Research shows that the carbon footprint of the average supply chain accounts for 90 per cent of a business's carbon footprint, so it’s no wonder that large companies are increasingly looking beyond their own borders to deliver on their net zero targets.

1. Corporate targets

Hundreds of the world’s largest organisations have now set targets to reduce greenhouse gas emissions in their supply chain. For example, Heineken has committed to achieving net zero across its entire value chain by 2040 and aims to work with suppliers to achieve a 30 per cent cut in emissions by 2030. HP has set the same 2040 goal, with the additional target of cutting supply chain emissions in half by the end of this decade. BMW has committed to reducing its supply chain emissions by 22 per cent on a per vehicle basis by 2030. The list goes on and on.

While most of these commitments focus on tier one suppliers in the first instance, many of the requirements being placed on these suppliers will naturally be passed on to their suppliers, causing a trickle-down effect that will ultimately impact everyone in the supply chain.

2. Risk management

The drive to reduce supply chain emissions isn’t just about corporate responsibility; it’s also about managing risk. Research shows that businesses with large supply chains could face an estimated $120 billion (around £94.45 billion) in increased supply chain costs by 2026 due to climate change, deforestation and water insecurity. By improving transparency and engagement with suppliers, firms are more able to identify opportunities to reduce these risks and future-proof their business.

3. What are suppliers being asked to provide?

According to one survey in 2021, by 2025, nearly eight in ten multinationals plan to stop sourcing from suppliers who could negatively affect their carbon reduction commitments. Suppliers that can actively contribute to their customers’ climate ambitions are, therefore, increasingly at an advantage.

Common measures being taken by buyers to reduce the climate impact of their supply chain include increasing the weight of sustainability and social value criteria when selecting suppliers, adjusting procurement KPIs, and using management platforms such as Sedex, EcoVadis and Achilles to gather environmental supply chain data.

Here are some real-world examples:

• The UK government now requires suppliers bidding for contracts above £5 million per year to commit to net zero emissions and submit a detailed carbon reduction plan
• BMW has made carbon footprints a ‘decision criterion’ in its contract award process with carbon targets for its top suppliers
• Microsoft calculates a ‘carbon cost of engagement’ to each supplier, which is used to make decisions for new business awards, including an agreement to setting science-based targets to reduce greenhouse gases (GHG) by at least 55 per cent by 2030
• Unilever will require suppliers to declare GHG emissions of their goods and services as part of a long-term plan to introduce carbon labels on products. It also actively prioritises partnerships with suppliers that have set science-based climate targets
• Owner of Asda, Walmart’s Project Gigaton initiative aims to avoid one billion tonnes of greenhouse emissions from its value chain by 2030, with 4,500 suppliers signed up to date

SMEs are taking action, too:

• One+All is extending its Planet Mark certification to its tier one overseas suppliers
• Crystal Doors has incorporated a net zero disclosure tool into its online portal for customers and suppliers
• We supported HOME in Manchester to incorporate sustainability criteria into its procurement process

4. How to be a green supplier of choice

The Carbon Trust has produced a useful introductory guide on how to become a good supplier to climate-conscious customers. Here are some additional tips: 

Understand what matters to your customers 

Being a good supplier is partly about understanding your customer’s risks, providing them with the information they need and taking action to mitigate them yourself.

Scrutinise your customer’s environmental policy, the commitments they have made, or sustainability reports they have published to help you understand their values and priorities.

Direct feedback can also be useful. For example, One+All introduced new packaging material after customers expressed concerns about packaging waste in its annual customer survey.

Establish policies and procedures to turn your values into action

Introduce a robust environmental company policy and make sure you can demonstrate compliance with all relevant environmental regulations when asked.

You should be able to demonstrate measures taken and an ongoing strategy to reduce the environmental impact of your operations, products and services, focusing on the areas that have the biggest overall impact. It may also be beneficial to explore whether any external accreditations or certifications could increase your standing with buyers.

Measure, monitor and disclose to ensure accountability

Hard data, especially your carbon footprint (but also other key indicators such as energy, fuel, water and waste), is hugely valuable. Have this information ready for responding to supplier requests when needed, or better still, make it available in reports or on your website.

Crystal Doors is a particularly good example of an SME that has made as much information available on its website as possible, but it can be as simple as a clear environmental policy and a disclosure of your carbon footprint.

Set targets and share your progress 

When you’re in a position to do so, set a formal net zero emissions target. The UK SME Climate Commitment is a formal route that allows you to become a signatory of the government-backed Race to Zero campaign.

Promote the progress and commitments you have made as part of your marketing strategy. You could consider building credibility by producing thought leadership pieces or blogs on how and why you are taking action. An annual update or report on your progress can also be a valued part of your documentation for customers.

Engage and collaborate with your customers 

Customers will often respond positively to advice and recommendations from their suppliers. You may be able to identify opportunities to improve environmental performance or make efficiencies that they might have missed, for example, through product or packaging eco-design. This could even lead to opportunities to provide new products and services.

Pass it on to your supply chain 

Your supply chain is also your customer’s as well, so embedding sustainability into your own procurement will ultimately reduce risks for your customer downstream.

Start by introducing supplier surveys and inserting sustainability or social value criteria into your invitations to tender. Being able to demonstrate that you have sustainability-conscious suppliers will also improve your social value by association.