All successful corporate climate efforts rely on effective supplier engagement programs. Yet many companies flounder in their efforts to create such programs for their suppliers. The keys to success in implementing a successful top-tier program lie in understanding supplier challenges and in careful design and execution.

Suppliers often lack the internal knowledge and resources to start a climate program and find it difficult to justify the investment. By making the business case for climate programs, building their own internal capabilities, listening to suppliers and investing in technology, purchasers can help suppliers overcome these barriers, leading to effective supplier collaboration.

Building a World-Class Supplier Collaboration Program

The recipe for effective supplier collaboration has three main ingredients: Engage, Educate and Execute.

How to engage suppliers

• Segment suppliers according to their emissions impact and their climate maturity, then tailor your outreach accordingly. The Transform to Net Zero Supplier Transition Framework provides a methodology for classifying supplier readiness.

• Provide a clear set of expectations and regular feedback on progress of the climate programs so that suppliers see what they need to do and how they play a part in the solution. Retail company Target, for example, set a goal for 80 percent of its suppliers by spend to set science-based Scope 1 and 2 emissions reduction targets by 2023. The company’s most recent sustainability report indicated 64 percent of suppliers (by spend and equivalent to 483 individual suppliers) have done so.

• Include the topics associated with the climate programs in your meeting agendas with suppliers. Keep track of the progress and communicate the value of contributions made by suppliers.

• Make it easy. Suppliers juggle many customer requests, so use some of the existing industry standards. For example, many companies are asking their suppliers to disclose their data in CDP Worldwide’s portal.

Educate internally and externally

• For suppliers, provide educational content via published guides from SBTi, webinars and potentially one-on-one assistance.  When doing so, meet suppliers where they are on the journey and help them understand the next steps, from getting started to advancing efforts. See section 5.1 of SBTi’s supplier engagement guidance for different methods of building supplier capacity. The Sustainable Purchasing Leadership Council (SPLC) Climate Collaborative also provides resources for procurement teams on sustainable purchasing.

• Train internal teams and empower them to drive the climate programs forward and consider one-on-one coaching as well.

Execute climate programs

• Integrate the climate program across the organization, especially including sourcing/procurement teams, by providing insights on supplier progress. Software solutions, such as supplier dashboards, including Pure Strategies Pure Supply™, are technology tools that help keep everyone informed.

• Recognize suppliers for their engagement and accomplishments. Walmart recognizes high-performing suppliers with a “Gigaton Guru” status, and the company recently raised the bar on status requirements.

• Use the program to identify ways to collaborate so that this is not a one-way exchange of information. Where possible, create forums with industry peer groups in which suppliers can collaborate and share solutions.

• Financing incentives are effective. Walmart created an industry-first finance program with HSBC and CDP for suppliers who reduce greenhouse gas emissions. Qualifying suppliers can get early payment on their invoices, with pricing based on the supplier’s CDP scores, targets and impact disclosure.

• Several large companies have established programs to scale renewable energy in their supply chains. For example, Schneider Electric runs participatory power purchase agreement partnership programs with Walmart, the pharmaceutical sector and the electronics supply chain.

• Incentivize suppliers by connecting progress in climate programs to more business. Radio Flyer makes this connection. According to Sam Sturgeon, product development & sustainability manager, “incentivizing suppliers with more business is a key sustainability strategy, as most of our carbon emissions stem from product materials and manufacturing. We award new business to suppliers who engage in sustainability projects, like installing solar arrays at their facilities or implementing sustainable materials like recycled content in our products.”

Technology solutions for supplier collaboration

Technology can improve your supplier collaboration processes and help engage people both internally and externally, to educate and execute the program. Solutions can be classified as good, better or best—based on the types of features. The “best” solution may not always be appropriate or needed for a company, so consider what level will fit your company best.

Good

A good solution is where many organizations begin. It relies on email communication, a spreadsheet-based survey or similar solution, and basic instructions. It typically has limited ability to summarize year-to-year supplier activity, limited dashboards for progress tracking and does not link to internal management systems or external reporting frameworks.

• Pros: low cost, gets the process going
• Cons: difficult to scale, time intensive, involves manual tasks, limiting communication across the company and with suppliers

Better

A better solution provides more automation, often through a software as a service (SaaS) model, and includes a survey tool that provides dashboard-type performance information to the supplier and the purchaser and has automatic communication and educational materials.

• Pros: scalable, fewer resources, automated feedback to the supplier, company dashboard, benchmarking performance against peers
• Cons: lacks educational focus and does not allow for continuous updating. Often limited to one sustainability issue (such as climate). Lacks integration into corporate management and disclosure systems

Best

The best solutions come with connectivity to internal data systems, including supplier communication and external reporting systems. These often manage multiple issues and can include more “white glove” advisory support, education and engagement to drive the process.

• Pros: better integration into company business processes and additional hands-on supplier support
• Cons: typically more costly and requires more set-up time, IT alignment and resources to connect with internal business tools

Supplier collaboration at scale

To meet climate targets and reduce Scope 3 emissions, companies need effective supplier collaboration. This involves setting clear expectations, collaborating with suppliers on decarbonization goals, providing training and resources, building internal capacity, implementing data tracking systems and offering incentives. By prioritizing high-impact suppliers and leveraging digital tools, companies can enhance supplier relationships and drive meaningful emission reductions across their value chains.

Email puresupply@purestrategies.com to learn more about Pure Supply^TM, a supplier collaboration software platform or visit the Pure Strategies website: https://purestrategies.com/services/puresupply-product

Image caption: 
Supplier engagement is more than asking for data. To be successful, suppliers need to be empowered with clear information, guidance, and support. Pure Supply provides this communication and capacity building through 5 phases of supplier progress, beginning with exploring and through to achieving the program aims.

This article originally appeared in GreenBiz on June 27, 2024.