## 3.5 Build the Enablers 3.5.1 Unlock the Process3.5.2 Unlock the People and Skills3.5.3 Unlock the Tools and Systems ## 3.5.1 Unlock the Process Embedding sustainability into your procurement strategy encompasses multiple processes in your organization. While previous chapters covered how to assess the sustainability performance of your existing suppliers and help them on their net-zero , this chapter outlines how to assess the sustainability performance of potential and new suppliers.Embedding sustainability into four critical procurement processesIncorporating sustainability in your organization’s procurement processes goes beyond merely setting targets for your suppliers. It requires a holistic approach in which sustainability practices should be embedded across all procurement processes, spanning from the initial supply market scanning process to contractual commitments and post-procurement evaluations. ## In the following section, we will elaborate on how your organization can embed sustainability into four key areas of your procurement process: ## Step 1: Distribute RFI documents to potential suppliers Distribute RFI documents containing sustainability-related questions to potential suppliers to get a preliminary overview of suppliers’ sustainability commitments and ambitions. Ensure the sustainability-related questions are aligned with your: (a) Internal sustainable procurement policies and (b) Scope 3 Upstream Action Plan.The questions should also vary depending onThe Supply Chain Tier: A supplier further up in the value chain (e.g., a Tier 3+ supplier such as a mining company) has a shorter internal supply chain. Hence, it may be less complex to measure PCF compared to companies further down in the value chain.The operating sector: Targets for input materials may be more relevant for a Steel Processing company than for a Financial Service Company. Concrete examples of relevant questions to include can be found at the beginning of this chapter, at the relevant definitions and descriptions. ## Step 2: Evaluate and shortlist potential suppliers Evaluate the suppliers’ capabilities and alignment with the organization’s requirements, and particularly how their sustainability practices are aligned with your organization. In this step, weighting your sustainability criteria is critical. If you e.g., have requirements for your suppliers’ ambition on prevention of deforestation, allocating additional weight to this parameter in your evaluation can be beneficial. In the exhibit below you can see an example of how sustainable criteria can be considered in the RFI stage: ## Step 3: Update your sourcing process by embedding sustainability-related questions in RFP If the shortlisted suppliers demonstrate satisfactory sustainability practices that align with your internal goals and requirements, a request for more details can be appealed through an RFP document to receive formal tenders from relevant suppliers. This document should contain sustainability-related questions that are more detailed and complex than in the RFI process as it seeks to uncover and verify detailed information about the supplier’s sustainability goals, commitment, and performance. Thus, it’s important to tailor them to the specific project and supplier under consideration. ## Step 4: Embed sustainability-related questions in the RFP evaluation criteria In the RFP process, the evaluation of sustainability-related questions is more specific and evidence-based, as suppliers are asked to provide detailed information and supportive documentation to their sustainability claims. This should be reflected in the evaluation process, following a similar approach as in the RFI evaluation process, where each sustainability criterion should be weighted accordingly. Based on this, you can identify which supplier appears most suitable for the specific project and hereafter proceed to the contractual agreements. In the graphs below you can see an example of how sustainable criteria can be considered in the RFP stage: ## Step 5: Include ESG clauses into supplier contracts When drafting contractual agreements, including ESG clauses into such contracts can efficiently encourage suppliers to comply with your organization’s sustainability criteria. Depending on your internal criteria, the maturity of your supply chain and the nature of the operating industry this can be included in two ways: (1) as a mandatory clause or (2) as a voluntary clause. ### Mandatory clauses Incorporating mandatory ESG clauses into supplier contracts makes your suppliers legally obliged to comply with your criteria, which efficiently secures commitment. Additionally, it enhances consistency by setting a clear baseline for all suppliers, ensuring standardization across your supply chain. Finally, it also provides full transparency of your supply chain which can be an effective hedge against operational disruption.However, as suppliers likely are in dissimilar maturity stages and operate in various industries, having mandatory requirements may not be applicable nor feasible to all suppliers. ### Voluntary clauses Including voluntary ESG clauses in supplier contracts encourages suppliers to fulfill your criteria but does not legally require them to comply.It provides a more flexible and modified approach as it encompasses all suppliers regardless of maturity or industry.Moreover, it may nurture incremental incentives and collaboration among suppliers as they are not bound by