Communicate Goals and Incentivize Suppliers
Environmental Defense Fund
Communicating your company's goals for GHG emissions reductions and incentivizing suppliers to reduce their emissions are two critical steps to reduce GHG emissions in your company’s supply chain.
Communicating greenhouse gas (GHG) emissions reduction goals to suppliers sets expectations and sends a message that reducing GHG emissions is a priority for your company. It also encourages suppliers to collaborate with your company to achieve your goals and starts a dialog that helps with measuring progress and ensuring that everyone is on the same page. Additionally, setting targets that incentivize your suppliers to act can help drive down their emissions. Incentivizing suppliers can take many forms and can include both positive and negative enforcement methods.
Also, your company works to reduce its GHG emissions and you incentivize suppliers to do the same, it is important to uphold human rights and thus take a comprehensive approach to sustainability that includes both environmental and social concerns.
Communicate Goals to Suppliers
When communicating your company’s goals for GHG emissions reductions to your suppliers, you should be as clear and specific as possible. Start by defining your emissions reduction goals and provide details on how you are planning to achieve them. Make sure your goals align with your company’s overall sustainability strategy and consider setting interim targets as you track progress towards your final goal.
It is also important to communicate the time frame within which you expect suppliers to meet these goals. This helps suppliers plan their actions and allocate resources effectively. Make sure the timeline is realistic and considers the time needed for suppliers to implement changes in their operations. Creating a two-way dialog can help you understand your supplier’s capabilities, needs, and constraints as you jointly work towards your emissions reduction goals.
While in-person communication is most effective, it might not always be possible, especially with a large number of suppliers. Use the methods that work for both you and your suppliers, and balance them as needed to keep communication open. Keep in mind that if you use several different methods to communicate with suppliers, your messaging should be consistent.
Incentivizing suppliers to reduce their GHG emissions is an important step in addressing your Scope 3 emissions. Here are some methods you can consider to incentivize suppliers to help you meet your GHG emissions reduction targets:
- Financial incentives: Financial incentives can be a powerful motivator for suppliers to reduce their GHG emissions. Consider offering bonuses, discounts, or preferential treatment to suppliers that meet sustainability targets or demonstrate continuous improvement in their sustainability performance.
- Contractual agreements: Incorporate sustainability performance requirements into contracts with suppliers. This can include specific GHG emissions reduction targets, as well as requirements for reporting, monitoring, and verification of emissions data. Make sure these requirements are clearly communicated and enforceable.
- Recognition and awards: Recognize and reward suppliers who demonstrate outstanding sustainability performance. This can include public recognition, awards, or inclusion in sustainability rankings. Celebrating sustainability successes can create positive momentum and inspire other suppliers to follow suit.
You can also consider prioritizing high performance suppliers in contract bids and implementing improvement programs to support your suppliers as they measure and reduce their climate impact. As a last resort, if a supplier fails to comply, consider changing your supplier.
Human Rights Considerations in Supply Chain
A truly sustainable and socially responsible supply chain is created by considering human rights issues, working with suppliers, and promoting equality. As you work with your company’s suppliers to integrate your sustainability strategy, consider the social implications of your supply chain. Suppliers should provide safe and fair working conditions and fair wages. Your suppliers should also respect the rights of indigenous peoples, local communities, women, and marginalized groups, including traditional land use rights and cultural practices. You can collaborate with your company’s suppliers to develop policies and procedures regarding human rights. Consider engaging human rights organizations to ensure international human rights standards are upheld throughout your supply chain.