How to upskill suppliers for mandatory carbon reporting

The next step in ESG compliance is mandatory carbon reporting in supply chains – but this will require support to improve supplier maturity.

Current approaches to carbon reporting in supply chains focus on encouraging reporting, but companies are increasingly looking to make this compulsory. Growing regulations on businesses, alongside external pressure on suppliers from stakeholders, mean firms must be more transparent on their emissions, according to a report by the World Business Council for Sustainable Development (WBCSD).

The WBCSD found many businesses reported challenges with supplier maturity, with suppliers lacking data, resources, capabilities or tools to sufficiently report on emissions.

Hannah Loake, senior manager, climate action at the WBCSD, said: “As pressure grows on business we predict a strong shift from encouraging to mandating carbon emission reporting. It's therefore important to start encouraging and upskilling your suppliers today, to ensure they are treated justly and can meet mandated reporting requests in the future.”

External constraints also weighed on reporting, including lack of industry standardisation, cost implications, and prioritisation of other strategies. To address these challenges, the WBCSD advised companies take three steps:

1. Create a sense of urgency

Decarbonisation must be prioritised through senior stakeholder engagement. Procurement can do so by highlighting the business case for carbon reporting. Meeting regulatory requirements, reputational benefits with both customers and investors, and demonstrating progress against net zero targets will all help encourage leadership to focus on decarbonisation.

2. Build good supplier relationships

Open discussions are necessary to understand where suppliers are along the decarbonisation journey. Firms must make sure they understand the challenges their suppliers face, and maintain a conversation on their needs. Companies should ensure they have clear messaging on why they are requiring reporting, and any incentives or tools available to share.

3. Implement a standardised framework

Industry frameworks, or carbon data provided centrally through third parties will reduce the reporting burden on suppliers. Companies must be able to compare datasets across the supply chain, so standardised templates are vital. If sharing common suppliers with a peer company, it is feasible to use the same reporting template.

Some other steps that companies can take to help provide their suppliers with the necessary tools include:

  • Help mapping the full picture of the supply chain
  • Uniform standard that accords with global goals
  • Creation of a scorecard based on voluntary disclosure

Atul Patel, director for stakeholder assurance at PwC, who contributed to the report, said: “Mandatory reporting of carbon emissions – scope one and two – is being adopted at a fast pace globally. Scope three emissions reporting is not far behind. The quality of what is reported will need to be the same as that expected of financial performance information and be independently assured.”

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