strict requirements, which in turn can lead to higher supplier engagement and Buy-in.Voluntary clauses, however, compromise the level of standardization otherwise achieved with mandatory requirements. Your organization must, therefore, choose the approach that is most appropriate to your supply chain. Below, we have provided examples of potential ESG clauses to include in your supplier contracts (either as mandatory or voluntary). ## Step 6: Track supplier performance Continuous assessment and monitoring of your supplier’s sustainability performance is critical to your organization for several reasons.Firstly, it enables your organization to track whether your suppliers continue to comply with your standards and adhere to potential new regulations.Secondly, it allows you to track suppliers’ progress and improvement on criteria of interest.Finally, it demonstrates commitment and engagement with your suppliers which fosters a culture of accountability and improvement.Data for re-assessment should be collected and evaluated at least annually from suppliers. In the graph below you can see an example of how sustainability criteria can be considered in your Supplier Performance Evaluation: *Featured content group* ## References to key resources and tools ### CDP: The global disclosure system for reporting and managing emissions. Use this to disclose and report your organization’s emissions and/or to benchmark or assess the emission profile of relevant companies or industries. ### EcoVadis: Allow companies and suppliers to assess and rate their sustainability performance. Use if you want to enhance the transparency of your supplier’s sustainability performance or utilize EcoVadis ratings in your supplier selection. ### SEDEX: Supplier Ethical Data Exchange is a collaborative platform for sharing ethical and responsible sourcing practices in supply chains. Use it to assess the ethical and social performance of current and potential suppliers. ### TCO Certified: Sustainability certification for IT products. Use in your IT procurement process to identify and select the most sustainable options. ### EPEAT Certification: A global Type-1 ecolabel for technology products. Use in your technology procurement process to identify and select the most sustainable options. ## 3.5.2 Unlock the People and Skills It’s important to unlock people and skills because the mandate of procurement teams will change significantly. The demand for addressing sustainability-related issues from consumers, regulators, investors, etc. continues to rise. Procurement teams will have to engage their suppliers on sustainability-related issues, something they have – in most cases – not done to this extent before. We need to equip them with the right capabilities and skills to set them up for success.To unlock people and skills, we need to develop a change management program that lays the foundation and prepares them for that expanded mandate. Through this program, you should:Explain why climate action is critical Articulate the Net-Zero journey and North Star Activate your procurement team through upskilling, and Embed skills and capabilities within your teams to ensure lasting change.Activating the new supplier engagement model outlined in previous chapters will necessitate a major revamp of existing procurement practices, i.e., the implementation of a new “green procurement model.” Below, we have provided a checklist for integrating a green procurement model into your organization. ## Step 1: Explain why climate action is critical To get the procurement team on board, you need to explain why the transition is important from the corporate and climate perspective. There is a strong business case for change. Competitive, customer, and market factors are incentivizing companies to transition towards a net-zero business model. Building resilient supply chains for the future can come with benefits like increasing operational efficiency and cutting long-term costs. Setting ambitious emissions reduction targets – also for Scope 3 Upstream Emissions – is becoming the new normal, and procurement teams should be upskilled to deliver on the targets. ## Step 2: Articulate the Net-Zero Journey and North Star Procurement teams have an important role to play in leading and executing supplier engagement. Once the team understands the “why” (i.e., climate action is critical), they should be onboarded on the “how”, i.e., actionable steps on how to tackle Scope 3 upstream emissions.Tell your procurement teams where the journey is going - the North Star Ask. As per the Scope 3 Upstream Action Plan, procurement teams should engage ~67% of their supplier base, based on emissions, by 2028. The objective of this engagement effort will be to support suppliers to set Scope 1-3 targets (aligned with a 2050 net-zero pathway) and decarbonize as per those targets. Please refer to Chapter 1.2 “The Scope 3 Upstream Action Plan” for more details on the action plan’s key elements.Tell your procurement teams how the suppliers can reach the North Star Ask. In addition to highlighting the end goal (i.e., the North Star Ask), tell your procurement teams about how suppliers can get there – i.e., through dedicated supplier engagement journeys, depending on supplier type. Please refer to Chapter 3.3 “Launch your Supplier Ask” for more details on the supplier journey and the North Star.In addition to clearly communicating your organization’s goals, you should also discuss the internal