The Power of Incentivizing Your Suppliers When It Comes to Achieving Sustainability Objectives

In the pivotal race to meet sustainability targets, organizations are facing a significant challenge: reducing their Scope 3 carbon emissions. With this in mind, Chief procurement officers (CPOs) should be looking for ways they can incentivize suppliers to prioritize sustainability. 

Posted on 
November 21, 2023
Gartner: Incentivize Suppliers to Advance Sustainable Procurement Goals

Worldwide Momentum Towards Sustainable Practices

Globally, sustainability has become a cornerstone of business conversations and action. Communities and industries worldwide are looking to embrace more environmentally friendly practices, especially as consumers continue to prioritize shopping sustainably. 

Momentum toward sustainability is no longer just a trend, it is a worldwide movement that businesses around the world are expected to take part in. Primarily driven by the conscious consumer, companies must look to redesign their business models to be more sustainable in order to retain their consumer base. 

In Specright’s recent sustainability survey, 80% of consumers surveyed stated that they were more likely to have trust in companies that had publicly shared data to back up their sustainable claims and 25% of consumers actively track government regulations around sustainability to better understand how it impacts their favorite brands and products.

These valuable stats are a reflection of consumers' rising awareness of their ecological footprint. For businesses in every industry, it means sustainable change can no longer be on the backburner, it must be implemented now. 

At the heart of this need for transformation is a need for transparency. Consumers are seeking more than just high-quality products, but the story behind their creation. With insight into product specifications, consumers can make empowered purchasing decisions and companies are held more accountable for their environmental impact.     

The Role Suppliers Play in Scope 3 Emissions

As companies assess the environmental impact of their supply chains, they must additionally review the role their suppliers play. For most companies, the carbon footprints of suppliers are reflected in scope 3 emissions.

Now you may be asking what are scope 3 emissions? The Climate Corporate Data Accountability Act (SB 253) defines them as indirect upstream and downstream GHG emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control.

In simpler terms, these are emissions that are not directly produced by the company’s own operations but are associated with its external activities. In relation to suppliers, this may include emissions from production processes and resource usage. 

For many businesses today, access to data on supplier greenhouse gas emissions is far from accessible making tracking and reporting difficult and tedious. Targeting these emissions for reduction requires companies to engage with their suppliers to align on sustainability goals. Collaboration is key when it comes to addressing scope 3 emissions and building a sustainable and resilient supply chain.    

Countries and states around the world are pushing legislation to the next level holding companies even more accountable for their carbon footprint. California just recently released The California Climate Corporate Data Accountability Act (SB 253) requiring businesses to publicly provide reporting on emissions. States around the nation are soon to follow, developing similar regulations.    

How to Implement Sustainability Initiatives and Expectations Into Supplier Relationships

Adequate implementation of sustainability initiatives requires all hands on deck, from internal engagement to supplier commitment. For suppliers specifically, it is important that companies are clear about sustainability goals and expectations right off the bat. 

This means being clear about sustainable expectations during supplier outreach. Procurement processes specifically should reflect these goals. Suppliers that are unable to meet these goals should not be considered. Scope 3 emissions play a huge role in overall company emissions making this alignment and goal communication of even higher value.   

Once expectations are established with a company's suppliers regular progress updates and emissions tracking should be done. With such a process suppliers can be recognized for their efforts, strengthening supplier relationships and building an even greener supplier chain. 

Sustainable Procurement Plans and How to Use Incentives to Get Suppliers On Board

Organizations prioritizing sustainable procurement plans will find maintenance of an environmentally responsible supply chain much simpler. Understanding the impact of procurement spending on overall emissions can make a huge impact when it comes to reducing emissions. 

With better supply chain visibility and an understanding of the impact of procurement on emission production, companies can start redesigning their supply chains to be more sustainable.

As stated before this includes sourcing from suppliers who prioritize eco-friendly processes. But for many companies aligning with suppliers on sustainability initiatives may be easier said than done. 

However, to encourage suppliers to align with sustainable practices companies may consider insighting incentives to get suppliers on board. Done strategically, incentives can develop a mutually beneficial relationship between both suppliers and buyers. 

A recent report from Gartner research shows that regular benchmarking of individual suppliers and their progress toward sustainability goals can increase accountability. Additionally, companies may consider offering public recognition for suppliers who go above and beyond. 

This not only gives businesses an opportunity to showcase their sustainable progress but also gives suppliers an opportunity to stand out among other suppliers and competitors. 

To learn more you can download the full Gartner report here.


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