Earth Day, observed on the 22nd of April each year, is a powerful call for environmental stewardship, and will see many manufacturers promote their sustainability efforts. Our Annual Sector Trends report revealed that one-third of manufacturers are likely to invest in Sustainable Technology in 2024, demonstrating that protecting the earth is a key priority in the sector. However, as manufacturers publicise their strategies, there is a key factor in a company’s environmental impact that is often overlooked and underemphasised: its suppliers.
The average manufacturer has hundreds of tier-one suppliers, extending to tens of thousands across the entire value chain. Even if the business itself is eco-conscious, monitoring the sustainability of this vast and complex network of vendors is difficult. Luckily, there are solutions available to ease the operational pressure, ultimately helping you cultivate a more environmentally-friendly supply chain and drive change in the industry.
Broaden the scope of sustainability
Manufacturers must focus on supplier sustainability to prove their environmental commitments are more than just lip service. Businesses that are serious about their sustainability refer to an acknowledged standard to measure their green efforts. The Greenhouse Gas Protocol (GHG) is perhaps the most reputable, used by more than 9 out of 10 Fortune 500 companies. Under this framework, businesses must consider 3 categories of emissions. Scope 3 covers indirect emissions and makes suppliers a key part of the picture.
Scope 3 emissions are related to purchased goods and services, including materials, components and parts. On average, supply chain emissions are 11.4 times higher than operational emissions, equating to 92 per cent of total GHG emissions. For a manufacturer of consumer packaged goods (CPG), this can be even higher; 98 per cent of toy manufacturer Lego’s emissions are Scope 3, for example. Any company not adequately tracking its supplier emissions is dealing with only a tiny fraction of its overall impact.
Organise to drive progress
Scope 3 emissions may be the most impactful, but they are also the most difficult to track, leading to fewer than 30 per cent of companies reporting meaningful Scope 3 emissions. A wide range of suppliers, often disparate across different business functions, means many companies find it challenging to even list every vendor they engage with, let alone how each one performs against science-based emission targets. This is where a strong supplier management tool becomes crucial.
A supplier management software solution creates a single source of supplier truth, where all vendors are gathered in one location for assessment; a key foundational step when it comes to providing accurate Scope 3 emissions data. A strong solution will facilitate regular structured supplier assessments to ensure adherence to environmental, social and governance criteria (ESG). With OneAdvanced’s Supplier Management solution, manufacturers can create category-based scorecards to compare how suppliers perform based on green credentials, allowing procurement leaders to take into account environmental factors when considering renewals or dividing spend.
Drive change in the supply chain
Often, suppliers might not be meeting emissions targets on first assessment, especially in niche markets and when dealing with smaller businesses. Manufacturers can take a proactive approach to bring their supply chain with them on the sustainability journey, by setting emissions reduction goals, sharing best practices and providing technical support.
Manufacturers can work hand-in-hand with suppliers to identify opportunities for reducing environmental impact throughout the supply chain. British snack food manufacturers Walkers have launched their Sustainable Farming Program, which will enrich the sustainable practices of the food manufacturing industry as a whole. Princes Group are another example of a food manufacturer cultivating sustainability in the supply chain. They work closely with their seafood suppliers to ensure high standards of sourcing are adhered to, and play an active role in industry debates over catch methods and sustainability. By engaging and innovating with suppliers and stakeholders, environmental objectives are taken to the next level.
Supplier Management allows you to set recurring reminders for your suppliers and tasks to encourage change. Though it may be tempting to discard suppliers falling below targets, encouraging their improvement - tracked in smart software - will help convert another business to a greener way of operating and raise the bar for the industry.
The road to a sustainable future is decidedly a collaborative effort. A manufacturing firm’s suppliers are its allies in this mission, and their credentials directly amplify or diminish environmental initiatives. This Earth Day, while celebrating strides in sustainability, manufacturers should take a moment to examine if they are fully accounting for Scope 3 impact. If not, there are software tools available that can help procurement teams engage and innovate with suppliers. Not only does this strengthen a business’s own sustainability story, but it also pushes the entire manufacturing sector towards a greener, cleaner horizon.
Live chat with OneAdvanced here as the fastest way to find out how we can help you revolutionise your supplier management, to raise sustainability standards.