sustainability targets and key performance indicators to stay on track with the journey. ## Step 3: Activate your procurement team through upskilling To ensure a successful implementation of your newly designed green procurement model, equipping your procurement leaders and employees with the right skills and know-how is essential. There are fourkey activities you can take to upskill your employees.1. Understand what skills and capabilities you need for the green Procurement Model. In general, the six values expected from Procurement are savings, innovation, quality, sustainability, speed, and risk mitigation. Traditional metrics, like EBIT savings, days cycle time, or return on procurement investment, might not fully reflect sustainability considerations. New sustainability teams need to look at other factors to determine how to embed decarbonization into procurement strategy.2. Survey your employees to understand their sustainability knowledge gap or identify areas of interest. Surveying your employees will enable you to assess the current knowledge level among your employees, which will facilitate a more informed approach to upskilling. As an alternative to a survey with specific questions, you can provide employees with a more open-ended response form to share their questions, doubts, or areas of interest regarding sustainability topics. Understanding the knowledge gap or areas of interest will help identify and tailor priority areas for the subsequent training sessions, allowing for a more efficient and engaging experience. Below, you can find potential topics to include in an employee survey: General sustainability knowledgeClimate-related risks and opportunitiesGreenhouse gas emissionsSustainability reporting and metricsCompany sustainability strategy and policiesCompany procurement strategy and policies3. Educate your employees through trainings and workshops or hire new employees. You can enhance your employees’ knowledge about sustainability, climate ambitions and requirements through structured training sessions. Involving your employees will enhance engagement and ownership which, in turn, will augment motivation, commitment and implementation. Consider initiating both larger workshops and individual compliance trainings survey: Workshops: Conduct larger workshops on relevant topics to your organization and include elements such as group discussions, Q&A sessions, guest speakers, etc. to facilitate an effective and engaging training. Individual compliance and regulatory training: Use individual trainings to reinforce key points and ensure that your employees are aligned with the regulatory sustainability guidelines. Consider conducting this through reoccurring surveys as an integral part of your existing compliance training.If skills to conduct workshops are not available within the Procurement Team, involve members from other teams to support with workshops (e.g., usually from the Sustainability Team).Alternatively, you can also expand your team through hiring.Sustainability Procurement Managers may hold responsibilities such as identifying and driving opportunities for Procurement spend categories to ensure implementation of net-zero commitments. Job responsibilities may include, but are not limited to:Conducting sustainability assessments of suppliers, identifying areas for improvement, and working with suppliers on the Net-Zero journey. Developing and implementing initiatives with Procurement managers and suppliers, such as reducing product carbon emissions. Tracking project progress with suppliers through key performance indicators and reporting systems (e.g., annual integrated reports). Developing sustainable procurement policies with interdisciplinary teams to establish sustainability criteria in supplier selection and contracts. Ensuring procurement practices follow the company’s sustainability goals.Manage the relationship with external partners and systems, e.g., EcoVadis or Together for Sustainability (TfS).Training sustainability teams, Procurement managers, and other stakeholders for adherence to sustainability practices.4. Foster ongoing engagement and innovation through interdisciplinary teams. Embedding sustainability criteria into your procurement processes involves multiple stakeholders across your organization. Thus, ensuring that all stakeholders are represented fosters a more holistic approach to decision-making and results in more efficient procurement processes.It can be beneficial to create interdisciplinary teams to leverage different experiences and areas of expertise, which fosters knowledge sharing. For example, a member of the sustainability team can help to upskill the procurement teams by working together.When establishing your teams, it is essential to divide clear roles and responsibilities among the team members. In the graphic below, you can see an overview of which disciplinary functions are relevant to engage in your procurement departments and their respective contributions. See figure below. ## Step 4: Embed skills and capabilities within your teams to ensure lasting change To ensure that your new procurement model gets properly integrated and embedded in your organization, consider:Conducting recurring trainings and upskilling activities for leaders and employees to ensure that knowledge gets reinforced and updated recurringly.Establishing non-monetary incentives for achieving sustainability goals. Examples include employee awards, which can be an