As scope 3 emissions become an increasingly important part of the emissions reduction conversations for corporates around the world, engaging your suppliers in your climate targets is more important than ever. For many corporates with ambitious climate targets, suppliers are key to taking emissions reductions to the next level. But this puts the company at the mercy of their suppliers, and those that succeed will be ones that learn to engage suppliers in their green transition.
Know your footprint
Engaging suppliers to reduce emissions is a daunting task, but brands can get started by focusing on the basics. “The most important thing is to know your footprint,” Rasmus explains. “Know your segmentation, who your suppliers are, what their impact is, how much and what they are emitting, and what kind of opportunities they have available.”
Supply chain mapping is a crucial first activity to help with prioritizing which suppliers to engage first.
Where can you get traction quickly?
When assessing your supply chain, consider who within your supply chain do you have a strong relationship with and can get traction quickly? It’s often easier to engage with larger suppliers, who can then help you address the next level of vendors in your supply chain.
“Prioritization is critical,” says Liam. “Aim for the low-hanging fruit and prove out the model first. We’ve seen companies try to take a standardized approach to all suppliers, but you’ve got to start by leveraging the strongest relationships. Those are the partnerships that you can most likely innovate with.” Because each of your suppliers is unique, we do not recommend developing a one-size-fits-all strategy for engaging suppliers in emissions reduction efforts.
Focus on strategic suppliers
Focus on the suppliers you have a long-term partnership with (rather than a more transactional relationship). When asking for more than just a product-level transaction — for example, asking them to engage in renewable energies — your more strategic suppliers will be most likely to readily engage with your demands. And as you engage more of your supplier base in your emissions reduction efforts, your strategic supplier base will begin to expand.
Show that you are serious
“Generally speaking, suppliers are used to being responsive to their customers,” says Liam. “The first question a supplier will ask is: is it serious for my customer or not? Historically we’ve seen corporates throw all kinds of environmental programs at their suppliers. The theme changes year on year, depending on what’s in fashion, and suppliers have learned how to go along with it without making real changes to their operations. They’re not going to transform the way they do their manufacturing unless their customers are really serious.”
Measure what matters
One way to demonstrate that your company is serious about cutting supply chain emissions is by setting quantitative targets to track supplier environmental performance. Requiring suppliers to report on quantitative metrics makes it highly visible when they fall short of them. And when multiple leaders in an industry require quantitative environmental reporting from their suppliers, a kind of ‘peer pressure’ effect comes into play.
Allocate spending accordingly
Environmental performance is a relatively recent addition to procurement criteria. Start a dialogue with sourcing teams to find out which methodologies they use to prioritizes suppliers, and work together to direct more budget towards greener suppliers.
Seek out proactive suppliers
“Our corporate clients have been waiting for years for their suppliers to change their perception,” says Rasmus. “The traditional description is that the suppliers are sitting and waiting for directions from their client and responding as they come along. But now leading suppliers are seeing the strategic opportunity to position themselves and take market share by becoming a preferred green supplier.”
Although this kind of strategic approach is new, we expect to see supplier sustainability profiles become a key competitive advantage in the green transition.
Collaborate, don’t compete
“If you’re Nike or Apple or Google, you have substantial leverage with suppliers,” says Rasmus. “But most brands won’t have this kind of bargaining power with their suppliers, which is why we’re delighted to see brands within sectors working together.”
Such collaboration also benefits suppliers, who won’t be required to report in different ways or set multiple targets. If brands can standardize their approaches and agree to industry-wide scope 3 targets, they can show suppliers that decarbonization is possible, and help them move in the right direction without overcomplicating the process.
Engaging your suppliers in your climate targets is more important than ever. In this podcast, Rasmus Nedergaard and Liam Salter, share their advice on engaging your supply chain in your emissions reduction targets.