Supplier engagement

Suppliers hold the key to potentially large reductions of CO2 emissions in an organisation’s supply chain. Organisations can put in place different engagement strategies to push suppliers to operate with renewable energy, make production processes more efficient and create innovative product solutions, to name a few.

How does procurement impact climate?

Procurement of goods and services can make a real difference in reducing carbon emissions. Emissions are associated with raw materials, production, processing/manufacturing, packaging, storage, transport as well as the emissions related to purchased services (maintenance, IT, etc.). For organisations in the aid sector, procurement can account for up to 70% of their carbon footprint.

Why is supplier engagement important?

Engaging with suppliers to decarbonise their business, and therefore their products and services, provides a huge opportunity to drive climate action at scale. Favouring suppliers that are on a decarbonisation pathway can be an efficient way to decarbonise value chain emissions instead of trying to define detailed carbon criteria for every single product.

Why is this a key issue for the aid sector?

Organisations in the aid sector buy a variety of products both for use in their headquarters, but mostly for the people they serve. Bought products range from medicines, (therapeutic) food, water treatment materials to clothes, hygiene articles or shelters, to name a few. An aid organisation’s supplier base is often large and spread across the globe, when buying locally is part of the purchasing strategy. This makes a dedicated supplier engagement strategy ever more important to achieving ambitious climate goals.

© Tiger Lily/Pexels.

How can we act?

The scope for action is vast: a recent report by the Carbon Disclosure Project (CDP) (1) showed that more than half of the 11,457 suppliers that responded to the CDP supplier questionnaire did not have any climate targets in the 2021 reporting year, setting targets being the very first step to a concrete climate action plan. With only 38% of the reporting companies engaging with suppliers on climate change, and only 55% on deforestation, the need to scale supply chain action is clear. Organisations that are part of the Science-Based Targets Initiative do not even have a choice: if the indirect emissions from their value chain (i.e. scope 3 emissions, including purchased goods and services, business travel, waste disposal, etc.) are higher than 40%, they have to address at least 67% of them – for example by asking their suppliers to also set a Science-Based Target, thereby creating a snowball effect (2).

How to engage with suppliers?

Engaging with suppliers on the topic of climate change can take many different forms, ranging from informing them about your climate strategy, bringing the topic up in meetings, providing incentives, to enforcing climate action by requesting suppliers to decarbonise (see procurement criteria for this solution).

Even smaller organisations can start with communicating their expectations to suppliers and enter into a dialogue on climate action. By joining forces with others, for example, through organisations such as The Climate Action Accelerator they can also give weight to their demands on low-carbon products and production processes, thereby supporting the necessary market shift.

  • Points of attention

    In order to make the supplier engagement strategy a success and to get internal buy-in, it is vital to involve the procurement function in the development and execution of your supplier engagement strategy – the earlier in the process the better. Buyers know the markets they operate in well and are in regular contact with their suppliers.

    It can also be beneficial to establish a baseline of climate action of the most important suppliers to know if they already measure their carbon emissions, which protocol they use, if they have in place a decarbonisation roadmap and if it is independently verified. This can be done through a simple excel-based questionnaire or through a service provider. The information obtained will help you to identify strengths and weaknesses of your suppliers and inform your strategic approach.

Key facts

231 million tonnes

231 million tonnes of emissions were reduced in 2021 by suppliers that report into the Carbon Disclosure Project (3)

70%

Emissions from procurement account for up to 70% of the footprint of aid organisations (4)

Key solutions

  • #1 Communicate & outreach

    Communicate your net zero strategy and expectations for supply chain emission reduction to suppliers. Consider providing suppliers with access to resources and training material.

  • #2 Incentivise suppliers

    Incentivise suppliers to decarbonise their business/products and reward low-carbon suppliers through public recognition, beneficial payment terms, long-term contracts, or higher product prices. Discover more

  • #3 Encourage innovation

    Encourage suppliers to submit low-carbon product proposals and innovations.

