From raw materials to office supplies, business services to manufacturers, companies are supported by an extensive network of suppliers, each serving a purpose that builds to the company’s success and progress. Yet as the world increasingly becomes more complex due to climate change, conflict, labor issues, and other external factors, so do sustainability standards and regulations.
The emergence of the Corporate Sustainability Due Diligence Directive (CSDDD) has led to more urgency in building sustainable businesses. With large companies now being required to assess the environmental and societal risks they may cause across the value chain, this creates new concerns towards the business practices of suppliers.
Corporate sustainability due diligence ensures that a business has set strategies to prevent, mitigate, and stop risks that can be detrimental to the environment and to society. To build these strategies, businesses must first assess their impact across the value chain, considering both upstream and downstream activities. During this assessment, a company will have to engage with stakeholders to determine the impact they have caused not just internally, but also externally with their suppliers, distributors, and other third parties. Through due diligence, a business is able to create concrete actions towards sustainability.
Engaging with your suppliers can kickstart progress into future-proofing not just your business but your suppliers as well. Supplier engagement aids businesses in developing effective strategies that can target the largest issues a company faces when implementing sustainability. It also strengthens relationships between a company and its suppliers, opening up dialogue on finding ways to better incorporate sustainability into operations. This builds sustainability across the value chain, strengthening initiatives towards sustainable sourcing and supply chain due diligence. In addition, you will also need to reach out to your suppliers to gather data and information essential to a sustainability report.
In the overall grand scheme of sustainability, engaging with stakeholders increases sustainability awareness and encourages businesses to be more sustainable. This chain reaction of conversations, agreements, and negotiations direct teams to overall global sustainability.
To assess your supplier’s sustainability performance and build a more sustainable value chain, here are some questions for you to consider asking:
Tracking emissions and energy efficiency are now more important and relevant than before as reporting standards and requirements are calling for businesses to report Scope 1, 2, and 3 emissions. With Scope 3 focusing on emissions from assets that aren’t owned by the company yet used in upstream and downstream activities, it’s important to have conversations with your suppliers on the emissions they have produced in relation to your company’s activities and how these can be further reduced through investing in energy efficient technology or renewables.
Manufactures and suppliers of raw materials make their own impact on the environment. By understanding how they manage their resources, we can assess and determine the sustainability of their operations, the raw materials they utilize, and their overall impact on the environment. This also opens up conversations on managing the risk they may create on nature and biodiversity.
Asking about your supplier’s waste management systems can give you a better understanding of the impact and risk they may have on the environment, which can trickle down to your company’s sustainability performance if the waste were byproducts generated from processes in your value chain.
By understanding the supplier’s waste streams and overall life cycle of the products or resources they provide, this can give better insight into how you can develop or rethink your own initiatives involving waste management and circularity. This will help you determine the strategies that can keep your products away from landfills and the risk of waste mismanagement. Knowing if a product or a resource can be reused, recycled, or redesigned will help foster a circular economy.
By asking about the working environments, health and safety policies, and adherence to human rights and international standards, you ensure yourself that you are working with a business that respects the welfare of its employees, which can affect business productivity and your brand reputation.
Community involvement can be one way to determine a supplier’s social responsibility. By learning more about how suppliers interact with local communities relevant to their business or the ecosystems they operate in, you can gauge their social impact and commitment to sustainability.
Compliance is essential in running a business. Knowing if your suppliers are following laws and regulations lets you understand more about their ethical practices and can guarantee trust, legality, and integrity.
Sustainability can become the norm when more people choose to adopt sustainable practices. When your suppliers also work with suppliers that consider sustainability in their business practices and decision making, this can further amplify the impact of your business and ensure integrity across your supply chain.
Anti-bribery and anti-corruption policies are necessary as these build ethical businesses. Asking your suppliers about these preventive measures assures that you are engaging with a supplier under fair grounds and an equal playing field with their other customers.
Transparency in reporting builds trust with stakeholders and holds businesses accountable for their actions and performance. However, with sustainability data crucial in determining the progress a business has for their own goals and for global targets, it is important to have these numbers verified by internal audits and third-party assurance. Learning more about your suppliers’ initiatives in transparent sustainability reporting can strengthen your trust and relationship with them.
The sustainability goals of your suppliers can indicate their focus and direction towards sustainable development. Having insight on their current progress can also gauge their commitment to sustainability and if they tackle these sustainability issues through ambitious or steady plans of action.
We are all on the road to sustainability. We all can improve as we continue to make progress towards our goals. Continuous improvement can mean setting up systems for monitoring or investing in climate technology. Aligned with the previous question, this gives you a sense of direction on where your supplier is heading and where your business may potentially head as you continue this relationship in the future.
Building a sustainable world requires cooperation across the value chain. Through proper dialogue and engagement with suppliers, a business can spread awareness about the necessity of sustainability. It is important to help empower and educate suppliers in business practices they can adapt to strengthen their sustainability initiatives, boosting their performance and yours.
At Keslio, we are deeply passionate about sustainability, equipping us with the expertise and extensive network needed to guide clients through their sustainability journey effectively and efficiently. Our expertise is particularly valuable for companies looking to embed sustainability practices into their businesses and investors looking to integrate ESG and impact into investment portfolios. To learn more about how Keslio can assist your organization on its sustainability journey, please don't hesitate to get in touch with us.
