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1.5°C Supplier Engagement Guide

A preamble to the 1.5°Supplier Engagement Guide

  • To achieve the 1.5°C ambition, global greenhouse gas (GHG) emissions should peak by 2020 and
    halve by 2030 to reach net zero by 2050, while at the same time removing some of the carbon
    already emitted into the atmosphere.
  • It is critical to mobilize the entire business sector for the 1.5°C ambition. 1.5°C Supply Chain
    Leaders encourage all companies to reduce GHG emissions across their full value chain in line
    with the climate science of the IPCC 1.5°C report before 2030.
  • To achieve this within their supply chains, companies should publicly set and implement targets
    which act to halve their supply chain emissions before 2030. Companies that can make progress
    more quickly will not only accelerate the needed transition but can also create significant
    competitive advantage.
  • This ambitious goal requires drastic GHG reduction across the supply chain, and for many
    sectors, also a significant transformation in supply chain models.

Ambition of the 1.5°C Supplier Engagement Guide

  • The Supplier Engagement Guide specifically addresses one critical component of wider supply
    chain decarbonization goals: engaging suppliers to take climate action.
  • The Guide’s actions are complementary to other steps companies take to decarbonize. They do not
    address all environmental sustainability – or even climate – issues which companies should
    consider, but focus specifically on how companies can work with self-selected suppliers to set
    and implement a 1.5°C target [to halve GHG emissions by 2030 and reach net-zero before 2050].
  • The 1.5°C Supplier Engagement Guide provides practical guidance that any company can utilize to
    work with suppliers to set and implement a 1.5°C aligned target for their organizations, and
    that suppliers can cascade across their supply chain. It suggests a structure to harmonize
    buyers requirements and simplify supplier engagement on climate.
  • Individual suppliers will each face their own challenges and opportunities – based upon sector,
    geography or other factors – that may require additional support or innovative solutions to
    deliver their 1.5°C target, while others may be well positioned to act faster, and should do so.
    Thus, companies may differentiate the Guide’s actions as appropriate for their suppliers, while
    always aligning with a 1.5°C pathway.
  • The 1.5°C Supplier Engagement Guide is open source and provides best practice examples derived from the experience of 1.5°C Supply Chain Leaders, as well as other leading practices and frameworks for supplier engagement, and is aligned with the 1.5°C Business Playbook. While every company’s supply chain is different, the Guide addresses key areas that each company should consider for best practice implementation.
  • Included with the Guide are links to resources and practical examples that every company can use; these will be further refined and curated over time.

How to Use the 1.5°C Supplier Engagement Guide

  • The 1.5°C Supplier Engagement Guide is an open source public good. We suggest that companies review the Ambition of the Guide before diving in.
  • The Guide is structured in 4 blocks, each with 3 recommendations, and a transversal fifth block
  • The primary audience of the 1.5°C Supplier Engagement Guide is company functions which work with suppliers and/or on decarbonization, such as: procurement, supply chain engagement and/or sustainability teams.
  • Companies can begin with whichever block and recommendations they find to be the most feasible. Companies will have different starting points depending on their internal preferences and the shape and complexity of their supply chains.
  • While the 1.5°C Supplier Engagement Guide provides a common framework, buying companies should adapt it as fitting for each supplier, while always aligning with a 1.5°C degree pathway.
  • Each recommendation comes with an explanatory “What”, “Why”, “How”, and a list of resources.
    • The “What” is a brief description of the recommendation.
    • The “Why” explains in what ways the recommendation connects to supply chain decarbonization, as well as the benefits of implementing the recommendation.
    • The “How” includes practical steps to implement the recommendation.
    • The resources are intended to simplify the implementation of the associated recommendation.

Foundation

WHAT

  • Secure clear management commitment and support to work with suppliers to halve their GHG emissions before 2030
  • Define clear internal responsibilities to achieve this goal

WHY

Clear management support from the start as well as a defined structure of responsibilities enable effective implementation of a company goal to work with suppliers to halve their GHG emissions before 2030, in your own organization and with suppliers.

HOW

  • Seek top management buy-in on working with suppliers to halve their GHG emissions before 2030
  • Have management facilitate alignment on climate strategy with relevant departments, such as procurement/sourcing
  • Assign clear responsibilities and clarify target implications for procurement/sourcing

WHAT

  • Set up and publicly state specific target to work with priority suppliers to halve their GHG emissions before 2030

WHY

Setting a target and asking selected priority suppliers to halve their GHG emissions before 2030 is a key step in aligning a company supply chain with climate science. Publicly stating such target communicates the company ambition to align with climate science to external stakeholders, including suppliers.

