global Head – Automotive
Olivier has a broad knowledge and understanding of business challenges as he spent the first half of his career in the FMCG industry first in Purchasing then in Marketing before moving to Automotive industry first leading International Marketing teams then managing EMEA businesses covering Sales, Marketing, Logistics, Finance, HR etc…