In the world of carbon reporting, supplier engagement isn’t just a box to check—it’s a strategic necessity. It can transform a reactive supply chain into one that’s proactive, innovative, and capable of meeting the demands of a low-carbon future.
Supply chains account for 60% of global emissions, but fewer than 15% report on carbon due to limited resources or capabilities. Engaging suppliers at different maturity levels and collecting accurate carbon data remains a significant challenge.
As sustainability and transparency become critical for business success, traditional Supplier Relationship Management (SRM) approaches no longer suffice. Instead, businesses must foster deeper collaboration with the suppliers, moving beyond compliance to create shared goals.
The focus now is not only on how to engage with suppliers but why it’s essential. Engaged suppliers can become active partners in reducing carbon emissions and navigating new regulations like the EU CBAM (Carbon Border Adjustment Mechanism).
This heightened level of collaboration ensures that companies are not just meeting regulatory requirements but are leading in sustainability. Authentic supplier engagement becomes the driving force that turns compliance into a strategic advantage, positioning businesses for a more sustainable future.
What is Supplier Engagement?
Supplier engagement refers to building and maintaining a collaborative, strategic relationship with suppliers to ensure they’re fully aligned with the company’s operational and business goals. This engagement goes beyond basic supplier management, focusing on deep collaboration that leads to improved efficiency, product quality, innovation, and resilience within the supply chain.
Why is Supplier Engagement Important in Modern-Day Businesses?
It’s a critical factor in meeting sustainability targets. Engaged suppliers help businesses track and reduce their carbon emissions, supporting compliance with regulations like the EU CBAM (Carbon Border Adjustment Mechanism).
This makes accurate carbon emission reporting possible, ensuring businesses meet their environmental obligations. For industry leaders, adopting a robust supplier engagement strategy is essential—not just to stay compliant, but to lead in a world where sustainability is the new standard. Moreover, having a robust supplier engagement strategy in place will;
- Enhance Resilience: Engaging suppliers allows companies to better anticipate and mitigate risks across their supply chains. This means businesses can adapt quickly to changes, such as regulatory shifts or supply disruptions, ensuring smoother operations.
- Improve Data Accuracy: Active supplier engagement provides companies with more accurate and reliable data, especially around carbon emissions. This precision helps produce credible carbon reports, which are in increased demand by stakeholders and regulators.
- Offer Compliance and Competitive Edge: Strong supplier engagement helps companies meet regulatory requirements like the EU CBAM more effectively. This not only ensures compliance but also positions businesses ahead of competitors by aligning with evolving sustainability expectations.
- Seamless Collaboration and Innovation: When suppliers become strategic partners, they are more likely to share innovative solutions and insights. This collaborative approach can lead to the development of new products, processes, and efficiencies that align with both environmental and business goals.
- Build Long-term Partnerships: Building deeper relationships with suppliers fosters trust and alignment with long-term sustainability goals. This shift from transactional interactions to collaborative partnerships helps create a more stable and transparent supply chain, supporting a company’s broader vision for a sustainable future.
7 Steps for a Successful Supplier Engagement Strategy
A robust supplier engagement strategy is not easy to build and requires structure and strategy. It demands a clear framework that prioritises mutual goals, consistent communication, and accountability at every step. Here are essential elements to consider when designing an effective supplier engagement strategy:
Step 1: Goals & Alignment
Setting clear traceability and sustainability goals with measurable Key Performance Indicators (KPIs) is foundational for aligning suppliers with your organization’s standards. These goals help ensure that everyone in the supply chain works toward consistent, mutually beneficial objectives.
Example:
Apple has set ambitious goals for achieving carbon neutrality across its entire supply chain by 2030. To support this, they require suppliers to align with renewable energy targets and report progress on reducing emissions. Apple provides guidance to help suppliers meet these environmental standards.
Step 2: Collaboration & Partnerships
Building collaborative partnerships with suppliers involves encouraging open communication, aligning on shared goals, and engaging in joint problem-solving. This approach fosters innovation and efficiency, making suppliers true strategic partners.
Example:
Unilever’s “Partner to Win” program is designed to foster strong supplier relationships. Through this program, Unilever collaborates with suppliers on sustainability initiatives, such as developing recyclable packaging. They engage suppliers in product development and innovation, holding events where suppliers present ideas to advance Unilever’s sustainability goals.
Step 3: Understanding the Resources
Identifying obstacles in the supply chain and providing resources to address them is critical for fostering a productive supplier relationship. This might involve offering technical support, training, or tools to help suppliers meet standards or overcome operational challenges.