HOW

  • Set a scientifically sound, achievable and understandable target. For example:
    • Working with a specific number or % of strategic suppliers to halve their GHG emissions
    • Halving GHG emissions from a specific percentage of spend
    • Reducing supplier GHG emissions by a specified percentage by a given target year
  • Include interim goals before 2030 to enable follow up on progress
  • Publicly state your decided 1.5°C Supplier target

WHAT

  • Map GHG emissions across the supply chain: understand the main GHG hotspots across supply chain Tiers, GHG reduction potential, supplier maturity and buyer leverage

WHY

When working with priority suppliers to halve their GHG emissions by 2030, companies need to prioritize resources where it’s more effective. Mapping GHG hotspots and the GHG reduction potential across the supply chain, enables prioritizing efforts to maximize the impact of climate action. Such analysis can inform a company 1.5°C supplier engagement approach, as well as the wider supply chain decarbonization approach.

HOW

  • Understand the different tiers across the supply chain, from Tier 1 upwards
  • Publicly state your decided 1.5°C Supplier target
  • Differentiate suppliers to maximize engagement impact, using criteria such as supplier GHG emissions, GHG emission reduction potential, readiness of suppliers to engage and strength of relationship with suppliers.
    • Suppliers outside of the engagement sample can still be encouraged to act on GHG emissions by joining relevant initiatives, such as SME Climate Hub, directly
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Procurement

WHAT

  • Clearly communicate the ask to halve their emissions by 2030 to supplier top management and key account team
  • Strengthen demand signal by aligning expectation with other buyers

WHY

Communicating clear expectations to suppliers encourages them to take the needed action to halve emissions by 2030. Communicating such requirement from company to supplier at top management level sets the expectation Communicating it from the company procurement team to the supplier sales/key account makes it operational. Joining forces with other buyers through 1.5°C aligned procurement pledges strengthens the message and provides an additional incentive for suppliers to act.

HOW

  • Communicate requirement for suppliers to halve emissions by 2030 in line with IPCC 1.5°C report, from your company top management (e.g. CEO) to you suppliers’ top management.
  • Communicate such requirement from the procurement team to the supplier sales/key account team.
  • Expectations should be clearly communicated to suppliers, but different options exist, according to each company setting. For example:
    • A letter, or email, from company leadership or procurement
    • A press release or mention on the company webpage
    • Updating Supplier Code of Conduct
    • Joining relevant initiatives such as 1.5° Supply Chain Leaders or align communication with other buyers

WHAT

  • Modify key procurement templates and processes to require selected suppliers – both new and existing – to halve GHG emissions before 2030
  • Include such requirements in the evaluation of new suppliers and renewal of contracts with existing suppliers
  • Evaluate how to integrate climate action into existing supplier base

WHY

Specific requirements to halve emissions by 2030 should be integrated into procurement document templates and processes. This effectively ties the buyer-supplier relationship to achieving climate goals and provides clarity to both suppliers and the procurement team. Because contractual relationships and suppliers’ maturity levels on climate vary, process integration may require flexibility across different suppliers.

HOW

  • Include text requiring suppliers to halve their emissions by 2030 and report on GHG emissions referring internationally recognized standards (e.g. GHG Protocol) in key procurement templates sent to suppliers by your procurement team. This include but are not limited to:
    • New supplier contracts
    • Supplier Code of Conduct
    • RFI/RFPs
    • Supplier self assessments
    • Performance cards
  • Systematize such inclusion by automating the process as much as possible
  • Ask procurement team to consider applying such requirements to existing contracts where applicable, as part of dialogue with suppliers

WHAT

Operationalize the goal [to work with suppliers to halve their emissions by 2030] with procurement teams by:
  • Training procurement staff and
  • Aligning internal incentives for relevant teams

WHY

The procurement/sourcing team has a fundamental role in making your 1.5°C suppliers strategy effective. For this reason, the relevant procurement teams must be trained on your company decarbonization strategy, and the role they can play in their relationship with suppliers. Their buy-in is fundamental. Tying incentives for the sustainability and sourcing team to the achievement of your 1.5°C suppliers goal is an effective way to move from ambition to action.

HOW

  • Leverage existing resources to provide short training to procurement employees, on the importance of 1.5°C aligned goals
  • Identify priority buyers to onboard to achieve 1.5°C suppliers goal (e.g. in charge of key categories or geographies)
  • Train selected members of the sourcing team, as relevant, on your company 1.5°C ambition, the importance of halving supply chain emissions by 2030 and the role of procurement
  • Consider appropriate incentives (inclusion in KPIs, financial reward) linked to 1.5°C suppliers goal performance, for procurement and sustainability teams
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Supplier Engagement

WHAT

  • Initiate dialogue with selected suppliers to understand their current/planned climate goals and encourage them to halve emissions before 2030 and achieve net zero emissions before 2050
  • Continue to include climate considerations into ongoing business interactions with suppliers

WHY

Initiating dialogue about climate with suppliers will provide a baseline understanding of their current climate ambition, and an opportunity to directly communicate expectations. Continuously integrating climate considerations into ongoing business interactions between the procurement team and suppliers is helpful to monitor climate performance; build trust; and find opportunities for support or collaboration.