     

  • #4 Joint improvement projects

    Engage in specific projects with suppliers to reduce the carbon impact of their products.

Key steps

Setting and publicly stating your organisation’s goals regarding the reduction of supply chain emissions is the first step.

In close collaboration with procurement, develop an ambitious supplier engagement strategy. The strategy should prioritise which suppliers to engage with directly for highest impact.

Depending on the approach(es) you choose, it should include measurable targets, such as:

  • % or number of strategic suppliers to halve their greenhouse gas emissions
  • Reducing supplier emissions by a specified percentage by a given target year
  • Number of suppliers that use renewable energy / have committed to switching to renewable energy
  • Number of product carbon footprints available for priority items by a given target year
  • Number of suppliers that participate in supplier webinars on climate action

Communicate your targets clearly to suppliers and start engaging with priority suppliers.

Work together with other organisations to send a clear market signal to suppliers. (5)

Cascading action through the value chain is necessary to eventually meet ambitious targets and must be amplified by continued supplier engagement. Carbon Disclosure Project, Engaging the Chain, 2022 (6)

Tools and best practices

  • 1.5°C Supplier Engagement Guide

    An online tool that provides key actions for different steps of the procurement process. It provides templates, supplier letters and other examples of concrete actions of organisations.

    Check here
  • BSR, Reducing Scope 3 Emissions and Achieving Science-Based Targets, 2020

    A comprehensive guide to reducing emissions in the supply chain, with a focus on supplier engagement.

    Read here
  • Science Based Targets Initiative, Value Change in the Value Chain: Best Practices in Scope 3 Greenhouse Gas Management, 2018

    A straightforward supplier engagement framework is presented in chapter 5 that can be employed across sectors.

    Check here
  • Transform to Net Zero, Buyer-Supplier Engagement to Reduce Upstream Scope 3 Emissions, 2021

    In this Transformation Guide, three Transform to Net Zero members, Unilever, Nike, and Microsoft, share their approach of engaging suppliers to bring them along on the decarbonisation journey.

    Read here

Resources for suppliers

  • 1.5°C Business Playbook

    A playbook with key steps for any business that is committing to reducing emissions in line with science.

    Read here
  • Science-Based Targets Initiative, Resources and training

    Resources on setting climate targets, including e-learning modules.

    Read here
  • SME Climate Commitment

    The SME Climate Commitment is one of the three pillars of the SME Climate Hub and provides SMEs - no matter their sector or geography - with the opportunity to make an internationally recognised climate commitment which is aligned with the latest climate science.

    Read here
  • Axfoundation, Climate Tool

    A free online course to help organisations get started on reducing carbon emissions. It focuses on the strategic process and a good overview on measuring emissions using the Greenhouse Gas Protocol.

    Read here
  • SME Climate Hub, Climate Fit Course

    A set of complementary online trainings specifically tailored to help SMEs determine how to take climate action and future proof their businesses. It focuses on the presentation of concrete solutions.

    Read here

Download this solution area

Sources

(1) Carbon Disclosure Project, Engaging the Chain: Driving Speed and Scale. CDP Global Supply Chain Report 2021, February 2022. Read here.

(2) Science Based Targets Initiative, How-To-Guide for Setting Near-term Targets, 2021. Read here.

(3) Carbon Disclosure Project, Engaging the Chain: Driving Speed and Scale. CDP Global Supply Chain Report, 2021, February 2022. Read here.

(4) Based on carbon footprints of Climate Action Accelerator partners.

(5) Adapted from the 1.5° Supplier Engagement Guide. Read here.

(6) Carbon Disclosure Project, Engaging the Chain: Driving Speed and Scale. CDP Global Supply Chain Report 2021, p. 18. Read here.

 

Cover photo © Marcin Jozwiak/Unsplash.

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Supplier incentives

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Request carbon reductions at supplier level