Supplier engagement and scope 3 emissions are intrinsically linked. Hence, engaging suppliers to reduce emissions is critical to meeting global climate goals.
Here are a few ways enterprises can improve scope 3 emissions management by engaging vendors to work towards Environmental, social, and governance (ESG) goals.
Set the Appropriate KPIs
Enterprises need to guide and make the vendors aware of the criticality of ESG in their deliverables. Setting key performance indicators (KPIs) that benefits enterprises, suppliers, and ESG goals are a robust way to ensure that the supply chain has a clear understanding of what is vital. These KPIs need to resonate with numerous parts of the company’s diverse supply chain aligning with the types of services and products the suppliers provide. Additionally, KPIs allow businesses to measure the social impact of the supply chain to ensure that ethical standards are met. Similar to the environmental KPIs, there should be consistency and uniformity to track progress accurately across the entire supply chain.
Businesses need to effectively address social issues depending on the suppliers’ current engagement and risk profiles, including establishing a code of ethics or other policies, risk-based audits and questionnaires, and supplier diversity programs.
Also Read: How Enterprises Can Prepare for Supply Chain Disruptions
Ensure Consistency in Supplier Reporting
The supply chain KPIs need to be accurate for each supplier covering the entire value chain network. These KPIs need to be consistent to appropriately track and manage suppliers, setting them up for success. With multiple customers requesting an array of reporting formats, suppliers often feel overwhelmed and shrink under these requirements, while trying to maintain their core business. With so many varying reporting frameworks to handle, suppliers utilize extra time and resources, duplicating efforts and reporting the same information in multiple formats. Therefore, businesses need to maintain consistency in reporting ESG metrics and goals at both the company and supply chain levels. Enterprises need to set questionnaires, audits, and other standardized reporting forms to improve data quality, increase performance, and meet targets.
Provide Suppliers with Adequate Resources Needed to Meet Compliance Standards
Suppliers need more institutional knowledge or resources to meet new and challenging requirements, targets, and policy frameworks. Smaller suppliers may need a more streamlined approach or institutional knowledge to establish a comprehensive data tracking system. Therefore, enterprises need to work together as a team with the vendors and suppliers to ensure that they evolve and improve accordingly, rather than opting for a different supplier. Enterprise as a customer is positioned to engage, educate, and provide suppliers with resources to help them succeed. The outreach can be in numerous forms, such as training and education, subsidies and investments in suppliers’ sustainability programs.
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Collaborate on a Joint Journey to Sustainability
The suppliers’ activities directly impact its associated enterprise environmentally and socially. However, as a customer, businesses need to play a crucial role in changing the way the suppliers operate and provide their products and services, from reducing carbon emissions and redesigning materials and processes to enhancing the quality of life for employees. It can be arduous for suppliers, who run minimal and leaner operations, to implement changes towards more sustainable practices. Customers’ support is a crucial driver for many suppliers’ ability and incentive to pivot and adapt to the goals and targets. A partnership is vital on the path to a more sustainable world, encouraging businesses to collaborate with the suppliers while embarking on their sustainability journey.
Businesses are dependent on suppliers; hence it is crucial to consider the value of supplier engagement from a risk analysis and business continuity perspective. With scope 3 emissions on the focus for many companies, there are high chances of visibility and transparency of GHG emissions throughout the supply chain and beyond. This involves tracking GHG emissions of purchased goods and services and working closely with suppliers in the value chain.
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