Supply Chain Guidance

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Why Engage Suppliers?

  • Alignment with sustainability commitment. As organizations commit to reduce the carbon footprints of the products and services they provide, they look to their suppliers to align their efforts with the organization's sustainability goals. Some organizations have GHG goals that explicitly include supply chain reductions. The interdependence between supplier and buyer can be leveraged to launch emissions reduction initiatives that support the bottom line of both parties and achieve sustainability goals.
  • Reduce costs. Some leading organizations engage with their supply chain on GHG emissions to ensure that key partners implement best-management cost-saving practices, which could lead to eventual cost savings for the companies. These cost savings can be passed on to customers, providing a competitive advantage to those organizations. By analyzing the sources of emissions within its supply chain, a company may also identify opportunities to directly reduce its own operational costs, in addition to reducing GHG emissions. Implementing sustainability-related efforts can also attract and retain talent, reducing the costs of recruiting and training new employees.
  • Risk mitigation. Association with less environmentally sustainable suppliers can undermine the credibility of organizations interested in differentiating their brands through environmental leadership. To protect their brands, organizations seek relationships with suppliers that "walk the walk" alongside them by taking steps to be proactive environmental stewards.

    Organizations also seek to insulate their supply chains from sudden spikes in energy and fuel prices, which may in turn affect the prices and availability of goods and services they procure from suppliers. With this aim in mind, leading organizations are beginning to work with suppliers to ensure that they become more energy efficient, especially for emissions-intensive processes.

  • Demand from customers, consumers, and investors. Increasingly, customers and stakeholders are asking organizations to provide information on the life cycle emissions of the products and services that they procure. Organizations therefore need information on scope 3 emissions from suppliers to provide customers and stakeholders with a more complete picture of organizational emissions performance across the value chain. Shareholder concerns are also reflected in the Securities and Exchange Commission's guidance about corporate reporting on climate change risk management.

    Organizations can also gain competitive advantage by improving the environmental sustainability of their products and marketing this feature to consumers.

How to Engage Suppliers

  • Strategically choose which suppliers to engage. Organizations are choosing to engage a small number of key suppliers that comprise 75 to 80 percent of spend as well as those that pose the greatest risk to financial performance or brand reputation if their emissions are not quantified and managed. The latter may include suppliers that provide critical components or represent other risk factors, such as energy-intensive operations that are vulnerable to rising costs from energy price increases.
  • Keep the questions simple. Organizations often use GHG emissions questionnaires or databases to collect information from key suppliers. Organizations that have conducted their own GHG inventories emphasize the need to keep the information requests simple and not ask questions that they themselves would have difficulty answering. Some organizations ask suppliers for quantitative data, while others focus first on qualitative questions such as whether the suppliers are measuring, reporting, or taking steps to reduce emissions. In some cases, organizations use supplier GHG emissions information as a proxy to understand how their suppliers are approaching sustainability more broadly.

    Organizations can use the questionnaire below as a starting point to understand the GHG emissions across their supply chains and engage suppliers on measuring and reducing their emissions. This questionnaire serves as a simple way to collect emissions-specific information from suppliers. Information reported in response to this questionnaire can also be leveraged to complete aspects of other questionnaires, such as CDP. Suppliers asked to assess their GHG emissions for the first time should feel more comfortable responding to any future requests to publicly report their GHG emissions after using this questionnaire.

  • Build trust with suppliers. Suppliers may be sensitive about how their information will be used, with some being concerned that sharing their GHG inventory data will provide insight into how their operations are managed and the potential link to production costs. Similarly, suppliers may worry that their customers could leverage the information to request further cost reductions, rather than grant them the flexibility to manage any operational cost savings identified as a result of developing their GHG inventory.

    To build trust, organizations may consider initiating engagement with suppliers by sharing their success stories on how measuring GHG emissions saved money or enhanced competitiveness, as well as lessons learned, tools, and other resources that resulted in realized and potential benefits. This may help suppliers avoid being skeptical of measuring and reporting their GHG emissions to the requesting organization. Organizations may also want to consider collecting data through third-party programs that protect suppliers' confidential business information.

  • Provide Assistance to Smaller Suppliers

    Smaller suppliers generally need more assistance than larger suppliers, as they have fewer resources and less in-house expertise.