HOW

  • Encourage procurement team to discuss 1:1 with supplier sustainability and sales representatives to:
    • Share expectation that suppliers set climate targets aligned with a 1.5°C pathway
    • Ask suppliers if they have current/upcoming plans to halve emissions before 2030, and inquire about support needed
  • Integrate GHG emissions information in supplier evaluation form (e.g. supplier scorecard)
  • Integrate climate considerations in regular interaction between procurement team and supplier representatives (e.g. business review) , at regular frequence (e.g. quarterly, yearly…) to monitor climate performance, provide feedback on peer performance and identify mutual needs and opportunities

WHAT

  • Provide tools and resources that suppliers with different degrees of maturity on climate, can leverage to commit and take action towards halving their emissions before 2030
  • Link suppliers to useful public resources, and offer ad-hoc support where needed

WHY

While some suppliers might be on track already to halve their emissions by 2030, others might not know where to start. Pointing suppliers to adapted public resources enables them to take action to halve emissions by 2030. Providing ad-hoc support to suppliers, can dramatically increase the action for those suppliers with a lower level of maturity in their climate journey.

HOW

  • Direct suppliers to publicly available tools and guides as appropriate:
    • GHG Accounting methodologies and tools
    • Target-setting methodologies and tools (SBTi)
    • SME-specific resources
    • Sectorial or geography-specific resources, as different types of suppliers have different needs
  • Offer ad-hoc support to inexperienced suppliers:
    • 1:1 support, through internal or external resources
    • Grouped supplier webinar or gathering
    • Automated platform support and helpline

WHAT

  • Identify the appropriate tools for your company to enable suppliers accelerate their halving emissions by 2030. This can include schemes such as recognizing supplier performance, financial incentives and/or collective buyer-supplier action

WHY

Referring to climate-related recognition and incentives schemes, and not merely requirements, may allow a better, faster uptake of halving emissions by 2030 among suppliers. Recognition and incentives linked to climate performance are an important complement to buyer requirements. While the appropriate means to accelerate action will vary by company, they may provide a boost to suppliers that are less mature on their decarbonization journey; lack motivation; or simply do not have the right resources to get started. Incentives and recognition can take many forms and need not always be financial.

HOW

  • Define the right enabling tools, considering the company and supply chain, to recognize supplier climate performance towards halving emissions by 2030, and embed them in the procurement process as relevant.
  • Tools may include:
    • Supplier recognition: recognize supplier climate performance publically (e.g. through website) or with peers
    • Preferential conditions: for example, improved payment terms, or locked-in longer contracts linked to climate performance
    • Applying discount factors in contracts, linked to progress towards climate targets
    • Direct financing of interventions: financially contribute to GHG reduction (e.g. switch to renewable energy in a supplier factory)
    • Leverage better credit rating to facilitate supplier loans
    • Collective financing with suppliers, for example on RE installations
    • Grouped decarbonization target with supplier
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Reporting

WHAT

Request suppliers to publicly disclose:
  • Their target to halve emissions before 2030
  • Their yearly GHG emissions and progress towards such target

WHY

Public disclosure allows suppliers to share the same information with all of their customers and other stakeholders at once. Disclosure of a target to halve emissions before 2030 by suppliers signals their intention to align with a 1.5°C pathway. Yearly reporting on GHG emissions and progress against the targets creates accountability and allows tracking.

HOW

  • Request suppliers to set and publicly disclose a target to halve emissions before 2030
    • Inform suppliers about existing climate commitment initiatives they can join, to signal public alignment with a 1.5°C pathway. Encourage suppliers to leverage such commitments
  • Request suppliers to assess and publicly report their Scope 1, 2 and 3 GHG emissions on a yearly basis, in line with international standards such as the GHG Protocol
  • Request suppliers to assess and publicly report yearly progress towards halving emissions before 2030

WHAT

  • Define a clear process to track supplier climate performance at least annually, leveraging publicly reported indicators disclosed by your suppliers

WHY

Tracking the yearly disclosures requested to suppliers allows the company to assess how suppliers progress towards their goal to halve emissions before 2030 and reach net zero emissions before 2050. It also enables the company to track and disclose how targeted efforts with select suppliers contribute to achieving your wider supply chain climate targets. Companies can leverage progress indicators in their dialogue with suppliers.

