Best Practices for Effective Climate-Related Supplier Engagement

This blog was coauthored by Vincent Hoen.

Over the past decade, an increasing number of companies have committed to setting greenhouse gas (GHG) emissions reduction targets. Through the Science Based Targets initiative, over 500 companies have committed to setting a science-based GHG emissions reduction target. When developing a climate-related target, companies should evaluate both operational emissions and the emissions associated with their supply chains. As seen in the figure below, supply chain emissions can make up a large portion of a company’s GHG footprint, especially in the tech, consumer goods, and retail sectors. Thus, decarbonizing the supply chain can have a large impact on reducing the GHG emissions of a company’s footprint and achieving emissions reduction commitments. 

Proportion of Operational and Supply Chain GHG Emissions by Sector

(Source: CDP Supply Change Climate Change)

Supply chains are often complex systems consisting of hundreds or thousands of suppliers, which makes supplier engagement a daunting task. This is especially the case if sustainability is not a priority within suppliers’ organizations. The following objectives identify how companies can effectively engage suppliers to achieve sustainability goals: 

1. Identify and Select Key Suppliers Based on GHG Impact and Maturity 

The first step in developing an effective supplier engagement program is to identify key suppliers that can drive decarbonization within the company’s supply chain. This is a function of two variables: 

• How the supplier’s GHG emissions are associated with your annual spend, or volume purchased with the supplier.
  

• The maturity of the supplier’s sustainability/carbon program. 
  

The latter variable can be assessed by desk surveys (e.g., the CDP Supply Chain database) or targeted interaction with suppliers. It is important to first focus on suppliers that have both a large amount of associated GHG emissions and an immature/nonexistent carbon program. This is where businesses can quickly drive the most change within their supply chains. Companies with a more mature program are collaboration and innovation partners.  

2. Communicate and Collaborate

Once key suppliers for GHG engagement have been identified, communication and collaboration is the next step. At this time, a company should educate its suppliers on its program and best practices on reducing GHG emissions and reporting. The company should engage its key suppliers identified in step 1 to recognize common opportunities and challenges to improve carbon programs. One proven method of collaboration and support is developing a web-based platform for suppliers along with webinars and working sessions. The platform will host relevant education/information materials and the means by which suppliers, the company, and third-parties can engage to facilitate access to information and communication. The working sessions provide depth where needed. Throughout this engagement process, it is imperative that the company leverage its existing supplier engagement mechanisms to efficiently add the sustainability-related component to its supply chain.

3. Monitor and Incentivize

Monitoring the suppliers’ progress is a critical success factor for a company. For example, this can be done by tracking CDP Supply Chain responses or direct information from company suppliers and updating each suppliers’ carbon maturity score. Each year the company can enroll more lagging suppliers into its targeted engagement program to drive increasingly more GHG emissions reductions in the supply chain. The web-based platform identified in step 2 will allow each supplier to annually monitor its own progress. To incentivize suppliers, the company can award top performing suppliers through a recognition program, monetary incentives, and peer benchmarking.

Although engaging a supply chain may seem daunting, following the pragmatic approach and best practices outlined above can help drive GHG emissions reductions. 

Supplier Engagement Program Mechanics

(Source: Guidehouse, Inc.)

For more information about our supplier engagement program implementation work please reach out to Kevin Foley and Vincent Hoen.