Firms lack carbon reduction plans due to struggles with supplier collaboration

Just 21% of UK businesses have plans in place for reducing carbon emissions because sustainability plans “fail to come to fruition” when collaborating with suppliers, according to research.

Nine in 10 (91%) UK businesses said sustainability-led innovation had become more important to customers in the last year, but the research from Ivalua found without “macro-collaboration” carbon will not be reduced.

Just 22% of survey respondents were planning to adopt circular economy principles, 20% planned to reduce e-waste (discarded electrical/electronic devices), and less than a fifth (18%) were planning to adopt renewable energy.

Ian Thompson, VP for Northern Europe at Ivalua, told Supply Management: “Suppliers are all companies in an ecosystem relating to one another, and it's that ecosystem that creates carbon rather than any one node. If there isn’t some sense of macro-collaboration within that ecosystem then you’re not going to produce less carbon. There needs to be a level of incentive [to reduce emissions] between those interactions in the network.”

He advised: “Be willing to start simply. Being perfect is the enemy of being good – you might want to add a deep level of abstraction over every single part of product creation, not just for carbon but for social aspects. ESG is all inextricably linked. But how can you even get all that data? How can you understand it? Start simply, and then over time it can become more sophisticated.”

Thompson explained the importance of data as an enabler for businesses to start their sustainability journey. In order to set KPIs, companies would need not only their supplier’s data, but data from subcontractors multiple tiers below.

“What’s really interesting is this delta between 91% of businesses saying they plan to implement sustainability initiatives, but when it comes to practical measures like setting KPIs it's just 20%. That’s a massive gap. Why is that? Trying to make change in companies is difficult. And supply chain emissions are normally your biggest set of emissions. So should the chief procurement officer own the topic? Or someone in production? Who is the owner?

“Whoever holds the gold makes the rules, and I think procurement holds the gold. From a supplier’s perspective, if your customer is driving this agenda, it will make a difference. That’s why procurement people almost have a responsibility, as a community, to get this right. We have a lot of power when we make our buying decisions.

“Sustainability is an area where procurement can proactively take ownership, because they are the custodian of the largest amount of carbon in the business. Make it a prerequisite for doing business with your suppliers for them to have these plans in place, and for them to be measurable. You need to be outwardly pitching that brand to suppliers. Additionally, put some level of demand on the executive level about what they’re doing for sustainability.”

The survey also found businesses face challenges when working with suppliers to increase sustainability-led innovation, including: 

  • Lack of understanding around supplier innovation capabilities (58%)
  • Lack of visibility into tier two and three suppliers (51%)
  • Poor data quality (50%) 
  • Difficulty collaborating (37%) 

Overcoming these barriers can have major benefits, with 97% of UK businesses saying sustainability-led innovation will help to improve customer relationships, while 96% said it would help to increase sales.

“The findings of this data are not necessarily negative,” Thompson concluded. “It's difficult for suppliers, for companies in general, to solve this problem, but there are first steps and solutions that are coming down the track. Who’s got more power to influence how things are produced than the people who choose where to spend the budgets? We should really take seriously the opportunity procurement has to make a difference in this space.”

The survey involved 303 UK procurement decision-makers at companies with 1,000 or more employees and revenues greater than £50m.

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