Engaging Suppliers in Sustainability

By:

Lisa M. Ellram
University Distinguished Professor
Rees Distinguished Professor of Supply Chain Management
Miami University

Wendy L. Tate
William J. Taylor Professor of Business
Cheryl Massingale Faculty Research Fellow
University of Tennessee

 

Engaging Suppliers in Sustainability: A Key to Achieving Net Zero Goals

In today's world, achieving sustainable business practices has become a top priority for organizations. To meet their sustainability goals, companies are now looking beyond their own operations and focusing on their supply chain emissions. Engaging key suppliers in proactive emissions reduction has become an essential strategy for procurement and supply chain organizations. The report Engaging Suppliers in Sustainability explores this concept and provides suggestions for beginning the journey to reducing GHG emissions in the supply chain. 

Why Supplier Engagement?

According to the CDP, scope 3 emissions from supply chains contribute 11.4 times more to companies' supply chains than their scope 1 and 2 emissions combined. In other words, organizations must address their scope 3 emissions to achieve their net-zero goals. Moreover, companies that engage their suppliers in sustainability initiatives can create a ripple effect, encouraging their suppliers to adopt sustainable practices and ultimately leading to a more sustainable supply chain.

How to Engage Suppliers in Sustainability?

Engaging suppliers in sustainability reduction initiatives requires a strategic approach. Here are some steps companies can take to begin the journey:

1. Assess Organizational Readiness: Engaging suppliers in sustainability requires a commitment at all levels and multiple organizational functions. To ensure your best probability of success, you should begin by assessing the level of top management support, your organization’s current ESG focus, and resources available to engage suppliers

2. Assessing ESG Materiality Concerns: Companies must determine which areas of their supply chain have the most significant impact on their sustainability goals. This will help identify areas where supplier engagement is necessary.

3. Approaches to Supplier Engagement: Companies can use different approaches to engage their suppliers, such as a formal system, targeted approach, or midrange approach. The approach chosen depends on the company's sustainability goals and the level of engagement required.

4. Ensure Policies, Standards, and Incentives in the Purchasing Area Reflect the Sustainability Strategy: Companies must align their purchasing policies, standards, and incentives with their sustainability strategy. This will help ensure that suppliers are aware of the company's expectations and are incentivized to adopt sustainable practices.

5. Develop Collaborative Sustainability Scorecards and Metrics: Companies can work with their suppliers to develop sustainability scorecards and metrics to track progress towards sustainability goals. This will help identify areas for improvement and enable suppliers to measure their sustainability performance.

These steps are discussed in more detail, along with best practices and suggested scorecards metrics in the full report, available for CAPS members in the CAPS library.

 

CAPS is a B2B nonprofit research center serving supply management leaders at Fortune 1000 companies. CAPS Research inspires leaders with profound discovery and executable strategies to shape the future of supply management. Research reveals the destination, benchmarking charts the course, and networking creates the path to transformation. All CAPS offerings are sales-free, bias-free, and practitioner-driven. CAPS was established in 1986 at the W. P. Carey School of Business at Arizona State University in partnership with the Institute for Supply Management. Learn more at www.CAPSResearch.org.