One approach to reducing emissions throughout the supply chain is to require suppliers to measure their carbon emissions and to put in place a carbon reduction plan. Organisations can also, for example, choose to focus on a specific topic, such as requesting suppliers to switch to renewable energy.
A large share of the environmental and carbon footprint of any organisation often lies not within its operations, but within the goods and services it purchases. Tackling carbon emissions at supplier level has the potential to rapidly lead to emission reductions at scale. It is also important to send a clear signal to suppliers: decarbonising their operations and products is a strategic issue. The more organisations send this signal, the stronger the accelerator effect.
#1 Include sustainability clauses in contracts
Include general sustainability criteria in contracts.
#2 Prioritise suppliers
Define key suppliers depending on spend and their relative impact on the carbon footprint. Consider further segmenting suppliers and adapting expectations accordingly (e.g. SMEs vs multinationals, suppliers in industrialised vs in emerging markets or developing economies, etc.).
#3 Define requirements for suppliers
Define requirements (for different segments of) suppliers, such as measuring their carbon footprint, having in place a carbon reduction plan, using renewable energy.
#4 Monitor compliance
Put in place a timeline for compliance, a system to monitor compliance and define actions for non-compliant suppliers.
#5 Include sustainability criteria in evaluation & award of contracts
Include sustainability criteria for the evaluation & award of contracts (see dedicated factsheet).
#6 Support suppliers
Consider providing access to information about footprint measurement and carbon reduction strategies to suppliers, especially small and medium enterprises (SMEs) and suppliers located in emerging markets (see factsheet communication & outreach).
- Achieving emission reductions at scale
- Establishing strong partnerships with suppliers around a common goal
- Decarbonisation of the supply chain is a strategic priority for procurement
- Training and awareness-raising of all involved functions
Prerequisites & specificities
- Aggregated data on the carbon impact for bought goods and services per supplier to allow for prioritisation, based on the carbon footprint
- Excluding suppliers in emerging and developing markets
- Excluding small and medium enterprises (SMEs)
Oxfam GB: Monitoring and reduction of emissions required
Oxfam GB expects its suppliers to monitor and seek to reduce GHG emissions associated with its operations. For operations located in industrialised countries or economies in transition, suppliers are asked to set absolute and timebound GHG reduction targets (3).
NHS: Long-term supplier roadmap
The British National Health Service (NHS) has set out clear and transparent expectations towards their supplier base until 2030. By the end of the decade, the NHS will no longer purchase from suppliers that do not meet or exceed its net zero requirements. This goal was further broken down into milestones suppliers have to meet to continue being accepted by the NHS in the short and medium term (4).
Microsoft: Emission disclosure and focused engagement
Microsoft requires suppliers to disclose their entire scope of greenhouse gas emissions (GHG – scope 1, 2 and 3) and provide GHG emission reduction plans. The procurement team will specifically engage with a subset of suppliers that account for 80% of emissions to focus the efforts on where the organisation can achieve the highest impact (5).
Example contractual clauses
The Chancery Lane Project (TCLP) is a collaborative initiative of international legal professionals. Their website contains practical contractual clauses ready to incorporate into commercial agreements to deliver climate solutions:
- Net Zero Standard for Suppliers: These supply chain clauses can be annexed to any supply agreement, across all sectors and industries. Read more
- Renewable Energy Requirements in Supply Contracts: A clause for a supply agreement requiring the supplier/contractor to procure energy from renewable sources. Read more
Tools and good practices
World Business Council for Sustainable Development (WBCSD), How to decarbonize your supply chain using procurement criteria, 2022
A short guidance document on how to leverage procurement criteria and embed carbon as a decision criterion for supplier selectionRead here
Exponential Roadmap, 1.5°C Supplier Engagement Guide
An online tool that provides practical guidance for 1.5°C-aligned targets and actions throughout global supply chain. The section on procurement contains guidance for setting supplier requirements as well as good practice examples.Read here
To go further
Carbon Disclosure Project (CDP), Engaging the Chain: Driving Speed and Scale. CDP Global Supply Chain Report 2021, 2022
The report provides data on the current state of affairs when it comes to environmental action of suppliers. It is based on the submission of data from over 11,000 companiesRead here
Transform to Net Zero, Buyer-Supplier Engagement to Reduce Upstream Scope 3 Emissions, 2021
In this Guide, three Transform to Net Zero founding members, Unilever, Nike, and Microsoft, share their approach of engaging suppliers to bring them along on the decarbonisation journeyRead here
Eliminate unnecessary or problematic plastic packaging
(1) McKinsey, Buying into a more sustainable value chain, 2021. Read here
(2) Carbon Disclosure Project (CDP), Engaging the chain: driving speed and scale, 2022. Read here
(3) Oxfam, Oxfam GB Ethical & Environmental Policy, 2020. Read here
(4) NHS England, Suppliers. Read here
(5) Transform to Net Zero, Buyer-Supplier Engagement to Reduce Upstream Scope 3 Emissions, 2021. Read here.
Cover photo © Markus Spiske/Unsplash.