## 3.3 Launch your Supplier Ask 3.3.1 Define your Supplier Engagement Journey3.3.2 Engage Suppliers and Kick-Start their Net-Zero Journey ## 3.3.1 Define your Supplier Engagement Journey How to define your supplier engagement journeyIn step 4 of chapter 3.2.3 “Segment and Prioritize Suppliers” we discussed how to plot suppliers based on their maturity level and supplier type. We now need to determine how to engage the suppliers along the journey.Suppliers will be at different stages in their net-zero journey, and depending on where they are, they should be engaged differently. The supplier engagement journey varies by supplier type (non-fossil fuel sectors, fossil fuel sectors, and small- to medium-enterprise suppliers).As a critical first step, suppliers need to understand where the journey is going and what they are working towards – i.e., they need to know the North Star Ask. ## Step 1: Align on the North Star Supplier Ask It’s important to envision the net-zero transition as a journey along which suppliers evolve, rather than an immediately achievable target. The first step of defining this net-zero journey is setting a clear ambition. Only then can you engage suppliers and support them to achieve the agreed upon end goal.The Scope 3 Upstream Action Plan recommends the following North Star Ask:Suppliers to set Scope 1-3 targets/commitments, aligned with a 2050 net-zero pathway Systematic emissions reduction activities and decarbonization as per those targetsBoth of those core asks are embedded in the Scope 3 Upstream Action Plan as well. ## While we recommend the overarching North Star to be the same across supplier types, we acknowledge certain nuances across supplier types: ### Non-fossil fuel sector companies Should either follow the Sectoral Decarbonization Approach (SDA), or the Absolute Contraction Approach (ACA) to set science-based targets. For companies in some sectors, such as power generation, iron & steel, cement, forest, land and agriculture, and maritime transport, the SBTi has developed specific methodologies, guidance, tools and requirements to help through the target-setting process. ### Fossil fuel companies Currently cannot set science-based targets since the sector-specific pathway is still under development. The SBTi is developing a target setting standard for oil and gas companies. The SBTi clearly defines companies that can and cannot commit to the SBTi until the fossil fuel method is finalized here. ### SMEs SMEs are encouraged to set targets as per the SME Climate Commitment’s three asks of halving greenhouse gas emissions before 2030, achieving net-zero emissions before 2050, and disclosing progress on a yearly basis. Depending on the sector you operate in, additional North Star Asks can be communicated to your suppliers – either as firm targets or as aspirational targets. For example,Product Carbon Footprint (PCF): allowing you to fine-tune your Scope 3 emissions baseline and make informed procurement decisions (i.e., by choosing one supplier over another, based on the reported PCF). For more information about a PCF and a seamless data exchange with suppliers, kindly refer to chapter 4.2.1 “Establish Supplier and Category Emissions Baseline”. Net-Zero Transition Plan: a comprehensive transition plan outlines how your company is planning to transform its business operations to prepare for a net-zero future. The Transition Plan Taskforce is currently developing a framework outlining the critical key elements of a best-in-class transition plan. For further details, please refer to the Transition Plan Taskforce (TPT) Disclosure Framework and Implementation Guidance. Other sector-specific metrics: a renewable electricity target can e.g., encourage suppliers to "green" their electricity consumption and, therefore, reduce their Scope 2 emissions.However, in terms of supplier asks, "less is oftentimes more” as you don't want to overwhelm your suppliers with targets and reporting requirements. The number of asks to be included in the North Star should therefore be carefully evaluated. ## Step 2: Define the Supplier Engagement Journey Setting an ambitious North Star is usually complemented by a holistic approach to align actions towards the ask. To provide a practical example: setting yourself the target of running a marathon isn’t enough to successfully complete it. You should design a tailored training approach with interim goals, consistent progress tracking, and healthy lifestyle changes. Similarly, achieving climate goals is a journey that requires a systematic approach and plan with practical milestones.The typical supplier journey has stages progressing in ambition and complexity to reach the North Star Supplier Ask. As described in the previous chapter, at the North Star stage, suppliers should have Scope 1-3 targets and systematic emissions reduction activities. Getting to the North Star is a journey which may look different for different supplier types. We recommend a supplier journey along 4 steps: Foundational, Advanced, Leading and the North Star Supplier Ask. In the following, we will elaborate on the key asks across each step. *Featured