You might consider your company sustainable, but are your vendors? Whether you run a small family business or spearhead a large organization, everyone has suppliers that support their daily operations — and how they treat the environment says a lot about your business. It is crucial to audit your supply chain from the ground up to assess your enterprise’s carbon footprint. Here is how to conduct a supplier sustainability audit to see if yours support your environmental mission.
Why Audit Your Supply Chain?
Considering overall impacts on the climate, suppliers often account for over 90% of an organisation’s greenhouse gas emissions. Many companies are used to sweeping their Scope 3 emissions — those associated with supply chain activity — under the rug, creating sustainability initiatives that only target Scope 1 and 2.
However, it is becoming increasingly common for businesses to adopt evidence-based sustainability targets that address every link in the supply chain. These goals help enterprises keep their emissions below the level required to keep global temperature increase under 2° Celsius. This target is the overarching mission of the Paris Agreement. Adhering to it contributes to a more sustainable society and can even inspire corporate growth.
The Science Based Targets Initiative helps businesses — especially those that outsource their manufacturing — develop these types of goals. It requires them to set Scope 3 sustainability targets if their supply chain emissions comprise at least 40% of their overall emissions.
How Do Companies Measure Scope 3 Emissions?
Scope 3 emissions encompass everything from a vendor’s electricity and fuel use to how they package their products. Generally, the more vendors a company has, the greater its Scope 3 emissions will be.
Measuring supplier sustainability is a challenge because it encompasses so many metrics. However, there are two fairly accurate ways to do it.
The first is to calculate a vendor’s carbon footprint with actual data. The second approach is to model supplier sustainability using calculations and estimates from assessments of average emissions by sector. A supplier sustainability audit may combine both methods to give an enterprise a better understanding of its vendors’ environmental footprint.
Where does your company stand on Scope 3 emissions? If you do not know, it is time to audit your supply chain.
How to Conduct a Supplier Sustainability Audit
In general, a supplier sustainability audit follows these steps.
1. Assess Your Own Company
Before you audit your supply chain, assessing your own Scope 1 and 2 emissions is crucial. In addition to helping you know where you stand, it signals to your vendors that you are not out to get them. A self-assessment can create a sense of camaraderie between your business and your suppliers — you are partners on a mission to become more sustainable.
2. Make a List of Vendors
Assessing your suppliers is much easier if you know how many you have and what their names are. Time to get organised. Use supplier engagement software to list all your suppliers and their respective information in one place. During this process, you may even notice redundancies on your vendor list. It may be wise to let go of any extraneous suppliers before proceeding with the audit.
3. Prioritise
You may have hundreds of suppliers for different products or services. If so, determine which categories are most important to you. Decide which suppliers are most likely to implement changes, what influence you have over them and which actions will help your vendors become more sustainable. Determining this information can make a supplier sustainability audit easier and less stressful.
4. Ask for Information
The best way to understand your suppliers’ environmental impact is to ask them about it. When CDP — formerly known as the Carbon Disclosure Project — began collecting supply chain details from the world’s biggest purchasing entities, it spurred a movement for companies to audit their suppliers. Today, many partner with CDP to collect information from their vendors. You can also use software to send your vendors a sustainability questionnaire.
5. Grade Your Suppliers
Assign your vendors sustainability grades using the information you gathered from them. You can do this manually or use software to do it for you. A numerical or letter-based score helps you determine which suppliers to stay partnered with, which ones may need work and which to cut ties with.
6. Conduct Regular Audits
It is crucial to audit your suppliers regularly to see how they have changed — if at all — over time. A vendor that receives a failing grade upon initial inspection could become one of your best environmental partners after making a few changes.
A Team Effort
All companies, no matter their size, have vendors. These third-party suppliers are usually an organisation’s biggest source of greenhouse gas emissions. Consequently, it is imperative to audit your supply chain and assign vendors a sustainability score. By choosing different suppliers or helping vendors improve, enterprises can do their part to reduce their ecological footprint.
