New Supplier Engagement Guidance: Unlocking the Power of Supply Chains for Decarbonization
19th Jun 2023
Supply chain emissions represent the largest source of emissions from companies - they are 11.4 times larger than direct emissions on average. It is therefore critical for businesses to activate wide-scale decarbonization efforts across supply chains to avoid the worst impacts of climate breakdown and enable the transformation to a net-zero economy.
Supplier engagement targets are one of the four target-setting methods for companies to formulate scope 3 targets. They specify the portion of a company’s emissions which will be covered by suppliers setting science-based emission reduction targets in the near-term, e.g. “Company X' commits that 85% of suppliers by spend covering purchased goods and services and the use of sold products will have science-based targets by FY 2024.
To be in line with SBTi Criteria, companies must set scope 3 targets - that is, supplier engagement targets and/or reduction targets that collectively cover at least 67% of total scope 3 emissions - if these emissions represent over 40% of their total scope 1, 2 and 3 emissions.
Engaging Supply Chains on The Decarbonization Journey: A Guide to Developing and Achieving Scope 3 Supplier Engagement Targets outlines how to evaluate, develop and set supplier engagement targets, implement engagement programs, and ensure businesses fully understand what it takes to achieve these goals. It is tailored to companies with scope 3 supplier engagement targets, and those interested in exploring different supplier engagement tactics to reduce scope 3 emissions.
While considerable effort, investment and internal buy-in is required to create a supplier engagement program (i.e. the strategy to engage the suppliers covered within the target boundary of a company, to set science-based targets), businesses setting supplier engagement targets could find them relatively easy to track. To meet a supplier engagement target, the company needs to work with their suppliers, within the target boundary, and have them set targets aligned to the SBTi Criteria.
Furthermore, supplier engagement is intended to drive a reinforcing feedback mechanism – the more stakeholders in the supply chain take action on climate change, the more data will become available to create more accurate and robust targets and reduction strategies, increasing the potential to track progress, thereby making it easier for others to work towards similar goals.
Addressing supply chain emissions enables supplier engagement and with that, the possibility of enhancing efficiency, transparency and resiliency across the value chain. It also can help build credibility among and within key stakeholder groups such as investors, customers and employees, who increasingly expect companies to take broader responsibility for the reduction of carbon emissions across their supply chain.
This guide to developing and achieving scope 3 supplier engagement targets includes a full set of materials and resources for companies to use when engaging their suppliers around science-based targets:
The key stages of the supplier engagement journey are included in the guide, and it provides recommendations for companies to make progress faster - through a step-by-step process.
To halve emissions by 2030 and reach net-zero before 2050, companies must take unprecedented and active efforts to engage actors in their supply chains. Enabling a climate-friendly and resilient supply chain is imperative to prevent the worst impacts of climate change and future-proof business growth, by empowering suppliers to start their own science-based target-setting process.
This guide is a starting point to support companies working with their suppliers to address their supply chain emissions in a more structured manner. It is also the first in a series of publications from the SBTi tackling the topic of supply chain emissions, including upcoming work on Beyond Value Chain Mitigation and scope 3 target-setting guidance.