content group* Foundational: Scope 1-2 Emissions Disclosure For all supplier types, the main outcome at this stage is measuring and reporting emissions. Suppliers should calculate their emissions themselves and disclose their results to you. Please refer to the section “for suppliers” to see how companies can start to measure their own emissions.Once suppliers know their emissions baseline, reduction quick wins are simple and easy steps that companies can take to reduce emissions, even without substantial mitigation know-how or expertise.Please refer to Chapter 3 – Net-Zero Journey for Companies, for concrete quick-win reduction levers. In addition, in Step 2 in Chapter 3.3.2 “Engage suppliers and kick-start their Net-Zero Journey”, we outline how you can support your suppliers in identifying concrete decarbonization levers.Illustrative quick wins across emissions Scopes include:Scope 1: switching your car fleet to electric vehicles. Scope 2: sourcing clean power, for example, through Power Purchase Agreements or Green Utility Contracts to increase the share of green electricity. Scope 3: supplier engagement, for example, encouraging your suppliers to increase the share of recycled materials or green power.Advanced: Set emission reduction targetsWhile the overarching objective is the same across supplier types, there are some nuances in suppliers’ ability to set targets.Non-fossil fuel suppliers should have Scope 1-3 science-based targets and systematic reduction activities, meaning that targets should be aligned with a 2050 net-zero pathway (for more information on science-based targets, kindly refer to the respective definitions’ section or SBTi’s sector-specific guidance here.). Systematic Reduction Activities refer to a systematic plan to reduce emissions in line with science-based targets. This requires deeper mitigation know-how and expertise compared to reduction quick wins. Examples of systematic reduction activities include:Scope 1: replacing a gas with an electric boiler.Scope 2: solar panels combined with long-duration energy storage solutions for 24/07 matching and deep electricity decarbonization.Scope 3: product innovation to improve material and energy efficiency of the products you sell.Fossil fuel suppliers should set non-science-based Scope 1-2 targets. Fossil fuel suppliers can currently not set science-based targets since there are no science-based pathways for the sector available yet. However, guidance will be released at the end of 2024. Until then, such suppliers should be encouraged to set ambitious reduction targets.SME suppliers at this stage should set targets as per the SME Climate Commitment. Companies abiding by the SME Climate Commitment pledge to: Halve their greenhouse gas emissions before 2030 Achieve net-zero emissions before 2050 Disclose their progress on a yearly basisThese asks are set by the SME Climate Hub, which is a global initiative to empower small to medium-sized companies to take climate action. The Climate Hub bridges the gap between corporations and SMEs by providing a pathway to reduce SME emissions. For more free tools and resources for SMEs, refer to the SME Climate Hub here.Leading: Double down on emission reductionsSimilar to the previous stage, the overarching objective is the same across supplier types. At the same time, differences in decarbonization ability results in minor nuances in the exact supplier asks:Non-fossil fuel suppliers at this stage should have a Net-Zero Transition Plan. A comprehensive Net-Zero Transition Plan goes beyond emissions reductions and includes other elements as per emerging guidance. For guidance, see for example The Transition Plan Taskforce’s Disclosure Framework detailed here.Fossil fuel suppliers at this stage should set non-science-based Scope 3 targets and have systematic reduction activities. Measuring and reducing Scope 3 emissions for a fossil fuel company is complex, especially without a decarbonization pathway available. Therefore, Scope 3 target setting comes at a later stage compared to non-fossil fuel companies. In addition, the supplier should set up a systematic plan to reduce emissions in line with targets.SME suppliers at this stage should have systematic reduction activities. These systematic reduction activities require deeper mitigation know-how and expertise compared to reduction quick-wins and will likely need your support.Once the steps of the supplier engagement journey have been defined, it is time to communicate the North Star ask, as well as the journey to get there, to suppliers. ## References to key resources and tools (Click below to open the links for more information) ### The science-based targets initiative (SBTi) provides sector-specific guidance for science-based targets, excluding the fossil fuels industry. ### Together for Sustainability (TfS) Academy: self-paced sustainability learning modules free for all employees of Together for Sustainability members and selected suppliers. ### SME Climate Hub: a global initiative to empower small to medium-sized companies to take climate action. ### Transition Plan Taskforce (TPT) Disclosure Framework: