Your Guide to Becoming a Sustainable Supplier: Managing Supply Chain Data Requests

Supplier sustainability has become a crucial factor in achieving business success in today’s competitive market. The push for sustainability and ESG reporting, primarily driven by supply chain partner requests, is at the forefront of business strategy. Embracing supplier sustainability not only sets a company on a path to success but also helps in winning and safeguarding business.

As the number and type of these requests increase, navigating a fragmented landscape of sustainability data requests within the supply chain is complex and challenging. Many companies find themselves without the tools, capacity, or knowledge to implement and manage a virtually new business function as is required to provide accurate sustainability metrics. As a result, companies without the resources to respond run the risk of jeopardizing priority business relationships.   

Fortunately, there is an upside to these sustainability data requests, and rather than see them only as a compliance burden, leading companies are now asking what they stand to gain if they build a strategy to turn these requests for supplier sustainability data into a source of value creation.

As your company builds its capacity to respond to new and emerging supply chain sustainability and transparency data requests, building your profile as a sustainable supplier should be seen as an opportunity. Read on to better understand why your firm is receiving more requests for sustainability data, best practices for responding, and insights for approaching supplier sustainability strategically.

Sustainability in the Supply Chain

Today, 47,000+ companies receive annual requests for their supply chain sustainability data from the CDP, 100,000+ companies request data through the EcoVadis questionnaire, supplier requests flow in for reporting into the Higg Index and setting targets based on the Science Based Targets Initiative (SBTi).

One reason that requests for measuring and reporting sustainability impacts are increasing is that supply chain sustainability reporting is becoming mandatory in many instances.

Sustainability reporting regulations have become a global phenomenon, and over 30 jurisdictions have proposed or enacted some sort of climate or sustainability reporting rule. However, EU and US regulators are making the biggest impact.

Sustainability disclosure rules in the US, like the SEC’s Climate Rule and California climate rules, are adding further pressure as they require impacted companies to share climate risk and emissions data from their supply chain. Whereas Europe’s sustainability regulations, like the Corporate Sustainability Reporting Directive, require affected companies (estimated to be ~60,000 EU and non-EU companies) to share much more extensive sustainability information from their supply chain.

All of these regulations will be coming into play over the next few years and will further expand sustainability data requests for suppliers, and the compliance element will add an additional requirement for data precision.

The Impact of Supplier Sustainability Management

For most companies, sustainability concerns emanate not from their operations but rather from their global supply chains. Looking at emissions, for example, data from the CDP shows that, on average, supply chain emissions, also known as Scope 3, make up around 11.4 times operational emissions. This is a primary reason that supplier sustainability has become such an important aspect of a company’s overall sustainability strategy and achieving its sustainability goals.

Because companies do not have direct control over the sustainability data or strategies in their supply chain, it is much harder to assess and reduce sustainability impacts there, which is why they ask their suppliers for help. Understanding and mitigating sustainability risks in the supply chain is clearly a critical part of the business’s overall sustainability strategy, and suppliers who are ready to help by sharing data will be rewarded.

Types of Supply Chain Sustainability Data Requests

As stakeholders increase their scrutiny of companies’ environmental performance and green claims, business success increasingly hinges on sustainable practices. Companies are taking action to align with suppliers committed to sharing their sustainability aspirations and targets.

Requests for supplier sustainability data can range from environmental impacts such as emissions, waste, and biodiversity to social impacts, including working conditions and diversity. However, the main supplier sustainability data requests that companies are currently receiving are around climate information, e.g., carbon inventories and emissions reduction goals.

For some companies, reporting this data is not mandatory; some companies only request only binary responses to questions such as, “Does your company measure Scope 1 and 2 GHG emissions?” and “Does your company conduct lifecycle assessments for its products?” However, large multinationals, like Microsoft and Target, now require more in-depth quantitative and qualitative ESG data and in their supplier codes of conduct request that suppliers report through CDP, EcoVadis, or via custom surveys, and that suppliers set impact mitigation targets.

The actual questionnaires used by these companies are not typically publicly available, as they tend to be proprietary and customized for the specific needs of the business or industry. The example below from Drive Sustainability, an automotive industry organization that sets guidance for automotive suppliers in partnership with 16 major automakers, is used by companies such as Ford and BMW:

Building your Profile as a Sustainable Supplier

Historically, less than 50% of the companies that receive a CDP sustainability data request respond to it. Given this, companies can seize on the opportunity to forge stronger relationships with their customers and investors and set themselves apart from those who overlook this vital opportunity to create value through sustainable supply chain engagement.

