Build Supplier Capability and Capacity

By collaborating with and supporting your suppliers, you can achieve multiple benefits for your organization and your supply chain partners. These benefits include cost savings from improving energy efficiency and optimizing resource use, managing risks associated with climate change, stimulating innovation, and enhancing your reputation among stakeholders by demonstrating your commitment to sustainability and social responsibility. Engaging with your suppliers on GHG emissions can also help you avoid potential disruptions or shortages in raw materials or energy supply and improve your operational efficiency. 

If your supply chain extends to developing countries, your suppliers are likely to face a disproportionate cost in meeting global net zero commitments. It’s crucial to acknowledge and address their challenges for a just transition and to achieve your shared sustainability goals. 

Methods to Collaborate with and Support Suppliers 

1. Provide Training and Technical Assistance: Training and technical assistance can take many forms, such as webinars, workshops, and one-on-one coaching. Companies can provide training on various topics such as emissions accounting, energy management, and low-carbon technologies. For example, Danone provides a training program for farmers to reduce costs and move to sustainable farming practices.¹ Technical assistance can also involve providing guidance on how to identify and prioritize emissions reduction opportunities, as well as how to develop and implement a GHG reduction plan. To ensure that training and technical assistance are effective, companies should consider the specific needs and challenges of their suppliers. 
2. Offer Financial Support: Financial support can come in various forms, such as grants, loans, and equity investments. Particularly important is providing financing options to address gaps in the existing market. Companies can offer specific financing vehicles to suppliers to support their sustainability journey. Companies may also collaborate with their suppliers to identify and access external funding sources, such as government grants or private sector financing. The availability of financial support can be a significant factor in the success of a supplier’s GHG emissions reduction efforts. For example, Energy Efficiency Services Limited (EESL) in India – in partnership with the Indian government – uses a pay-as-you-save model to support companies in implementing efficiency measures, thereby removing the need for a company to make any upfront capital investment.²
3. Provide Access to GHG Reduction Technologies: Companies can work with their suppliers to identify and pilot innovative solutions, such as low-carbon materials or circular economy models. By providing access to low-carbon solutions, companies can help suppliers reduce their emissions while also creating new business opportunities. For example, Google helps suppliers identify value-generating energy efficiency opportunities and supports them in implements these at office sites.³
4. Foster Collaboration: Collaboration between companies and their suppliers can take many forms, such as joint research and development projects or simply sharing best practices. Companies can also establish forums for suppliers to discuss challenges related to reducing emissions and develop solutions collaboratively. Companies can also work across their supply chain to establish joint targets for emissions reductions, with clear incentives and penalties for achieving or failing to meet those targets. By fostering collaboration, companies can create a sense of shared responsibility and drive innovation in the supply chain. For example, Maersk and H&M have jointly developed an initiative that enables low-carbon shipping of H&M products using biofuels.⁴
5. Share Data and Information: Sharing data and information with suppliers can help them better understand their emissions profile and identify opportunities for reductions. Companies can share emissions data and benchmarks with suppliers, as well as information on best practices and low-carbon solutions. Sharing data and information can also help build trust and collaboration between companies and suppliers. 
6. Leverage Stakeholder Support: Engaging with stakeholders such as NGOs, government agencies, and industry associations can help companies build supplier capability and capacity for reducing GHG emissions. Companies can collaborate with these stakeholders to develop industry-wide sustainability standards and best practices, which can help guide supplier sustainability efforts. They can also engage with these stakeholders to access funding or technical assistance to support their suppliers and thus leverage external resources to support their suppliers’ sustainability efforts.

The below table from SBTi’s best practices in GHG management demonstrates how different types of support can most benefit suppliers in different contexts:⁵

Considerations for Suppliers in Developing Countries  

As companies in developed nations work towards achieving net zero emissions in their supply chains, it is important to recognize that their suppliers in developing countries may face significant challenges and costs in making the transition. These suppliers often operate with limited resources, infrastructure, and technology, and may lack the capacity to adopt new sustainable practices and technologies. Furthermore, the cost of transitioning to net zero emissions can fall disproportionately on these countries and suppliers. 

To address these challenges, companies in developed countries can take a more supportive and collaborative approach to working with their suppliers in developing countries on a net zero transition. Providing financial and technical support, collaborating on emissions reductions, sharing knowledge and best practices, and engaging with supplier’s local communities and governments can be some of the most effective methods in addressing challenges and costs these suppliers may face.

Footnotes:

1. Danone | Training Programs for Farmers 
2. WEF |Energy Efficiency Services Limited
3. Google | Building an energy efficient, low-carbon supply chain
4. H&M Group reduces carbon footprint with Maersk ECO Delivery
5. SBTi’s Best Practices in Scope 3 GHG management 

Other Sources:

• WEF | Net-Zero challenge: The Supply Chain Opportunity