a sector-neutral disclosure framework for companies and financial institutions to develop gold-standard transition plans. ### Transition Plan Taskforce (TPT) Implementation Guidance: recommendations and steps companies should take to develop a transition plan, as well as when, where and how to disclose their plan. ## 3.3.2 Engage Suppliers and Kick-Start their Net-Zero Journey To facilitate true change, engagement and dialogue with your suppliers are needed. Setting clear expectations is important so suppliers are aligned with your vision.Communicate with your suppliers in advance about your expectations and how you will engage them along the journey. Develop a category-specific engagement approach and mitigation levers Fi.nally, begin your targeted outreach to prioritized suppliers. For more details on how to prioritize and segment suppliers, please refer to Chapter 3.2 “Select and Segment Suppliers”. Step 1. Clearly communicate the North Star Ask in advanceThe initial call to action comes when you inform all your suppliers about the North Star and obtain their buy-in. You should share where you want them to be when, encourage them to commit to the goal, and outline how you will engage them until then. You should also communicate new requirements and how that would change procurement policies going forward.A recent survey of 90 members of the WEF’s Alliance of CEO Climate Leaders determined that close to 90% of all members applying this measure as part of their supplier engagement find it highly effective in mobilizing supplier action.After setting the expectations and sharing initial information, further dialogues should be initiated to elaborate why the North Star is the right ambition to aim for and describe how it can be reached.One of the key arguments in favor of ambitious climate action is increasingly stringent regulation. The European Union has updated ESG related reporting requirements, so companies are expected to step up ambition and develop detailed climate strategies.Step 2: Develop a category-specific engagement approach and mitigation leversSuppliers in different categories have differing decarbonization levers and abilities to decarbonize. Because of those differences, it is important to develop a tailored engagement approach for each category and support your suppliers with tangible decarbonization recommendations.As a starting point, eight major levers can abate supply chain emissions. Decarbonizing value chains will often draw on a combination of these levers. For emission-intensive procurement categories, it can make sense to co-develop concrete decarbonization strategies with suppliers. This will enable you to recommend them clear decarbonization levers which can accelerate their emissions reductions.Imagine you are a TelCo company and are working with manufacturers of antennas and routers. Both product categories have different emissions drivers. You should therefore identify tailored decarbonization levers that address the main emission drivers in each category. This way, you can give your suppliers very clear recommendations on what they should do, to bring down their product carbon footprints:Antenna emissions are driven by raw materials whereby aluminum accounts for half of material emissions. Emissions could be reduced by using recycled aluminum, substituting aluminum with other material, or reducing the amount of aluminum used. On the other hand, plastic is the largest emissions driver for a router. As a result, increasing the share of recycled plastic, increasing bio-based material, and reducing component sizes could be ways to reduce router emission footprints.In the process of defining category- and supplier-specific levers, you can also consider mapping suppliers on feasibility and ease of implementation. Decarbonizing aluminum might be more feasible if the supplier is in a country with policies rewarding decarbonization. On the other hand, aluminum might be more difficult to decarbonize if the supplier’s region of operations has less developed policies. Step 3: Targeted Outreach to Prioritized SuppliersSuppliers that were prioritized from the “Segment and Select Suppliers” chapter should be the focus of outreach. Meet with your targeted suppliers to examine their current key performance indicators. You will need to work with them more individually to understand where they currently stand, establish the timeline to reach the North Star, and demonstrate how you can help them achieve those milestones through continuous engagement. For more information on supplier engagement, please refer to the SBTi Supplier Engagement Guide here. The guide describes five general stages of the supplier engagement journey and how they can be implemented. Start by understanding the supplier’s status and needs. Design the high-level engagement program and align on resources made available to the supplier. Company resources, such as relevant personnel, IT solutions or other support levers (e.g., educational webinars or training), should be incorporated into the supplier engagement program. Contributions from several functions may be required to support