Collaborating with Suppliers to Reduce Emissions

Businesses are crucial in mitigating climate change.

According to CDP, environmental awareness has increased significantly since 2003, and corporate climate disclosures have doubled since 2020. The nearly 23,000 companies that disclose to CDP understand the importance of disclosing their emissions, as it facilitates transparent reporting of scope 3 emissions and enables companies to implement effective strategies by reducing their environmental impact.

One powerful way a business can reduce its scope 3 emissions, achieve broader sustainability goals, and minimize overall carbon emissions is through supplier collaboration. A company that engages with its suppliers develops more sustainable procurement practices and can unite under the common goal of emission reduction targets.

Supplier Engagement Begins with Trust

To effectively strategize with suppliers, establishing a foundation of trust is essential.

Suppliers might be cautious about sharing GHG inventory data or discussing emissions reductions with you. One way around this is to provide ample context about why you want to have this conversation and what the benefits are for you and them. The more information suppliers have and can share with customers about emissions, the better positioned they will be to win customers' business.

• According to the US EPA, one way to build trust with suppliers is by sharing details on “how measuring GHG emissions saved money or enhanced competitiveness, as well as lessons learned, tools, and other resources that resulted in realized and potential benefits.”
• Additionally, organizations can organize joint workshops and training for suppliers on the significance and methodology of reducing emissions. For example, the US EPA lists the following programs:

1. ENERGY STAR Program: Helping buildings and plants manage energy efficiency
2. SmartWay: Measuring, benchmarking, and improving freight transportation efficiency within supply chains

Case Study: Agora

Stephanie plans to collect value chain data through CDP’s Supply Chain Program when engaging with suppliers within Agora's value chain. Based on conversations with Agora’s executive leadership team, there’s been a history of mistrust and difficulty due to contract issues and unrealistic demands. She decides to tread lightly and approach the delicate situation with the help of a third-party program, Persefoni. As part of her subscription, Stephanie leverages Scope 3 Data Exchange (S3DX) to securely request and receive scope 1, 2, and 3 emissions directly from suppliers.

Selecting Low-Carbon Suppliers to Build Sustainable Procurement Practices

After engaging suppliers and collecting data, organizations can determine which suppliers to do business with based on emission reduction practices. This incentivizes and favors suppliers with low-carbon business practices and demonstrated dedication toward emissions reduction.

This may sound confusing and subjective to do in theory. However, there are some practical guidelines that even the most nascent companies can use to help in the decision-making process. Determining which suppliers emit the most GHG emissions is relatively straightforward. However, what happens if the data lacks detail? This is where it is beneficial for organizations to scrutinize spending habits.

According to the SBTi, it is most effective to target either suppliers that are high emitters of GHG emissions OR suppliers that take up a large portion of the organization’s finances.

Suppliers that constitute a large portion of an organization’s finances are important because it boils down to materiality. When a company begins calculating its emissions, sorting its vendors by cost ensures the organization captures a material amount of its operations.

There are a few options to explore concerning suppliers. You can:

• Discuss lowering emissions with suppliers by sourcing different or lower-emission products.
• Talk about setting targets and making decarbonization plans to ensure continued reductions in the future.

While these questions are important to ask suppliers, you can also leverage these questions to inform your own organization’s business decisions. For example, by deciding to purchase from one supplier over another, you can make demands on your suppliers with strings tied to emissions performance and underline more or less favorable terms to encourage supplier behavior.

Case Study: Agora

Agora’s sustainability manager, Stephanie, is tasked with determining the organization’s overall carbon footprint. However, since she is the first in her role, there aren’t detailed historical records of each supplier’s emissions data. Stephanie understands that although she lacks data on supplier GHG emissions, she must find a workaround.

She requests a copy of the company’s financial records and begins to sort Agora’s suppliers by cost. She reasons that Agora’s most expensive suppliers are also likely to be the same suppliers producing the most emissions.

Establishing Emission Reduction Targets

Companies looking to reduce their carbon footprint can set targets for scope 1, 2, and 3 emissions. In scope 3 emissions, there are specific requirements for meeting SBT standards that are meaningful and aligned with the latest climate science.

The Science Based Targets Initiative (SBTi) defines and promotes the best practices for setting SBTs and offers a range of resources and guidance to support organizations toward a decarbonization journey. SBTs are not only considered the benchmark for setting ambitious and effective targets, but they are also critical in remaining aligned with the Paris Agreement.

Case Study: Agora

Agora understands the significance of scope 3 emissions and sets an SBT focused on partnering with suppliers to reduce 20% of its scope 3 emissions by 2030. The organization reaches out to its shortlist of low-carbon suppliers and requests each supplier set its science-based targets by the end of the quarter. Agora is upholding accountability by setting an SBT and leading by example by encouraging each supplier to develop its target.