Closing the Supply-Chain Gap: Engaging Tier 1 & 2 Suppliers
For many companies, 70–90% of their carbon footprint lies outside their own walls—in the supply chain. Yet only 20% of firms report formal Scope 3 targets. This article pulls from CDP’s supply-chain action report, BCG’s emissions research, and Unilever’s supplier initiatives to demonstrate how companies can bring suppliers into their Net Zero journey.
Mapping Supplier EmissionsCDP’s 2023 analysis shows that most companies lack comprehensive visibility into Tier 1 and 2 emissions, often relying on proxy data. To address this, leading organizations segment their supplier base, focusing first on the top 30%—those contributing 75% of procurement spend and emissions. By requiring these suppliers to submit GHG inventories through standardized templates, firms can quickly establish a credible emissions map.
Incentivizing Reductions through ProcurementUnilever’s supplier scorecards tie procurement decisions to environmental performance. Suppliers meeting specific reduction targets receive preferential payment terms and joint marketing opportunities, while underperformers enter a remediation program. Within two years, Unilever achieved an 18% emissions cut across 200 key suppliers, underscoring the power of procurement as a lever for climate action.
Enabling with Digital PlatformsBCG recommends deploying a collaborative portal where suppliers upload data, access training modules, and track progress against targets. Automation reduces administrative burden, increasing participation rates from 40% to over 80% within a year. A large automotive OEM reported that after rolling out such a portal, supplier engagement jumped by 60%, accelerating the pace of Scope 3 data collection.
Building Long-Term PartnershipsA Net Zero supply chain is not achieved overnight. Companies like Nestlé host annual supplier forums, inviting top vendors to share best practices, co-develop decarbonization roadmaps, and showcase success stories. These forums build community and establish shared accountability, transforming suppliers from compliance obligations into strategic partners.
Action Plan Summary
Supplier Segmentation:Identify and prioritize suppliers by emissions impact.
Scorecards & Incentives:Link performance to procurement benefits and co-investment opportunities.
Collaborative Platform:Roll out a digital portal for streamlined reporting and training.
Engagement Events:Host forums and workshops to foster partnership and knowledge sharing.
Key TakeawaysEngaging Tier 1 and 2 suppliers is critical to closing the Scope 3 gap. By combining data-driven segmentation, procurement incentives, and digital collaboration, companies can drive meaningful emissions reductions across their supply chains.
References:
CDP. (2023).The State of Supply Chain Climate Action. https://www.cdp.net/supply-chain-action
Boston Consulting Group. (2023).How companies can drive down supply chain emissions. https://www.bcg.com/supply-chain-emissions
Unilever. (2023).Sustainable Procurement Report. https://www.unilever.com/sustainable-procurement