Emissions calculation and reduction is increasingly becoming a focal point for businesses, and supplier engagement plays a critical role in achieving environmental and social goals. During our recent community event, we hosted a workshop with industry professionals to explored three key areas of supplier engagement: general strategy, onboarding suppliers, as well as data validation. Here are the main takeaways.

Supplier engagement strategy

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Hotspot analysis, where to focus?

One of the first challenges is segmenting suppliers effectively. Should companies base segmentation on value spend or carbon emissions? The consensus was that value spend is a more practical approach since it is easier to track and manage.

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Prioritizing Suppliers: multiple perspectives

Traditionally, supplier engagement prioritizes large suppliers due to their maturity and impact. However, an alternative approach is to prioritize based on key accounts (customers). If key customers demand Product Carbon Footprints (PCFs) for specific products, then engaging the suppliers of those products becomes a priority. This is especially relevant for large distributors.

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Offering PCFs as a business differentiator

Companies should offer PCFs of key products to customers as a competitive advantage. For example, sustainability data on fertilizers could position a company ahead of competitors in the market.

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Should companies pay a premium for sustainable products?

Opinions on whether businesses should pay more for sustainable products varied:

• Some were of the opinion that Sustainable products should be cheaper.
• Others suggested that rather than paying a price premium, sustainability should be incorporated into long-term agreements (3-5 years). Instead of receiving discounts for long-term contracts, companies receive sustainable products

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Building a business case for supplier engagement

A well-structured business case for supplier engagement should highlight a clear win-win. Key elements include:

• Defining the cost implications of supplier engagement upfront.
• Clearly messaging the benefits for suppliers.
• Knowing what data to request from suppliers to avoid frustrating back-and-forth interactions.
• Prioritizing suppliers based on spend categories.
• Starting with large suppliers who are more likely to have data and be open to sharing it.
• Preparing to offer guidance and support to smaller suppliers who may need additional help.

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Roles and responsibilities between Procurement and Sustainability

Supplier engagement should be a shared responsibility:

• Procurement has the most influence as they drive purchasing decisions that impact costs, environmental footprint, and social issues.
• R&D/Product Design plays a crucial role in material selection, affecting sustainability at the product level.
• Sustainability Responsibilities Should Be Distributed:
  • Reporting & compliance under finance.
  • Value chain impact under procurement.
  • Product impact under R&D.
  • Executive Committee Representation to ensure sustainability is a strategic priority.
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A balanced approach to supplier commitments

Supplier commitments should be pragmatic and scalable, considering company size:

• Large suppliers can be expected to commit to ambitious targets.
• Small suppliers should not be burdened with excessive requirements (e.g., SBTi commitments can be costly and impractical for SMEs).

A flexible approach includes:

• Implementing a general Code of Conduct as a starting point.
• Allowing multi-year transition periods instead of short deadlines.
• Applying S (social) ESG criteria universally, but taking a gradual approach to environmental commitments.
• Balancing price, commitment, and quality when evaluating suppliers rather than making engagement a binary requirement.

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Onboarding suppliers

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What data points should be collected?

The fundamental data point to collect is carbon emissions. Beyond that, companies should select one additional ESG metric based on their double materiality analysis. For example:

• Breweries may prioritize water usage.
• Raw material importers may focus on child labor.

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PCF targets and expectations

Companies may request PCFs at different levels of data granularity to balance the complexity of gathering and receiving data, as well as the accuracy:

• Relative footprint (proxy for PCF)
• PCFs per product group
• PCFs per location

The ideal approach? Suppliers should make PCFs available at the most granular level (e.g., per factory, per bottle type). Then, AI can aggregate the data based on customer needs.

Encouraging supplier participation

How do we motivate suppliers to share their sustainability data?

1. Preferred Supplier Program: Only suppliers meeting data requirements can join.
2. Competitive Spirit: Rank suppliers and communicate standings (“You are #4; three suppliers outperform you.”).
3. Financial Incentives: Collaborate with banks to offer better interest rates for sustainability investments.
4. Training & Education: Help suppliers understand why and how to engage.
5. Procurement-Driven Approach: The procurement team must drive the initiative since they control purchasing decisions.
6. Carrot Over Stick: Use positive reinforcement rather than penalties.

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Collaboration with Competitors?

The general sentiment was not to engage competitors directly in supplier engagement. However, collaboration can happen at an industry level through sector organizations. For example, they could agree on certain values for industry averages or standardize the esg questions which are relevant for their industry.

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Primary data validation

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Ensuring audit-readiness

One of the participants emphasized that ClimateCamp must play a role in making PCFs audit-ready by clearly showing adherence to ISO standards. Whereas another suggested creating Tier 1 and Tier 2 PCFs, where Tier 1 represents fully validated data.

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How much validation Is needed?

At this stage, the focus is on increasing amount of suppliers engaged and data granularity rather than strict validation. Auditing processes for sustainability data are still evolving and learning from industry-specific use cases, so these don't necessarily offer the highest guarantee of value yet.

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Who should undergo validation?

Procurement teams should prioritize validation efforts in the same way as we engage with suppliers. You select the most impactful suppliers on your carbon footprint, for example those providing agricultural products in food and beverage industries or certain raw materials in chemicals and manufacturing industry.

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Handling unvalidated data

For now, businesses should accept unvalidated data and focus on educating suppliers and improving the amount of suppliers providing data. Offering support, tools, and free solutions can help suppliers calculate more accurate CCF and PCFs.

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Conclusion

Effective supplier engagement requires a combination of strategic prioritization, strong incentives, and a structured approach to data collection, supplier education and validation. By leveraging supplier relationships, industry collaborations, and innovative approaches to PCFs, companies can accelerate their sustainability goals while maintaining strong supply chain partnerships.

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