Supplier engagement: Educate and incentivize suppliers to decarbonize your supply chain

A robust supplier engagement program involves education, collaboration, and incentivization so you can effectively reduce emissions throughout your supply chain

Supplier emissions account for 11.4 times more of an organization’s total emissions than their direct operational emissions—so helping your suppliers decarbonize is one of the most impactful actions you can take on the path to net zero. It can also be one of the most daunting; after all, these emissions originate outside your company and are therefore outside of your control. However, it’s not impossible to decarbonize your supply chain, despite the challenges.

Earlier this year, Walmart announced that it had reached its goal of cutting 1 billion metric tons of greenhouse gas (GHG) emissions from its supply chain—six years early. Walmart is the world’s largest retailer, with over  100,000 suppliers; their size grants them extra influence, but it also creates unbelievable complexity. So their massive, ahead-of-schedule success shows that real impact is possible.

What’s their secret? Well, it’s no secret at all. Walmart relied on classic supplier engagement best practices—education, incentivization, support, and collaboration—to meet their ambitious supply chain goal. Whether your company has Walmart’s size, resources, and influence at its disposal or not, it can lean on similar tactics to get the job done. Let’s explore them step by step.

Want our Complete Guide to Supplier Engagement? Click here to download the eBook.

Educating suppliers on GHG emissions, accounting, and reduction

Education is the cornerstone of your supplier engagement program. Throughout your supply chain, companies are at different stages of climate program maturity, including at least a few who may have never done an emissions inventory. It’s key to bring those suppliers up to speed, so they can participate in your other supplier engagement activities.

What should supplier education cover?

Considering the spectrum of sustainability knowledge among your suppliers, it’s safest to start at the beginning and cover a wide breadth of information. For low-maturity climate programs, host a “Greenhouse Gas Accounting 101” training session. You’ll want to cover:

  • Why GHG accounting and emissions reduction are important, both on a global level and as a supplier to your company

  • Scope 1 and 2 emissions, plus relevant examples

  • Where to find data on emissions sources

  • How to calculate emissions and create an emissions inventory

For slightly more mature suppliers, and as a follow-up session to GHG Accounting 101, a subsequent workshop, or series of workshops, can cover:

  • Scope 3 emissions, plus relevant examples, and where to find data

  • Setting a Science-Based Target

  • Decarbonization: where to start and how to build a strategy

What other resources should I provide to suppliers?

Provide ongoing support in the form of a “help desk,” which could be as simple as an email address that puts suppliers in touch with someone on your team who can answer questions. You might also consider occasional office hours, where a supplier contact can ask their questions “in person” on a virtual call and get real-time answers.

Make your educational sessions available as on-demand recordings, so suppliers who join between sessions, or after your series has ended, can catch up. Make sure slide decks and transcripts are available to download.

Consider asking your suppliers to self-assess their climate maturity using Optera’s Climate Program Maturity Curve, so they can gauge their own climate program’s maturity level and access helpful resources tailored to them.

Ongoing supplier collaboration

Beyond education, consider how you can collaborate with your suppliers—and how your suppliers can collaborate with each other—to reduce emissions. For example, Walmart created the Gigaton PPA Program to make renewable energy purchases accessible to their suppliers who were too small to access PPAs on their own. Walmart also partnered with HSBC to create a supply chain finance (SCF) program, offering their sustainability-minded suppliers a more competitive rate than traditional SCF programs. While such partnerships might not be an option for every company, they illustrate creative ways to leverage economies of scale among your suppliers to help them achieve things they wouldn’t be able to on their own.

Companies including Coca-Cola, General Mills, Nestle, and many others support collaboration among their suppliers by sponsoring the Supplier Leadership on Climate Transition (Supplier LOCT) collaborative, a collective where their suppliers can access peer networking, mentorship, education, and certification.

Consider how else you can collaborate with your suppliers, or empower them to collaborate with each other. That might include collective emissions reduction actions, optimizing transportation or energy use, or other joint projects around sustainability. Ideally, you will provide your suppliers with visibility into their performance with a dashboard, highlighting areas where they can improve over time. Hewlett Packard Enterprise uses Optera’s Supply Chain Manager to share emissions data, reduction targets, and progress with their suppliers, providing a strong foundation based on data for every supplier relationship.

Depending on how extensive your supply chain is, you may not be able to engage directly with every supplier. That means part of your collaboration strategy will need to include supplier prioritization—identifying those suppliers for whom decarbonization will have the biggest impact on your scope 3 emissions. Check out this blog for more on how to identify and rank high-priority suppliers.

Whether you choose to set up formal collaboration programs or not, maintaining open communication and positive relationships with your suppliers is key to successful supplier engagement. Those relationships foster a shared commitment to the goal of reducing emissions, ultimately helping you meet your supply chain targets.

Incentivizing suppliers to set targets and decarbonize

To maximize participation in your supplier engagement, reporting, and emissions reduction efforts, make it worth their while. The spectrum of incentivization is wide—what your company chooses is ultimately up to you, but should include a blend of “carrots” (positive incentives) and “sticks” (negative incentives). Here are some options:

  • Recognition: Recognition could include a badge in your supplier portal all the way up to a press release and publicity campaign, but being thanked for their effort will go a long way toward making your suppliers feel that their efforts are worthwhile.

  • Scorecards and benchmarking: Give your suppliers a sense of where they stand—and stoke some healthy competition—by giving them a score and showing them how they compare to other suppliers and their peers. You can set this up using your supplier data management system; check out our guide on how to collect and manage emissions data to make scorecards and benchmarking possible.

  • Contract requirements: Consider adding climate requirements to your supplier agreements or supplier code of conduct, requiring suppliers to participate in order to continue earning your business.

  • Better terms: Reward participation in your climate efforts with preferential terms, like faster payouts, longer contracts, and more.

  • Increased pressure from other customers: Partner with your industry peers and create similar expectations to signal that taking action on climate is increasingly a requirement of doing business, regardless of which customers a supplier works with.

Supplier engagement: Unlocking supply chain decarbonization

For a sustainable supply chain, engaging your suppliers effectively is essential. Education, collaboration, and incentivization make  it easy for your suppliers to participate in your climate impact efforts and increasingly difficult to refuse. Recognize that some suppliers may be embarking on an emissions inventory for the first time, and you are making a big ask of them. Show them the way, work together, and reward their hard work, because they make major contributions to you meeting your own climate targets.

To get started building a comprehensive foundation of scope 3 data, complete with supplier dashboards, guided supplier reporting workflows, and more, check out Optera’s Supply Chain Manager.

Need to get your internal stakeholders on board? Read our guide, Building a business case for supply chain emissions software.

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