    Spreadsheets and databases with built-in emissions calculations, such as EPA's Simplified GHG Emissions Calculator can assist these suppliers.

    Provide training and capacity building. At first, suppliers may not know how to measure and report their GHG emissions and believe it could be resource intensive. However, when developing a GHG emissions inventory for the first time, suppliers often find that gathering the utility bills and other necessary information is more time-consuming than difficult.

    Training and capacity building for suppliers are critical components of a customer-supplier relationship that have the goal of managing GHG emissions. Many organizations have supplier focused meetings or forums that can be leveraged to include trainings on managing emissions. If resources permit, companies can also create a standing team to provide technical assistance to suppliers through a "Help Desk."

    EPA's voluntary programs also provide organizations with technical assistance. For example:

    • ENERGY STAR Program provides tools and resources to help buildings and plants implement energy management systems and streamline their operations. The program also supports products and homes to become more efficient.
    • Green Power Partnership program increases organizations' voluntary green power use to advance the American market for green power and the development of those renewable electricity sources.
    • SmartWay helps companies advance supply chain sustainability by measuring, benchmarking, and improving freight transportation efficiency. The public-private partnership works to reduce freight emissions through education and providing public recognition for companies that adopt more efficient transportation options.
  • Conduct pilot initiatives. Some organizations select only a subset of suppliers and ask them for GHG emissions information. Organizations have reported needing approximately three years to glean lessons learned from piloting supplier initiatives before having the results and information needed to begin scaling up and solidifying supplier programs within their organizations.

Building Internal Support in Supply Chain Management

  • Develop allies in business units. A small team of an organization's environmental, health, and safety personnel are usually the champions for addressing both organization-wide and supply chain GHG emissions. It is therefore important to develop relationships with key managers and procurement personnel in each business unit so that they can become allies and support efforts to reach out to suppliers on managing their GHG emissions. Different value propositions for targeting supply chain GHG emissions will resonate with different departments or divisions within an organization. By demonstrating a direct connection between reducing emissions and achieving business unit performance goals, champions can build broad internal support for greening the supply chain.
  • Leverage one business unit to drive change across the organization. Since the magnitude of supply chain emissions can vary widely across business units, organizations may elect to focus first on departments or divisions that can have the greatest influence on overall supply chain emissions to pilot outreach to suppliers. Once successful results can be communicated across the organization, other business units can be brought on board. Multinational corporations can use their organizational complexity to their advantage where changes can often be more easily tested within certain business units or in certain lead markets before branching out across the entire company.
  • Secure executive support and communicate resource needs. Executive support for managing supply chain GHG emissions and a clear understanding of the resource needs is critical for any initiative's success. Some organizations recognize the need for executives to appoint a senior-level manager dedicated to work full-time on sustainability issues, including addressing supply chain GHG emissions, especially when organizations have many suppliers and a large amount of data that must be evaluated. Over time, many organizations have been able to build a small team dedicated to helping the senior managers implement supplier outreach programs.

Leveraging Third-party Programs

Organizations can seek third-party programs to bolster their internal supplier outreach programs. Such external programs can maximize efficient use of resources by helping companies request and analyze emissions information from suppliers and then provide suppliers with additional tools to develop their own GHG inventories and manage their GHG emissions.