Example:
Nestlé supports smallholder farmers who supply raw materials by offering resources and training on sustainable practices. Through their Creating Shared Value initiative, Nestlé helps suppliers improve yield and quality while advancing ethical and environmental practices in their sourcing.
Step 4: Data Collection & Reporting
Digitizing data collection and implementing traceability platforms enables transparent reporting and efficient monitoring. This step ensures real-time insight into supplier performance, compliance, and product traceability throughout the supply chain.
Example:
Inditex, Zara’s parent company, employs RFID technology to track product movements from supplier to shelf. This traceability system ensures that Zara can track inventory, improve supply chain transparency, and monitor supplier compliance with ethical sourcing and quality standards.
Step 5: On-The-Ground Support
Providing in-field support to suppliers helps them implement processes and adhere to quality and compliance standards. On-the-ground support can include training, process optimization, and direct oversight from experienced teams.
Example:
Nike provides on-site support to its suppliers through its Manufacturing Sustainability Index (MSI). Nike’s sustainability team works directly with suppliers to help improve labor practices, enhance working conditions, and reduce environmental impacts, ensuring suppliers meet Nike’s high standards.
Step 6: Incentives & Benefits
Incentivizing suppliers by recognizing and rewarding high performance can motivate them to align more closely with your goals. This could involve bonuses, award programs, or additional business opportunities for top performers.
Example:
Procter & Gamble’s (P&G) “Supplier of the Year” and “Partner of the Year” awards recognize outstanding supplier performance. P&G gives special recognition to suppliers who meet high standards in sustainability, quality, and innovation, reinforcing the importance of these goals across its supply chain.
Step 7: Improvement & Feedback
Regular feedback and data-driven insights allow suppliers to continuously refine processes. Open communication ensures that suppliers can provide input and adapt to changes, creating a cycle of ongoing improvement.
Example:
Toyota’s “kaizen” philosophy of continuous improvement extends to its suppliers through the “Toyota Supplier Partnering Hierarchy.” Toyota actively seeks feedback from suppliers, fostering a culture of shared problem-solving and operational enhancement, which has helped them establish a highly reliable and efficient supply chain.
8 Tips for an Effective Supplier Engagement Strategy
- Keep Communication Open and Flowing: Build trust with regular touchpoints, supplier summits, and digital tools that keep everyone in sync.
- Join Forces for a Greener Future: Partner on sustainability goals like waste reduction and renewable energy adoption for shared impact.
- Leverage Tech for Clearer Tracking: Use professional platforms to integrate supplier data, enhancing reporting and accountability.
- Deliver Feedback That Drives Action: Provide concise, constructive feedback and encourage two-way communication for ongoing improvement.
- Equip Suppliers for Success: Invest in training and knowledge-sharing to strengthen supplier capabilities and elevate standards.
- Build Lasting Partnerships, Not Transactions: Foster dependable, long-term relationships by recognising loyal, high-performing suppliers.
- Set the Standard with Smart KPIs: Define clear KPIs to ensure alignment on goals, making it easy to measure and adjust.
- Stay Agile in a Changing World: Embrace flexibility to adapt to market shifts together, ensuring a resilient partnership.
As businesses intensify their focus on sustainability, having the right tools to manage supplier relationships and environmental impact is essential. Mavarick steps in as a comprehensive solution, enabling seamless integration of supplier data into carbon tracking and reporting systems. With features like real-time data tracking, automated reporting, and customisable dashboards, this platform streamlines supplier management, making it easy to align on sustainability metrics and compliance standards.
Supplier Engagement and Its Impact on Carbon Emission Reporting
Supplier engagement plays a crucial role in carbon emissions reporting, especially in managing Scope 3 emissions, which are often up to 11 times higher than direct emissions. In industries like consumer goods, upstream emissions—mainly from purchased materials—can make-up 70–75% of total Scope 3 emissions.
This highlights the need for companies to collaborate with suppliers on decarbonisation, such as by using sustainable materials or improving energy efficiency.
And rightly so, companies like Walmart and L’Oréal show how effective this can be. Walmart, for example, cut emissions by over 28 million metric tons, roughly equivalent to taking 5.9 million cars off the road for a year.
This calls for companies to consider strong, ongoing engagement with suppliers to drive sustainability across the supply chain. By setting clear reduction targets, investing in sustainable practices, and providing the necessary resources, organisations can not only reduce emissions but also enhance transparency and resilience throughout their operations.
Implications of EU CBAM on Supplier Engagement
For EU companies to comply with the Carbon Border Adjustment Mechanism (CBAM), supplier engagement is critical. With CBAM’s focus on embedded carbon emissions in imported goods, companies must collaborate closely with suppliers to gather precise emissions data.