Companies that are proactive in managing and sharing their sustainability data with their customers have the opportunity to build better, more sustainable relationships with existing customers and make themselves more appealing to new customers. Here are two key reasons why receiving a request for sustainability information should be seen as an opportunity rather than a burden:

Strengthening Supplier Relationships

Companies are taking an increasingly hard line on companies that do not include sustainability information in their supplier request for proposals (RFPs) and are, in some cases, flat-out denying them because of it. However, companies that do answer RFPs, in our experience, can benefit from a litany of opportunities, such as increased sales volume, preferential shelf spaces, collaborative marketing, shared innovation projects, deeper leadership ties, better payment terms, and more. 

Building Positive Brand Reputation

Companies that are proactive with their sustainability metrics collection and reporting will be able to build their brand image, which will not only be an opportunity for growth with existing customers. It could also help them differentiate their company from others, win more business, appeal to an increasingly eco-conscious consumer base, and branch out into new markets that have more stringent sustainability regulations, like the EU.

It is imperative that your company responds efficiently, accurately, and consistently to customer requests for your sustainability data. Many of these requests must be completed in order to continue being a supplier for a particular buying organization. Ignoring requests or providing inaccurate or inefficient reporting carries a reputational risk. It can damage rapport with the client and lead to losing future clients to more sustainable competitors.

Effectively Responding to Supplier Sustainability Questionnaires

If you are not already, your company should anticipate receiving these requests. When you do, here is a straightforward process to ensure you can effectively respond to every supplier sustainability data request:

• Prioritize Customer Requests: If you receive more than one request, assess and rank each based on the importance of the account and the ease of responding. Determine the specific sustainability data customers are requesting and look for convergence.  This could include simple qualitative governance and social data, such as board diversity, labor rights, or more in-depth quantitative emissions, waste, or water data.
• Collect your Data: Implement robust processes to ensure data quality and integrity. Sustainability management software can help you with ingesting, storing, and calculating metrics and make them easily shareable with customers. If you do not receive customer data requests or if requests only include binary answers today, anticipate that will change in the future. Start to collect relevant data, set relevant ESG goals, and keep ahead of trends before requests come in.
• Report: Choose a reporting framework that aligns to the most common requests that you receive. If your company has the capacity, you can report through multiple frameworks to cover all bases, such as a GRI or ISSB-aligned framework for your annual sustainability report or use CDP or EcoVadis to receive an ESG rating and share it directly with your buyers.

Most importantly, keep in mind the value of building a comprehensive sustainability strategy – not just a compliant reporting approach – and bring on the required expertise to develop strategies for addressing your sustainability impacts, such as decarbonization plans, DEI schemes, waste reductions, etc. to improve overall ESG performance and meet stakeholder expectations.

What You Gain By Becoming a Sustainable Supplier

The most tangible benefits of supplier sustainability come from maintaining and improving current business relationships and brand reputation. However, some additional benefits of managing and reporting sustainability include:

• Climate Risk Mitigation: Measuring sustainability metrics and mitigating impacts also enables companies to understand their risks and build better strategies to reduce them.
• Stronger Investor Relations: Investors are increasingly in need of decision-useful sustainability data. Companies that can provide the data they need are more likely to get access to capital.
• Harnessing Operational Efficiencies: Implementing sustainable practices often leads to increased efficiency in operations. This can include reductions in energy use, waste, and raw material consumption, which can also result in cost savings.
• Employee Engagement and Attraction: Employees increasingly prefer the companies they work for to be socially responsible employers. A strong sustainability program can improve employee retention and attract new talent; it can also boost employee morale, which can lead to increased productivity.
• Meeting Regulatory Compliance: The regulations pressuring your biggest companies to request sustainability data from you may eventually impact your company. Preparing your sustainability data today will ensure you are prepared for any future expansion of existing or new regulations.

Companies may think that collecting and reporting sustainability data will be prohibitively expensive, but with the right sustainability partner, the path to supply chain sustainability compliance and reaping these additional co-benefits needn’t be overly challenging.

Supply chain sustainability data requests will only increase in the coming years. Ignoring these inquiries should not be an option, as major buying organizations draw a hard line for how to deal with it. When this hits a particular industry is hard to say, but you can bet it won’t be long. The best way to set your company up for success now is to prepare to get ahead of sustainability requests; start collecting data, select a reporting framework (GRI, ISSB, CDP, EcoVadis), and begin communicating with your biggest customers to understand what their future requests for information might be.

We’re here to help you craft a smart, step-by-step strategy for kicking off and improving your sustainability program. We’ll make sure you have all the data you need to satisfy your major customers, snag some quick wins, and keep the positive momentum going from there.