Suppliers play a critical role in tackling climate change and realising wider business benefits of sustainable practices, says Alex Saric.
Last November, COP26 once again piled pressure on organisations to take action on climate change. This resulted in a wave of big brands pledging net zero commitments and stamping out emissions from their operations, but most organisations have a long way to go. Ivalua’s recent Supplier sustainability report surveyed suppliers across the UK, France, Germany and Switzerland, finding more needs to be done across supply chains to ensure firms can hit their green targets.
To make tangible progress and meet their net zero goals, organisations must turn their attention to supply chains, the source of Scope 3 emissions. Procurement must be the driving force that delivers green initiatives, ensuring poor sustainability practices do not slip through the net unnoticed.
Sustainability sits with supply
The research found that, despite green pledges at COP26, few suppliers are being regularly assessed on sustainability practices – with less than a quarter being routinely measured on their carbon emissions. What’s more, just 12% of suppliers say they are assessed on their sustainable practices when entering initial contract negotiations.
Suppliers have a critical role to play in tackling climate change, as for the majority of organisations emissions from their supply chain are many times greater than their direct emissions. While the environmental impact of suppliers may have previously passed unnoticed, incoming laws will force organisations to take accountability for their green practices. This comes as listed UK businesses will soon have to publish net zero plans, so firms must ensure they are driving continuous improvements to hit CO2 goals.
Even without regulations, organisations should also be encouraged to take sustainability seriously because there is a real business imperative tied to hitting environmental targets. Environmentally conscious organisations can strengthen their brand reputation, improve sales and gain the edge over ‘less-green’ competitors. Yet, as the conversation on sustainability has become even louder, organisations must ensure that their green claims match up to reality – and this starts with the supply chain.
Collaboration is the best policy
While it’s clear more needs to be done to regularly assess green credentials, the research shows few firms are equipped with the right procurement tools to make this a reality: 69% of organisations surveyed said it should be made easier to collaborate with buyers on sustainability, with visibility and communication the common obstacles to delivering on green promises. A further 35% agreed collaboration tools would help them deliver on environmental initiatives.
Organisations must have conversations with suppliers, regularly assess their sustainability efforts, and provide them with the flexibility to offer innovative solutions. This means laying down the law with their supplier selection criteria and assessing the willingness to collaborate on environmental projects from day one. Suppliers that don’t define their eco-efforts should face being swapped out in favour of more environmentally conscious competitors.
Collaboration on green initiatives also requires a degree of give and take. Organisations must play their part by investing in tools that encourage collaboration among suppliers, improve the ability to share information quickly, and give suppliers more flexibility in how requirements are met. By taking a smart approach to procurement, they can facilitate collaboration and access actionable insights to turn green claims into action.
The green advantage
This smarter approach to supplier management hasn’t just led to a reduction in carbon emissions, it’s also been a driver of general business improvement. In fact, 76% of suppliers believe sustainability will give buyers a competitive edge in the future. Environmentally conscious organisations which can showcase sustainability across their entire supply chain will reap the benefits by also gaining reputation, sales, and revenue advantages. Sustainability cannot be treated as an internal affair – now is the time to start the conversation with your suppliers.
Alex Saric is a smart procurement expert at Ivalua