Supplier Engagement Strategies
This is the third part of our series where we dive into Scope 3 emissions, this article is focussed on how you get suppliers engaged.
Before engaging your supply chain, you need to know where your company sits in the value chain and how big a player you are.
In the previous video, we covered how a materiality assessment can help narrow down where to focus your time, as it can be highly resource-intensive!
You then need to develop a supplier engagement strategy relevant to the context of your organisation. This will drive the type of engagement approach utilised.
What does your company want to know about Scope 3 emissions?
As part of the supplier engagement strategy, you need to consider what your company requires out of the engagement.
You want to get insights on where the supplier is regarding their sustainability journey and what initiatives they have to reduce emissions.
If your relationship is established, discuss with suppliers and tell them what goals your company is aspiring towards.
Collaboration along the value chain is critical to establish a baseline and reducing emissions. It may also unlock opportunities to create further value for each side or new revenue streams.
Effective Supplier Engagement Approaches
There are several approaches to engaging the supply chain, the main two being supportive or enforcing. Either way, you need to be clear with your expectations of your supply chain participants.
We always recommend taking a supportive approach to build the relationship and work on unlocking potential value between companies.
This could include guidance, capacity building, measuring and reporting support or training to help your suppliers on their sustainability journey.
Empower your Suppliers
Ultimately, empowering your suppliers will help fast-track your company’s sustainability journey. For example, Microsoft developed a supplier portal with decarbonisation tools and resources to help their suppliers transition their businesses.
If you are a large company, you may be able to take a more enforcing approach. However, you must understand the potential risks with this approach.
Porsche specified that its 1,300 suppliers must use 100% renewable energy to manufacture their products by a certain date. Otherwise, they will not be eligible for contracts moving forward.
Scope 3 Emission Data Transparency in Western Australia
In Western Australia, we are seeing increasing contractual requests for supply chain participants in the mining, energy and resource sectors to provide Scope 3 emissions-related data to their clients.
You can take more enforcing approaches that can also induce competition among suppliers. However, you need to be prepared for the risk of losing them as a supplier or having the costs passed through if you take this approach.
You may be next in line
If you are a small or medium company supplying larger companies with products or services, you must know where you sit in the value chain. Therefore, if you are not a hotspot in the value chain initially, you may be next in line once the high emissions areas have been resolved.
There will be increasing pressures and contractual requirements to be transparent in carbon emissions and other sustainability metrics to provide suppliers.
Contracts will become important, but this will be covered in the next video.
If you would like to know more