HOW

  • Leverage suppliers’ public reporting to track:
    • Existence/or not of a 1.5°C target
    • Yearly GHG emissions and progress against 1.5°C target
  • Define tracking responsibility within your organization. Tracking is sometimes a manual process, but consider opportunities to automate process with a data management platform to minimize errors and simplify
  • Make information available to procurement team for dialogue with suppliers
  • Note that reporting from suppliers will cover their entire organization’s scope, not just the proportion of emissions directly associated with the production of your products

WHAT

  • Assess and publicly disclose suppliers’ aggregate yearly progress towards halving their emissions before 2030
  • Tie suppliers’ disclosure to company progress towards its overall supply chain decarbonization target

WHY

Tracking the aggregate progress of suppliers towards halving their emissions before 2030 helps the company monitor progress of its 1.5°C supplier engagement program and adjust the approach if needed. This feeds into public progress reporting towards the company overall supply chain decarbonization target to stakeholders.

HOW

  • Disclose publicly company progress on working with suppliers to halve their emissions before 2030. Relevant indicators include:
    • Number or % of suppliers engaged
    • Number or % of engaged suppliers with 1.5°C targets
    • Number of suppliers progressing towards halving emissions before 2030
  • Use relevant channels for reporting, such as sustainability report/website, or specific platforms
  • Include such reporting in the wider context of reporting progress towards achieving company climate target
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Collaboration & Innovation

WHAT

  • Collaborate with a broad range of stakeholders outside of normal scope of business operations – such as peers, NGOs, customers, governments, academia – to support a systematic approach towards decarbonization
  • Accelerate the progress of existing collaborations or create new ones where gaps need to be filled

WHY

Collaboration can be catalytic for each company by helping identify new solutions, enhancing knowledge, sharing best practices and driving collective solutions at systemic or industry levels. Collaboration can help harmonize decarbonization approaches across stakeholders and industries, which can:
  • reduce climate action ‘fatigue’ for buyers and suppliers
  • encourage other buyers to join the movement, thereby accelerating collective progress
  • incentivize suppliers to take action in response to unified requests from multiple buyers
The collective action enabled by collaboration can help to co-invest in exploring a variety of emerging approaches, accelerate climate action, and drive successful innovation to scale.

HOW

  • Adopt a collaborative mindset. While every company will pursue their own collaboration strategy, all companies that seek to enable catalytic change will need to do so in partnership with stakeholders outside their existing operations to both reap and sow support for decarbonization goals.
  • You may consider:
    • Teaming up with like-minded partners in a multi-stakeholder collaboration to drive unity and change for decarbonization at a systemic level
    • Teaming up with like-minded buyers to accelerate change amongst common suppliers
    • Working with partners to deploy programs or other solutions aimed at supporting climate action in your supply chain
    • Educating customers about your efforts – such as about why your products or services might be changing – and enlist their support

WHAT

  • Evaluate the need to disrupt company sourcing model to achieve overall supply chain decarbonization goal
  • Identify, pilot and scale new solutions, particularly disruptive ones with high potential for drastic GHG reduction

WHY

Many industries must be fundamentally re-designed to enable a 1.5°C pathway; this might mean a significant shift in supply chain models. Incremental change might not be enough, yet disruptive solutions often start small and may be beyond the traditional scope of suppliers. Innovation and disruption can facilitate major progress on decarbonization while also generating significant competitive advantage. An innovation and disruption mindset can also be closely linked to, and accelerate, the four Building Blocks

HOW

By their very nature, innovation and disruption cannot be prescribed. Innovative and disruptive companies are, for example, looking to:
  • Evaluate the materials and processes used to produce products/services and consider switching to more climate-friendly alternatives (input substitution)
  • Consider suppliers located in closer proximity to sales markets in order to reduce transportation impacts and create local resilience (geography switch)
  • Apply a circular mindset by assessing the entire product lifecycle and develop ways to move from cradle → grave to cradle → cradle (circularity)
Innovation and disruption can also accelerate your work in the four Building Blocks, for example:
    • Foundation. Consider innovative and disruptive solutions to tackle the hotspots in supply chains that are hardest to abate with traditional solutions.
    • Procurement. Innovate supplier selection criteria and procurement team reward structure to prioritize the selection of climate-aligned suppliers.
    • Supplier Engagement. Collaborate with other buyers sourcing from the same market to create a common funding pool to support suppliers’ decarbonization efforts
    • Reporting. Leverage technology to increase traceability and ease the reporting process
    • Collaboration. Demonstrate leadership by sharing innovative solutions which can scale across industries.
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