Supply chain is the next frontier to sustainability, with regulations and stakeholders increasingly focusing on its impact. In this blog, discover the main reasons why and learn how to engage your suppliers with sustainability initiatives.
Why is engaging suppliers with sustainability so important?
- Supply chain impact – Suppliers represent a significant proportion of a company’s social and environmental impact. Research shows that the emissions in a company’s supply chain are on average 11x greater than the emissions from their direct operations (SBTi). To improve sustainability, companies must work with suppliers to cut emissions, reduce water usage and waste, and improve social and governance practices.
- Reputation management – Negative supplier practices can damage a company’s reputation. It is estimated that less than 2% of workers in the fashion supply chain earn a living wage (The Lowest Wage Challenge). A well-known example is when Boohoo’s share prices fell and their retailer partners suspended relationships when they were accused of using suppliers that paid workers below the minimum wage (BBC).To mitigate such risks, companies must improve ESG performance by working with suppliers to increase transparency and oversight in supply chains.
- Regulatory compliance – Companies are no longer only held responsible for just their direct operations. Increasingly, new regulations cover the wider impacts of a company, including supply chain. For example, Germany’s Supply Chain Act will oblige companies operating in Germany to address human rights and environmental issues in their supply chain (Norton Rose). By engaging with suppliers, companies can ensure that they meet regulatory requirements and avoid legal and financial penalties.
- Innovation and competitive advantage – Collaborating with suppliers drives innovation and boosts competitive advantage. Companies can work with suppliers to differentiate themselves in the market and develop innovative, sustainable products. Patagonia is a great example of this, having collaborated with its suppliers to experiment with scaling a manufacturing technique that uses naturally dyed clothes, which consumes less water and harmful chemicals as a result (Patagonia).
- Stakeholder expectations: Companies can gain stakeholder trust by improving ESG performance and communicating their effortsthrough supplier engagement and wider impact reporting. This open communication increases the authenticity and transparency of their business’ ESG efforts, setting and meeting expectations.
How to engage your suppliers effectively
At Seismic, we advise our clients to practise these four things when engaging suppliers:
- Set clear expectations – Clearly communicate your ESG expectations to your suppliers, including specific targets with timelines. Be authentic and transparent with what your business is trying to achieve, and how their performance impacts this.
- Monitor and evaluate – Regularly monitor and evaluate supplier performance to ensure they are meeting sustainability expectations. Aim to provide specific feedback and proactive support to help them improve their performance.
- Collaborate and provide support – Engage in open collaboration with suppliers and offer resources, training, and incentives to drive sustainability improvements, engaging the entire business to jointly tackle sustainability challenges.
- Recognise and reward – Celebrate suppliers who demonstrate strong sustainability performance through public recognition or preferential treatment in procurement decisions.
Supply chain expertise rooted in sustainability
With over 160 years of sustainability experience, Seismic partners with companies to uncover opportunities for them to reach their sustainability goals. A substantial focus of this is on our partners’ supply chain. We engage with our clients’ suppliers directly to understand their current sustainability performance and future ambitions. In this way, we seek to ensure good alignment that will support our clients’ on their sustainability journeys.
Seismic’s team of ESG experts have a deep knowledge of how to engage suppliers around social and environmental issues, and how to work with them to drive performance.
Get in touch with our team to discover more about how to engage with your suppliers and accelerate your impact journey.