Suppliers improving their sustainability performance can earn a competitive advantage – Here’s why.

Any company wishing to reach Net Zero will need to ensure that its decarbonisation journey is a collaborative process with its suppliers and customers. This is particularly true when tackling an organisation’s scope 3 emissions.

There has been plenty of progress in supplier engagement, but engaging customers to reduce their own emissions will be equally important. After all, everyone involved in the value chain’s emission reduction initiatives will influence their ability to reach their own decarbonisation targets.

Some companies have suppliers that are also their customers, highlighting the importance of collaborating closely with value chain partners to ensure that achieving scope 3 emission reductions is not an exercise driven in isolation by one organisation.

As more and more firms start engaging their suppliers on their sustainability performance, these suppliers will need to be equipped with the resources, knowledge, and data to answer their customers’ requests. That’s why we’ve prepared a primer for the engaged supplier.

Your customers have their own pressures to reduce their emissions

While you might be receiving customer requests regarding your emissions, it’s important to understand why that is happening. One reason is that the companies procuring your goods and services face regulatory pressure to comply with the latest environmental sustainability guidance.

The growth of sustainability regulations has meant that companies are now not only responsible for their direct emissions but also accountable for their scope 3 emissions. These are the emissions arising in their supply chain, from suppliers just like you.

New regulations such as the EU’s Corporate Sustainability Reporting Directive come with a long list of data points that businesses are expected to gather on their own activities and those of their suppliers. The CSRD covers all aspects of ESG, and section ESRS-E1 on climate change is mandatory.

Even if you aren’t one of the 50,000+ businesses that meet the criteria for CSRD compliance, the regulation’s scope 3 stipulation means your customers will need to gather data from you to meet their own compliance requirements. Requests for data will work their way downstream, and suppliers will be expected to roll the data back up to their customers.

Companies can’t report on scope 3 without suppliers, and they will look for suppliers who can help them do so. They will be expected to outline how they plan to reduce emissions, and sustainable procurement practices are one place they may look to begin.

Your scope 1 and 2 emissions are your customer’s scope 3 emissions, which is why customers are interested in partnering with suppliers whose emission reduction initiatives will enable them to meet their own decarbonisation targets. Don’t be surprised to hear companies say things such as, “We only work with suppliers that have an emissions reduction plan” in the near future.

Meeting and managing customer sustainability requirements

There are many good reasons to start monitoring and mitigating emissions. The why determines what kind of data your customers will ask you for, which in turn affects how you obtain it.

Late adopters are usually organisations panicking because they’ve just realised they must comply with the CSRD or other regulations. Suppliers will likely receive minimal support from these customers as they will be occupied with measuring their own greenhouse gas emissions.

In that case, the best thing to do is to be as proactive as possible on your emission reduction journey to position yourself to answer customer requirements before they are even shared. It’s never too early to start getting on top of your emissions, both in your operations and in your own supply chain. The benefits extend beyond compliance and will soon become apparent.

Some customers are already pretty far down the road to net zero. They’re in it for the business benefits, such as achieving cost savings, unlocking new revenue streams, improving their brand reputation, or increasing investor confidence. You’ve probably already heard from them because they are advanced in their decarbonisation journey, and supplier engagement is essential for them to tackle their scope 3 emissions.

Reporting is not a one-and-done: Customers will want a greenhouse gas emissions inventory and will expect you to monitor progress over time. Suppliers will need to take a long-term approach to emissions calculation and reporting or risk losing business to more sustainably mature competitors.

Of course, supplier engagement is a two-way street. Without a strategy of your own, you’ll struggle to get scope 3 data, which is why we built Procurewise. It provides suppliers with an easy-to-use platform that lets them get started collecting their emissions data. To streamline the process and save you time, the surveys are already pre-populated with publicly available information.

Emitwise also generates a CSRD-specific report that covers all the climate change data points in the ESRS E1. It’s tailored to the CSRD’s standardised reporting input requirements. Sending data upstream relieves the reporting burden for yourself and will also save time for your customers.

Suppliers can get ahead of their competitors by proactively managing emissions and supporting customers to comply with sustainability regulations. Your ability to report on emissions reductions effectively will become a means by which your value as a supplier is measured.

In short, managing emissions data will give you a competitive edge. Keep the customers you’ve got happy, and the rest will follow because they either have to or stand to benefit from partnering with organisations such as yours to stay ahead of the regulatory curve.

Get in touch to get ahead.