Environmental Responsibility in Manufacturing: Conscious Consumers and Derived Demand

In a stereotypically net polluting industry, we’re looking at what it means to be environmentally conscious in manufacturing. This is the first of a series articles relating to this topic.


Industries like manufacturing, fabrication and construction are not ordinarily synonymous with sustainability, social awareness or environmental responsibility; however fundamental changes in consumer sentiments are beginning to unify the concepts. When we consider industries that design and create physical things like manufacturing, construction or fabrication, the first word that comes to mind is consumption. To build a house, we use material, labour, transportation and other consumables. The same is true for almost all other manufactured goods; we just consume differently depending on the product. While consumption is arguably one of the fundamental principles that defies the values of the green movement, there are several different approaches to becoming more sustainable. We’ll talk about some of the different methods and how we are working to reduce consumption and consume smarter.

A quick preface before we jump fully into our topic list: to discuss sustainability in one article would be unreasonable. The subject is far too broad to voice an opinion in a palatable length for a single article, so this represents the first of (hopefully) many on the idea of sustainability. In future articles we’ll discuss things like selecting materials, consuming responsibly and how education about sustainability impacts supply chains. This one, however, will focus on a few concepts that are shaping the ways in which we all conduct business today; those concepts are the conscious consumer and derived demand.

Conscious Consumers

The conscious consumer is a phenomenon most often associated with consumer goods like clothing, electronics, and food products. Generally, it means people care about what goes into the goods they purchase; more than they have in the past. To illustrate an example, let’s consider one of the most popular products on the consumer market: Nike sneakers. Where once the brand carried significant prestige because of the extensive list of professional athletes associated with it, today's consumers also want to ensure that the factory in which the sneakers were produced doesn’t use child labour, provides safe working conditions and is disposing of waste safely.

It’s an incredibly interesting concept because it demonstrates that consumers are essentially forcing accountability on companies and brands by way of the most powerful driver of business decisions; their money. Customers are educating themselves on more than just the technology and performance behind the products, and ultimately purchasing from companies with which their values align. This forces brands to be more transparent in their processes, use sustainable manufacturing processes and constantly reduce their consumption. In short, customers are telling companies it’s not good enough to just make innovative products and, in some cases, will outright refuse to purchase from companies whose businesses don’t contain an element of social awareness.

The example above talks more about consumer goods, but the phenomenon will inevitably transcend all industries. Further, it’s not just the Nike’s of the world that this will impact. It applies to all companies who consume in some way for the creation of a product or to provide a service. So, what does this mean on a larger scale? Well it means that everyone needs to step up their game; not just the companies whose logo ends up on the final products. This is the theory of derived demand.

Here’s a great article for more information about consumer consciousness: 

Derived Demand

Just as Nike manages their supply chain, so too do OEMs and construction companies. Whether they own the factories where their products are created in their entirety, purchase certain elements from suppliers, or hire companies like us to help build complex or specialty parts, they are ultimately managing the building process. That said, if they do use any suppliers or manufacturing services like ours, their business and that of their supplier are intertwined in interesting ways.

We’re going to get a bit technical on the economics side so bear with us. Derived demand is an economics theory that describes how the demand for a product influences the demand for intermediate products or the components that are used to create the final product. Let’s consider an example that relates to our business. If one of our customers produces “Product X” and have asked us to build a component (Component Y) that will be used in the final assembly of the product, the demand for Product X directly influences the demand for Component Y. In other words, if demand for Product X goes up, demand for our Component Y also goes up (and vise versa).

Okay, hopefully we haven’t bored you with economics theory. The graph below shows an example of what we’re talking about. A more general explanation of derived demand can be found here: 

Derived demand graph from: https://courses.byui.edu/econ_150/econ_150_old_site/lesson_10.htm

This concept relates mostly to the demand for products, but environmental responsibility also factors into this equation. We'll use our example from above again. If the end users of Product X stop purchasing the product because they don’t think the supply chain is doing enough from a sustainability standpoint, demand for Product X can fall, and therefore so does demand for Component Y.  So now we see how a conscious consumer on the front end can impact a business with whom they've never interacted.

Since we supply complex fabricated steel parts and products to other companies, we inevitably make up many different supply chains. This is the reason we’ve already made changes to our operations. We’ve worked with our energy provider to install motion sensing lights throughout our entire facility, thereby reducing our energy consumption. We’ve installed ventilation systems in our welding department to create a cleaner work environment, and we’re moving towards reducing the amount of paper we use in the office and in our production facility. All of these changes were made in accordance with our own values but also have benefits for our customers. We won’t wait for customers to require cleaner, more efficient, and more environmentally conscious processes, we are making changes in anticipation of it.  


SO! To get away from economic theories, what does that mean for manufacturers, distributors, wholesalers and retailers? Well it means we need to take an objective look at our supply chains and figure out where we can improve. It means we need to understand the social impacts of our operations, actively improve our processes, and select suppliers that fit with our values and those of our customers. It also means that we should not be passive and wait for the market to tell us we’re doing something wrong, but instead, be proactive and change in anticipation of the inevitable.

Armed with this knowledge, we hope to illustrate the power of supply chains and the importance of making practical changes to our businesses. To go further, let’s not just be conscious consumers in our personal lives but also hold our companies and our partners accountable for being more environmentally and socially responsible. Let’s mark this as the beginning of the “conscious supplier” and influence change before it's demanded by our customers.


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