effective way of providing recognition for efforts toward your sustainability goals. While this can improve engagement and participation of employees, it also creates a culture where sustainability remains a focusLinking executive remuneration to sustainability criteria, such as a decrease in Scope 3 Upstream emissions. This can be a powerful monetary incentive to drive action.Engage in outside networks for best-practice knowledge sharing. Interacting and collaborating with other companies is an effective method to learn, collaborate, and update your organization’s sustainability competencies. Firstly, it allows you to access expertise and knowledge from peers or industry leaders through knowledge sharing. Secondly, it allows you to take part in collaborative problem-solving which may advance sustainability processes in your organization and operational industry further. Finally, it provides insights into industry trends and emerging sustainability regulations which ensures that your organization’s sustainability practices remain relevant, compliant, and updated. *Featured content group* ## 3.5.3 Unlock the Tools and Systems Digital tools and systems can standardize processes and increase efficiency. In this section, we will:Provide an overview of where and how you can leverage IT systems and tools to embed sustainability in your procurement processes, and Outline some of the key criteria to consider, when choosing an IT system or tool.Overview of sustainability-related IT systems and toolsThere are two main areas in which a company can leverage IT systems and tools to embed sustainability within its procurement processes. These areas include:Baselining Decarbonizing ## Step 1: Baselining 1. Supplier Emissions Profile Data collection is necessary to build the supplier’s emissions profile. Often, this step is one of the most challenging for companies given the vast amount of data to be collected (explore more here). Data collection should be prioritized for suppliers that are expected to have the most significant GHG emissions, and thus the most significant GHG reduction opportunities (BCG analysis).Ideally, you would collect primary supplier data to establish a first emissions baseline and assess sustainability maturity. If there is no primary data available, use secondary data as an interim solution, while working towards the collection of primary data.Primary data is defined by the GHG Protocol as data from specific activities within a company’s value chain. Tools for primary data include data solutions and platforms for collecting the supplier’s emissions information. Explore more here. Secondary data includes industry-average data and other data that is not from specific activities within a company’s value chain. Tools involved in secondary data collection include public data, predictive models, and emissions factor databases with aggregate data. Explore more here.2. Data ExchangeTo collect data, you can use tools with varying degrees of automation, ranging from manual data collection (e.g., excel file questionnaires) to fully automated and integrated solutions. Costs tend to increase with a higher degree of automation and integration. However, efficiency also increases as automated data collection is more scalable, and allows to track data sources and assumptions used. Solutions should be able to record data at a granular level and facilitate updates of data and emissions factors.Once the supplier’s data is collected, the data should be processed to extract meaningful insights and track and report changes over time. Data processing includes activities such as emissions calculation and reporting.3. Emissions CalculationDepending on the complexity of the company, tools for emissions calculation could range from a manual Excel, a software solution, or a solution embedded in data management systems. Two main types of tools can help suppliers understand their GHG inventory:Calculators that use collected primary data to generate GHG emissions estimates. For example, the GHG Protocol’s GHG Emissions Calculation tool provides free, Excel-based worksheets using emissions factor sources like the EPA, DEFRA, or IPCC. For more information, reference the GHG Protocol tools here. Simulators providing an estimate of GHG emissions, using secondary data. SMEs can particularly benefit from using these simulators as a starting point to identify hotspots in their Scope 1 and 2 emissions. For example, the SME Climate Hub developed a free Business Carbon Calculator to allow SMEs to estimate their full carbon footprints. For more information on the Calculator, please refer here. Explore more here. 4. Reporting toolsReporting tools should communicate emissions baselines to relevant stakeholders. Stakeholders often demand greater transparency on emissions, so data should be monitored and reported. Reporting tools can integrate reporting guidelines and frameworks so emissions can be reported in accordance with standards such as ISO 14064. Disclosure and evaluation platforms are other tools where calculated emissions can be disclosed. The WWF outlines a list of carbon accounting and reporting tools across various sectors here. ## Step 2: Decarbonizing Once data is collected and processed, performance improvement tools allow suppliers and procurement teams to implement and follow through on initiatives. Tools may be needed for activities under this step, including:Tools that monitor emissions trajectory and model