  • Build collaborative initiatives to engage common suppliers. More and more industry groups and trade organizations are collaboratively engaging with their suppliers and sharing best practices. Creating sector-specific initiatives to collect data from common suppliers and helping them manage their emissions can reduce reporting and data management burdens. Suppliers that are shared by many organizations need respond only once, and in a single format, to a request to report their GHG emissions inventories.
  • Leverage programs that disseminate common questions across industry supply chains. There are quite a few platforms emerging where suppliers can collect and/or view information from organizations within their supply chains. Some of these are the Climate Disclosure Project (CDP), the Supplier Ethical Data Exchange, and the Global Reporting Initiative (GRI).
    • The CDP Supply Chain initiative is a unique program that sends questionnaires to suppliers as requested by participating organizations in different industry sectors. As of 2022 this initiative represents more than 340 supply chain members representing $6.4 tn in purchasing power. Organizations can become CDP Supply Chain members and then identify which of their suppliers across industry sectors should receive the questionnaire. CDP collects the requests from all nominating participants, cross-references the suppliers, accounts for multiple requests from organizations intended for a single supplier, and then ensures that each supplier receives only one questionnaire. Suppliers can specify whether their information can be shared with their requesting customers or made public, protecting any confidential information.
    • The Supplier Ethical Data Exchange (SEDEX) also offers member companies a secure, online database to store, share, and report information on their supply chain. SEDEX provides suppliers with an online questionnaire on a broad range of topics such as labor, health & safety, and environmental standards.
    • The Global Reporting Initiative presents the most widely used standards for sustainability reporting, including reporting on a company's supply chain. The GRI guidelines provide examples of relevant information and data to collect from suppliers and presents a framework for identifying importing suppliers and reporting on the impacts of a company's supply chain.

Examples of Sector-Specific Engagement

Trade groups and sectors are collaborating to engage common suppliers and share best practices.

  • CDP provides one venue where companies in key sectors throughout the world are using a common questionnaire and platform to engage suppliers.
  • Using CDP as a framework, members of the Electronic Industry Citizenship Coalition (EICC), a group of multinational electronics manufacturers with common sustainability tenets, developed and piloted a standardized approach to measuring and reporting on key GHG, water, and waste indicators. Through the Responsible Business Alliance (RBA; formerly the EICC Environmental Reporting Initiative), the companies developed a standardized questionnaire and a reporting system that allows suppliers common to multiple customers enter their data only once and specify which of their customers are permitted to access the information.
  • Another example of a collaborative industry initiative that collects information from common suppliers is the Electric Utility Industry Sustainable Supply Chain Alliance (EUISSCA), which is comprised of the 16 largest utilities in the United States. American Electric Power (AEP) nominates its key suppliers to answer EUISSCA's common supplier questionnaire, which contains 36 questions—one of which asks suppliers how they are managing their GHG emissions. On behalf of EUISSCA, a third party compiles and analyzes the information for the participating utilities and makes the information available if suppliers permit it to be shared with their customers.
  • Other organizations such as the Global Social Compliance Programme and The Sustainability Consortium are developing standards and tools for manufacturers and retailers of consumer goods.

Resources for Reducing Supply Chain Emissions

Scope 3 Accounting Standard

Third-Party Reporting Programs and Frameworks

The following resources have developed reporting frameworks and questionnaires for suppliers to report on GHG emissions and other indicators.

  • CDP and its CDP Supply Chain Initiative project are programs for voluntary, public reporting of corporate GHG emissions inventories and other climate related information. The flagship CDP Climate Change Information Request questionnaire allows S&P 500 corporations to disclose their climate risks, opportunities, strategy and emissions, whereas CDP Supply Chain serves its member companies by collecting this same information in addition to a supplier specific module requesting that suppliers allocate their emissions to the requesting company as well as additional information about the supplier.
  • The Electric Utility Industry Sustainable Supply Chain Alliance (EUISSCA) is a collaborative of electric utilities in the United States that develops standards and frameworks to collect supply chain data and share best practices.
  • The Global Reporting Initiative (GRI) presents the most widely used standards for sustainability reporting, including reporting on a company's supply chain. The GRI guidelines provide examples of relevant information and data to collect from suppliers and presents a framework for identifying importing suppliers and reporting on the impacts of a company's supply chain.
  • LMI's GAIA Sustainable Supply Chain Maturity Model provides companies with a framework to assess the maturity of their own organizations and programs for engaging suppliers on managing their GHG emissions, based on industry research.
  • The Responsible Business Alliance (RBA; formerly the EICC Environmental Reporting Initiative), developed a standardized questionnaire and a reporting system that allows suppliers common to multiple customers enter their data only once and specify which of their customers are permitted to access the information.
  • The Supplier Ethical Data Exchange (SEDEX) also offers member companies a secure, online database to store, share, and report information on their supply chain. SEDEX provides suppliers with an online questionnaire on a broad range of topics such as labor, health & safety, and environmental standards.

Supplier Engagement Guidance

EPA Center for Corporate Climate Leadership

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Last updated on March 8, 2024