Kevin Lambert offers some starter tips on how to engage with and influence your suppliers as part of a wider sustainability or net zero strategy.
This article follows on from a previous blog, How to be a ‘net zero ready’ supplier. The latter explained how to cement your place as a supplier of choice for climate-conscious customers, but this one explores the flipside – how do you influence your own suppliers to be greener?
First of all, let’s summarise some of the benefits of embedding sustainability into your supply chain and procurement activity:
It reduces risk: It’s likely that most of your organisation’s environmental impact – and therefore environmental risk – comes indirectly through your supply chain. Suppliers who are actively taking measures to improve sustainability will be more resilient to potential vulnerabilities such as changing regulations, reputational risks, rising energy or material prices and so on, which by extension means more resilience for you and everyone else further down the supply chain.
It can improve your product or service: A greener supply of materials or services adds additional value to your own products and services and may even provide knock-on benefits such as reduced costs and operational efficiencies. For example, switching to a supplier that uses eco-efficient packaging or a take-back scheme could reduce the waste you generate and the associated costs of dealing with it.
It fosters stronger relationships with suppliers: Closer engagement and mutual support on sustainability can build trust and may also lead to greater collaboration opportunities on new products or other shared goals.
It demonstrates good practice to your own customers: Your supply chain is also your customer’s, so your efforts to influence suppliers will aid their own sustainability activities and potentially improve your chances of winning new work. The more upstream data you can provide your customers with, the better.
Sustainable procurement and supply chain engagement is a rapidly growing trend amongst larger organisations. Many corporates have their own in-house initiatives (take for example Unilever’s Climate Promise programme or Walmart’s Project Gigaton), and the UK public sector follows a standardised methodology in tenders that sets mandatory requirements and incentivises social value.
So what can smaller businesses do? Thankfully, you don’t need to use expensive supply chain platforms or methodologies to have an immediate impact. Here are four key steps to getting started:
Put the foundations in place
Supply chain sustainability needs to be clearly linked to a wider sustainability or net zero strategy. That means procurement decision-makers and budget holders need to be fully involved in your wider plans, and given training if necessary on sustainable procurement principles and understanding of environmental impacts. You should also create a formal procurement policy document tied to your wider environmental goals.
It may be beneficial to appoint a dedicated sustainable procurement champion to take responsibility for leading projects and reporting on progress – ideally someone in a senior management role who has sufficient influence to co-ordinate activities and ensure a mandate for greener purchasing decisions.
This is something our team can advise on. For example, our work with arts organisation MAST involved developing a procurement framework and matrix that decision makers could use to assess their procurement processes and bring them in line with the organisation’s environmental goals.
Identify your priorities
In any organisation’s supply chain there will be certain suppliers or materials that are responsible for the lion’s share of environmental impacts, so it makes sense to focus your energy on these hotspots.
In terms of your carbon footprint, you can identify priority areas by measuring as much of your Scope 3 greenhouse gas emissions as possible (this is the part of your carbon footprint that covers emissions outside of your direct control, including your suppliers).
The results may surprise you. After measuring its Scope 3 emissions for the first time, one of our manufacturing clients discovered that a key raw material was responsible for over a third of its entire carbon footprint, and more than its direct emissions and energy use combined.
However, it’s important to remember that carbon emissions are not necessarily the only thing you should focus on. You may work in a sector that has other environmental impacts such as water consumption or deforestation, for example. The UN Sustainable Development Goals can be a useful marker for ensuring you are aligned with the entire breadth of the sustainability agenda.
It may also be sensible to focus on the materials/suppliers that represent the lion’s share of your procurement spend, as they are likely to correlate with your environmental impact and tend to be the suppliers you have most influence over.
Create a two-way dialogue
Questionnaires and surveys are a good method of gathering consistent and comparable information about your suppliers’ existing capabilities and future plans. Through our work with MAST, arts centre HOME developed a procurement questionnaire that allowed it to compare suppliers across several key areas and create a bespoke scoring system, helping to inform a tender that ultimately resulted in switching to a greener waste and recycling partner.
It’s important to clearly communicate your sustainability commitments and targets with suppliers so that they are aware of your expectations moving forward. Establishing a two-way dialogue and asking for suggestions can also open up opportunities for collaboration. For example, suppliers may be willing to provide a lower impact material you’re not aware of, reduce the packaging they use or consolidate their deliveries.
There may even be opportunities to work together on joint R&D projects by offering to pilot new solutions your supplier is developing. This sort of collaboration is an ideal opportunity to prepare for the ‘circular economy’ of tomorrow by finding ways to keep resources in a continuous loop between yourself and your suppliers through reuse, takeback schemes or recycling.
Introduce green KPIs and targets
If you use a tender process to select suppliers, apply a specific weighting to sustainability and/or social value criteria when scoring submissions. This is already a mandatory requirement in the public sector, which follows a specific Social Value Model. Greater Manchester has its own Social Value Framework and checklist that businesses are encouraged to use.
If you do not use tenders, you can still take sustainability into account through questionnaires (as above) and introducing Key Performance Indicators (KPIs) for procurement. For instance, you could introduce a target to achieve a certain percentage of spend within the local region or with organisations that have a formal net zero target in place.
Tracking and reducing your Scope 3 carbon footprint will also drive greener procurement decisions. Generally speaking, a robust science-based climate strategy should aim to achieve a minimum 5 per cent reduction in Scope 3 emissions per year.
You can even use carbon footprint data to incentivise lower carbon spending by establishing an internal ‘carbon price’ which assigns an artificial cost to every tonne of carbon you emit. This can be particularly useful if you purchase carbon offsets – every tonne saved through lower carbon procurement generates a real cost saving on your bottom line.
Resources and support
For more information and some best practice examples on sustainable procurement and engaging suppliers, take a look at the 1.5°C Supplier Engagement Guide, which was developed by several leading businesses such as IKEA, BT and Unilever.
You can also benefit from expert guidance through our online Journey to Net Zero programme. Designed exclusively for Greater Manchester SMEs, the programme covers how to manage risk in your supply chain and influence your suppliers, as well as understanding the wider net zero agenda, improving your operations and implementing an effective carbon reduction strategy. Sign up for our next cohort using the link below.
This post was originally published on the GC Business Growth Hub website here.
Posted under General Interest and Make Savings in Your Business on 27 January 2022