Procurement Glossary
Material substitution (ESG): Sustainable material changes in Procurement
November 19, 2025
Material substitution (ESG) refers to the strategic replacement of materials and raw materials with more sustainable alternatives, taking into account environmental, social and governance criteria. This sourcing strategy is becoming increasingly important as companies look to decarbonize their supply chains and achieve sustainability goals. Find out below what material substitution (ESG) involves, what methods are available and how you can successfully manage risks.
Key Facts
- Systematic replacement of conventional materials with sustainable alternatives
- Consideration of environmental, social and governance aspects when selecting materials
- Reduction of CO2 emissions and environmental impact in the supply chain
- Compliance with regulatory requirements such as EUDR and the Supply Chain Due Diligence Act
- Improving supplier evaluation through ESG criteria
Contents
Definition: Material substitution (ESG) - meaning and benefits
Material substitution (ESG) involves the systematic evaluation and replacement of materials based on sustainability criteria.
Key aspects of ESG material substitution
ESG-oriented material substitution takes three central dimensions into account when selecting materials:
- Environmental: Reduction of the product carbon footprint and environmental impact
- Social: Avoiding child labor risks and promoting fair working conditions
- Governance: adherence to compliance requirements and ethical standards
Material substitution vs. conventional procurement
In contrast to traditional procurement, which focuses primarily on costs and quality, ESG material substitution integrates sustainability aspects as equally important decision criteria. This requires a holistic assessment of the life cycle analysis of materials.
Importance in modern Procurement
The strategic importance of material substitution is increasing due to stricter regulation and stakeholder expectations. Companies must analyse their material flows and identify sustainable alternatives in order to secure competitive advantages and minimize risks.
Methods and procedure for material substitution (ESG)
The successful implementation of ESG material substitution requires structured methods and systematic evaluation approaches.
Material analysis and evaluation procedures
Substitution options are evaluated using multidimensional analysis methods. Central methods include material risk assessment, sustainability screenings and technical compatibility tests.
- Implementation of life cycle assessments for material alternatives
- Evaluation of the recyclability of new materials
- Analysis of the traceability of materials
Supplier integration and qualification
The involvement of suppliers is crucial for successful material substitution. Suppliers must have appropriate certifications and meet ESG standards. Qualification takes place through structured evaluation processes and continuous monitoring.
Implementation strategy
The gradual introduction of new materials minimizes risks and enables learning effects. Pilot projects, test phases and continuous optimization are key elements in the successful implementation of sustainable material substitution.
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Key figures for controlling
Measuring the success of ESG material substitution requires specific key figures that reflect both sustainability and business objectives.
Environmental and sustainability indicators
Key environmental indicators measure the ecological impact of material substitution. The focus of the assessment is on reducing CO2 emissions and resource consumption.
- Reduction of Scope 3 emissions through material change
- Share of sustainable materials in total volume
- Improving the recycling rate of materials used
Supplier and compliance metrics
Supplier performance is evaluated using ESG-specific key figures. EcoVadis ratings and other sustainability assessments serve as benchmarks for supplier selection and development.
Economic performance measurement
In addition to sustainability aspects, key economic figures must also be monitored. Cost savings through increased efficiency, risk reduction and improved market positioning are important indicators of success for the strategic evaluation of material substitution.
Risks, dependencies and countermeasures
Material substitution involves various risks that can be minimized through systematic risk management and preventive measures.
Technical and quality risks
Switching to new materials can cause quality problems and technical incompatibilities. Insufficient test phases or a lack of specification adjustments lead to production downtimes and quality defects.
- Carrying out comprehensive material tests prior to launch
- Establishment of quality assurance processes
- Development of relapse strategies for problems
Supply chain risks and availability
Sustainable materials are often only available in limited quantities or are dependent on a small number of suppliers. This increases the risk of supply bottlenecks and price volatility. Supplier due diligence is essential for risk assessment.
Cost risks and profitability
Sustainable materials are often more expensive than conventional alternatives, which can affect profitability. Companies need to carry out total cost of ownership considerations and take long-term cost trends into account. However, integration into science-based targets can create long-term benefits.
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Practical example
A car manufacturer replaces conventional plastics in its interior fittings with bio-based alternatives. The company first carries out a comprehensive life cycle analysis and evaluates potential suppliers according to ESG criteria. In a six-month pilot phase, the new materials are tested in selected vehicle models. The substitution reduces the CO2 footprint by 15% and improves the company's sustainability rating.
- Material analysis and supplier evaluation (3 months)
- Pilot implementation and quality tests (6 months)
- Complete conversion and monitoring (12 months)
Trends & developments in material substitution (ESG)
Material substitution is driven by technological innovations, regulatory developments and changing market requirements.
Regulatory drivers and compliance
New laws such as the Supply Chain Duty of Care Act and the EUDR Regulation are increasing the pressure on companies to use sustainable materials. Compliance requirements are constantly being tightened and require proactive substitution strategies.
Technological innovations and AI integration
Artificial intelligence is revolutionizing material substitution through automated evaluation processes and prediction models. AI-based systems can analyze large amounts of data, identify substitution potential and assess risks. Machine learning enables the continuous optimization of material portfolios based on ESG criteria.
- Automated carbon footprint calculations
- Predictive analytics for material availability
- AI-supported supplier evaluation
Circular economy and bio-based materials
The trend towards a circular economy is promoting the development of recyclable and bio-based materials. Companies are increasingly investing in second-life concepts and sustainable packaging solutions to improve their environmental footprint.
Conclusion
Material substitution (ESG) is becoming a strategic success factor in modern Procurement. The systematic integration of sustainability criteria into material decisions enables companies to meet regulatory requirements and create competitive advantages. Successful implementation requires structured methods, continuous monitoring and close supplier cooperation. The long-term benefits clearly outweigh the initial challenges and additional costs.
FAQ
What is meant by ESG material substitution?
ESG material substitution refers to the systematic replacement of materials, taking into account environmental, social and governance criteria. More sustainable alternatives are identified and implemented in order to reduce environmental impact and improve social standards.
How do you assess the sustainability of materials?
The evaluation is carried out using multidimensional analyses that take into account environmental impacts, social aspects and governance factors. Life cycle assessments, certifications and supplier evaluations are key instruments for the objective evaluation of material sustainability.
What are the costs of material substitution?
The costs include material price differences, development costs, testing costs and implementation costs. In the long term, however, savings can be made through increased efficiency, risk reduction and improved market positioning, which compensate for the initial additional costs.
How do you minimize risks when substituting materials?
Risks are minimized through comprehensive preliminary analyses, structured test phases, supplier diversification and continuous monitoring. The development of fall-back strategies and close cooperation with qualified suppliers are further important risk reduction measures.
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