suppliers in different ways, including:Procurement team for communication and engagement with suppliers, with the category manager likely serving as the key point of contact. Sustainability division for project planning and monitoring. Finance team to approve monetary incentives. Legal team to review and grant approval on contracts with suppliers, e.g., NDA for emissions data. IT team for technical support, e.g., IT could add a sustainability module to the existing supplier portal where suppliers can easily input data. Third-party service providers, such as auditors and software solution providers.Category managers then reach out and take the lead in setting up individual meetings to provide more details on the supplier journey and discuss the next steps. ## As part of next steps, an engagement and support plan can be crafted, where you develop: ### 1. A timeline with key milestones, outlining where you expect the suppliers to be when. A timeline with key milestones, outlining where you expect the suppliers to be when. Start by aligning the program’s purpose and North Star with the supplier. As per the Scope 3 Upstream Action Plan, this includes setting Scope 1-3 targets aligned with a 2050 net-zero pathway, i.e., targets that are in line with and aim to decarbonize in accordance with this pathway. After aligning on the North Star, align on high-level plans to reach the end goal.Instill a sense of agency to suppliers so they can understand why their actions matter. Suppliers should understand that if they continue along their current path, supply chain emissions will grow by X% in the next Y years. However, if following through with the net-zero journey, they can help reduce emissions by Z% instead. ### 2. Concrete actions you expect suppliers to take, and how progress will be monitored. As part of the engagement plan, you should outline abatement levers and reduction quick wins that you expect your supplier to tackle. For example, an abatement lever of 100% renewable electricity in steel processing could be broken down into more achievable initiatives. The supplier’s role could be to ensure that your company’s production sites achieve 100% renewable electricity by 2025.Align with suppliers on the report frequency, data granularity, and the support personnel and tools needed. In designing and sharing the timeline, you could leverage a pilot program or grace period so suppliers can reasonably accomplish the goals within the time frame. For example, suppliers that fail to achieve a decarbonization target could receive a warning with a grace period and increased support. ### 3. Engagement and support levers you will unlock for suppliers, depending on where they are in their net-zero journey. These levers could include educational webinars and training sessions, access to different carbon accounting tools, financial support, collaborative projects, etc. CDP offers the Bitesize Sustainability Webinar Series, a series of 30-minute webinars to improve understanding of different sustainability topics and ask experts questions. Topics covered in webinars include increasing carbon accuracy, technologies to accelerate the journey to net zero, the importance of assurance, and business action on climate change mitigation and adaptation. CDP also offers an annual Disclosure Workshop series with regional events. The Disclosure Workshops offer support on CDP reporting guidance, science-based targets, credible transition plans, and more. Free recordings and slides from past workshops can be found here.The Greenhouse Gas Protocol hosts a Corporate Standard Training as an entry-point for corporate GHG emissions accounting. Participants gain knowledge and skills in areas such as GHG accounting and reporting principles, setting boundaries, tracking emissions, and more. Webinar recordings and training materials can be found here.The SME Climate Hub has a free online training course called ClimateFit designed to help SMEs reduce carbon emissions. The self-paced course includes seven key topics for SME climate action, as well as interactive activities and quizzes. The SME Climate Hub also offers several additional tools and resources for SMEs. For more detailed information on levers, kindly refer to the chapter on “Engage and Support Suppliers”. *Featured content group* ## References to key resources and tools Click below to open the links for more information ### Schneider Electric’s The Zero Carbon Project strives for a Net-Zero supply chain through capacity building, thought leadership, resources, and handholding. Suppliers are encouraged to quantify emissions, adopt decarbonization goals, and deploy action plans. ### European Sustainability Reporting Standards (ESRS) E1 covers climate change requirements. ### The Corporate Sustainability Reporting Directive (CSRD) defines a uniform sustainable disclosure standard. ### Non-Financial Reporting Directive (NFRD) requires companies in Scope to publish a non-financial report on ESG performance. ### The SBTi Supplier Engagement Guide defines five main stages to engage suppliers, and it also provides additional resources for supplier engagement.