scenarios, based on production plans, projected growth or different decarbonization initiatives. Tools that identify decarbonization levers, that is, possible actions to reduce a company’s emissions. Tools for target setting, including defining which objectives to set and selecting appropriate frameworks, such as those aligned with pathways set by the SBTi. Tools that are involved in creating a roadmap, that break down targets into initiatives across teams. Tools for monitoring progress and execution of initiatives. These tools could include software to manage regulatory compliance, enterprise risk, and sustainability data and activities. Software suites on the market might include additional, non-climate-specific functionalities. For example, environmental health and safety (EHS) software is a data management system to collect, store, and analyze information regarding occupational health and safety along with sustainability-related topics. RELEVANT SELECTION CRITERIA (see figures below)Before looking at the key selection criteria to assess and identify the right IT system / tool for a procurement team, two key aspects should be evaluated:Consider your objectives and needs. Understand what you are trying to achieve with the solution. Consider additional factors such as appetite for change, and capacity to implement and roll out the solution beyond your organization (i.e., with suppliers or other stakeholder groups). Consider supplier characteristics and needs. If you are considering rolling out a tool to your suppliers as well, consider the supplier’s maturity, sector, risk exposure, and size. All of these factors may impact the supplier’s ability and appetite to implement a new tool. The ability can also be considered by adapting the implementation timeline or communicating expectations clearly in advance.After these key aspects have been assessed, you can select your evaluation criteria, based on which you can assess short-listed tools. We recommend considering five key criteria.Functional capabilities across the key areas discussed earlier (i.e., data collection, data processing, and performance improvement). After having identified which key functional capabilities you are looking for, you can assess which capabilities are covered by the system/ tool provider, and how strong the provider’s offering is compared to competitors. Hosting type and its strengths and weaknesses. Tools and systems that are cloud-based have the advantages of faster deployment and speed to access, but security might be higher with on-premise usage. Explore more here. Technical considerations. Consider ease of implementation, e.g., how complex, and sophisticated is the tool? What’s the estimated timeline of deployment? Consider ease of use, e.g., does the tool require substantial training to fully understand its functionalities? Consider the tool’s integration capabilities, e.g., does the tool integrate external standards, such as the GHG Protocol? Could the tool be integrated with multiple enterprise systems? Enterprise applicability of the tool. What size, sector, maturity, etc. of companies are within the tool’s Scope of support? Financial costs of the tool, and whether the costs are Capex (i.e., mostly upfront) vs. Opex-driven. You can then benchmark and score different solutions depending on their performance across the short-listed assessment criteria. ## Case study: Unilever Unilever offers high-emitting suppliers access to tools and resources through the Unilever Supplier Climate ProgrammeUnilever’s Business Operations Sustainability team researched which tools and capability-building partners exist and selected the best fit for their suppliers. To select the appropriate tools, they segmented 35 pilot suppliers into three groups based on maturity. Suppliers just starting out on climate were offered an e-learning tool, the mid-range suppliers were given a tool that helped them learn how to calculate product carbon footprint, and the most climate-aware group was asked to share their existing data.Following the pilot, Unilever found that early-stage suppliers wanted to move beyond e-learning into actual data gathering and analysis, as well as target setting, and so Unilever provided a platform to help them develop their greenhouse gas emissions baseline and an emissions reduction plan. The more advanced suppliers asked for a more automated and industry-aligned way to share their product carbon footprint data. Unilever now mandates suppliers to follow WBCSD PACTv2 methodology to calculate and share their data. ## References to key resources and tools ### The WBCSD Scope 3 GHG emissions Data Roadmap provides an understanding of the available resources regarding GHG emissions through the value chain. ### The GHG Protocol’s GHG Emissions Calculation tool provides free, Excel-based worksheets using emissions factor sources like the EPA, DEFRA, or IPCC. ### The SME Climate Hub has developed a free Business Carbon Calculator to allow SMEs to estimate their full carbon footprints and find quick-win emissions reduction actions. ### CO2 AI Product Ecosystem is an end-to-end sustainability management platform to measure, decide, reduce, and collaborate on carbon emissions. ### Sphera provides end-to-end ESG performance and risk management solutions. ### PlanA is an end-to-end sustainability platform providing product capabilities such as emissions data collection, sustainability reporting, target setting, strategy improvement, and more.