Establishing strong, open lines of communication helps ensure suppliers understand the necessary data requirements and the impact of non-compliance, especially as reporting standards shift to require actual emissions data in 2024.
Note
Supplier engagement strategies, such as providing tools for accurate emissions tracking, offering training, and setting clear reporting expectations, can facilitate data collection and compliance.
Additionally, adopting digital platforms for real-time data sharing can streamline emissions reporting, reduce risks of errors, and build a more transparent and sustainable supply chain—key for meeting both CBAM and broader corporate sustainability goals.
For a deeper dive, go through our blog on EU CBAM Reporting which talks about the key aspects of compliance, data requirements, and strategies for aligning with the EU’s Carbon Border Adjustment Mechanism (CBAM)
Case Studies and Real-World Examples
1. ASDA Supplier Engagement
ASDA has taken a proactive approach to reinforce supplier relations by integrating carbon reduction goals into its supply chain strategy. ASDA encourages suppliers to improve environmental performance by setting clear reporting expectations and collaborating on emissions reduction.
This engagement approach has enabled ASDA to advance its sustainability goals while helping suppliers align with lower carbon standards, an approach that strengthens compliance and reduces Scope 3 emissions, which represent indirect emissions from the supply chain.
CDP’s Supplier Engagement Leaderboard
The CDP Supplier Engagement Leaderboard highlights companies that excel in engaging their suppliers to achieve environmental and carbon reduction targets. CDP’s data shows that engaged suppliers are instrumental in helping businesses reduce emissions, with companies on the leaderboard collectively contributing to millions of tons in emissions reductions across their supply chains. This leaderboard celebrates companies making significant headway in Scope 3 emissions reporting and supplier collaboration, offering a model for others striving to meet rigorous carbon accountability standards.
IKEA’s Supply Chain Sustainability Initiatives
IKEA has focused on reducing carbon emissions across its value chain, engaging over 1,600 direct suppliers to switch to renewable energy sources. With around 60% of IKEA’s climate footprint tied to its supply chain, IKEA’s strategy includes helping suppliers access renewable electricity, thereby decreasing the overall carbon impact of its products. By empowering its suppliers to make sustainable shifts, IKEA not only reduces emissions but strengthens the resilience and environmental performance of its global supply chain.
These cases demonstrate how strong supplier relations and targeted sustainability programmes are essential for businesses aiming to meet environmental targets and navigate new regulations like the EU CBAM, which increasingly demands robust emissions data from supply chains.
Conclusion: Is Supplier Engagement Worth It?
Supplier engagement goes beyond compliance—it strengthens resilience, increases transparency, and drives sustainability. By fostering close supplier relationships, companies can reduce emissions, improve data accuracy, and manage supply chain risks, ultimately aligning with long-term net-zero goals. Investing in these partnerships is a powerful strategy that supports both growth and sustainability.
The question is: can businesses afford not to make supplier engagement a priority?
Frequently Asked Questions (FAQs)
1. How does supplier engagement contribute to a company’s carbon reduction goals?
Supplier engagement brings suppliers into the sustainability conversation, enabling shared carbon reduction strategies. By collaborating on emission goals and data accuracy, companies and suppliers can co-create practices that drive impactful reductions across the entire supply chain.
2. What are the key benefits of having engaged suppliers for carbon reporting?
Engaged suppliers provide accurate emissions data, essential for effective carbon reporting and compliance with regulations like the EU CBAM. This transparency improves overall reporting quality and enables companies to spot opportunities for emissions reductions, creating a more sustainable supply chain.
3. What steps can companies take to enhance supplier engagement on sustainability?
Companies can start by setting clear environmental expectations, integrating sustainability into supplier contracts, and offering training on emissions tracking. Regular communication and shared sustainability goals help suppliers align with a company’s carbon reduction vision and build trust in the partnership.
4. Why is supplier engagement increasingly seen as a competitive advantage?
Engaged suppliers reduce compliance risks, boost data reliability, and help companies meet growing consumer demand for sustainable products. These factors make supplier engagement a strategic asset, contributing to a stronger, more resilient business that’s well-prepared for a sustainable future.
5. Can digital tools aid in streamlining supplier engagement for carbon reporting?
Yes, digital platforms enable real-time data sharing, emissions tracking, and simplified reporting processes. These tools make it easier for suppliers to report their emissions accurately and provide companies with reliable data to meet sustainability targets and regulatory requirements.
Contact Mavarick today to discover just how powerful and straightforward it can be to enhance your supply chain operations, creating a more sustainable and transparent network.
